It's been over three months ago that the government eliminated ACD on the imported wine and spirits. It has been exactly a week less that Maharashtra slapped an excise duty of 150% on the imported beverages, presumably to protect the producers in the state. Neither the importers, nor the producers are happy with the decision. Both are awaiting the decision of the excise commissioner to charge a fixed amount per bottle.

But is the state excise department listening?

The new levy has made the inexpensive wines cheaper. But the better quality wines have become a lot more expensive; the finer the wine the more negative impact on the price there has been. The government has been sympathetic to the petitioners. Perhaps they even realise the harm this arbitrary and unjust policy will cause the importers, producers and consumers alike.

Hotels in Maharashtra are the worst hit. Compared to the earlier Rs.150 a bottle, they are being asked to pay 150% of the assessable value which translates into a massive increase for wines costing over $2.50 (at which level the excise duty remains the same whether at 150% or Rs.150 a bottle.

Surprisingly, they are keeping totally quiet. Says Sanjay Menon, owner of Sonarys, Mumbai. 'It's the hotels that are affected very badly because they can't take a call on buying the better wines as they will become hugely more expensive. But they are doing nothing about it. They should be going by now to the CM's door and breaking it down.'

Sanjay is a very disheartened person today. His passion and knowledge of wines is unparalleled in the world of importers. He is more of a connoisseur than a businessman and a passionate promoter of fine wines. Many years ago, at a wine dinner in Maurya Sheraton, Delhi where a second and third growth from Bordeaux were featured, he was seen going from table to table finishing the left-over wines at the end of the dinner. ' I cannot stand the sight of good wine being left in the glass,' he said with disgust, chiding people who did not appreciate fine wines from these Chateaux from Medoc.

Sonarys is the biggest in Maharashtra in marketing imported wines. His sales are suffering the most, naturally. 'We don't have any clout with the government but we can only hope the government will understand our viewpoint and makes the excise more sensible.' In fact, he and other importers have the full and active support of domestic producers like Rajiv Samant of Sula as it hurts him and other domestic producers as well.

Whatever may be the motivation of the Maharashtra government, the apathy towards the problem is not going to help the case of India in the ongoing dispute at the WTO where the case has been going on with the US; the EU had first suspended and then withdrawn their case. US is quite adamant, fearing that states like Maharashtra will neutralise the effects of eliminating the Additional Customs duty on July 3 this year.

US has to submit some more papers to WTO during the second week of October. From all accounts, it seems unlikely that it will change its stand, especially with the rigid stand taken by the Maharashtra government.

10th October will mark the completion of 3 months of the new policy. Many foreign producers have been already disappointed and discouraged by this policy. In fact, many have written to me if it is wise to write about such negative developments. We of course, have to tell the story as it develops. We are quite optimistic about the long term prospects for wine.

The ironic part is that the new policy is supposed to protect the farmers of Maharashtra and it is hurting them the most. Reason is simple. Wines costing less than $2.50 a bottle are now cheaper due the 150% policy. It does not need an expert to figure out that there are thousands of labels available between $1.50- 2.50 around the world, which offer better quality wines than the majority of Indian wines. In effect, the new policy will hurt these producers.

The parlays between the industry, importers and the government have been taking place since the very beginning. A month and a half ago, the excise department had appeared to agree with the joint plea of Rs. 300 a liter-translating to Rs. 225 a bottle-an increase of 50% from the existing excise duties.

One newspaper even went to the extent of reporting that the excise duties have been made applicable at Rs.300 a liter. But the decision still rests with the department. There is an impasse in the meantime, no sales are taking place and the uncertainty is hurting all concerned.

Whether Maharashtra has been acting like an anti-hero or villain would depend upon whose point of view one is looking at. But the state government surely will get a hero's welcome from consumers if the policy of Rs.225 a bottle as excise duty is announced without any further delay.

Subhash Arora
October 8, 2007

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