The additional duty on liquor, took the total import duty to as high as 550% earlier. Now the customs duty will come down to 150% (actually 164%, including some residual special duties), resulting in a significant drop in the retail price of whiskies, vodkas, gins and other hard liquor- of up to 30% or more. Beer will share similar benefits as the basic duty remains unchanged at 100%.

Wine, on the other hand may suffer as the basic duty has been increased from 100% to 150%, which is within the agreed outside limit with WTO. The more expensive premium wines, which also attracted 100% basic duty but only 20% ACD, compared to 75% ACD on the cheaper wine (under $25 a case), will become costlier.

It should have been a matter of common sense to keep beer and wine in the same category due to their lower alcohol content, even though wine has more health benefits, proven consistently by several neutral, multi-national scientific studies.

Possibly, due to pressure from the local industry the duty on wine, and not beer, has been raised to the maximum of 150%. The domestic beer market is a lot bigger in size. With 105 million of beer cases consumed annually, one would think that keeping the duty at same level will hurt the local beer industry even more.

There is a general consensus that the low end foreign wines (less than $25 a case) will benefit the most, of course. The retail price of these wines will come down between 25-30%, bringing them much closer to the price of domestic wines. This will be the area of concern for the domestic producers-provided however, that the states do not take counter measures to increase the local duties.

Says Kapil Grover, MD and senior partner Bangalore based Grover Vineyards, 'What prevents Maharashtra from increasing the state excise duties on imported wines? After all, they already charge unfair duties of 150% on the assessable value of our wines as out of state wines.'

Indeed this is quite possible. Grover decided to start buying grapes from Maharashtra to produce its Sante label to save these heavy 'import duties'. A bottle of La Reserve, that used to cost Rs.440 in Delhi till March this year, costed about Rs.650 in Mumbai-it will become more expensive than many imported wines under the new duty regime unless the state applies extra duties on the imports as well.

The government seems to have taken a hasty decision to keep WTO at bay. Earlier, it had announced that legislation would be passed in the parliament which would allow the states to charge a maximum of the same duty on imported wines, out of state wines and the domestic wines. It announced a few weeks earlier that the states had been taken into confidence, only to retract and infer that the states would be allowed to recover the losses due to scrapping of ACD by bringing out their own excise policies.

In so doing, the government appears to have overlooked a major protagonist- the WTO. Indeed, the first reaction of EU and US to the cut has been a guarded optimism. Any such move by the states would be opposed by EU and WTO and other signatories to WTO. Adds Kapil,' they should have passed the requisite legislation before taking this step.'

Agrees Aman Dhall of Brindco, who is not only the biggest wine importer, but also a stakeholder in Grover. He may face rough waters ahead because he had right aligned the prices of Grover wines (read price increase of Rs. 40-100 a bottle) after taking over its all India distribution in April this year. He is fairly certain that the states will play a spoil sport in the current scenario.

Nevertheless, Kapil feels certain that they will achieve the sales of 1.2 million bottles this year as compared to 800,000 bottles in the previous year, a whopping increase of 50% despite a price increase of 10-20%.

Sula Vineyards, the fastest growing of the three top producers (Indage continues to be the leader) on the other hand is maintaining a brave front.' The withdrawing of additional customs is good, but I think the Indian wine industry needs protection from cheap wine imports,' claims Rajeev Samant, CEO & MD of Sula Vineyards.

'Wine producers in the EU, because of the common agriculture programme, are heavily subsidised. We are not. We still need some protection from the cheaper wine imports.'

However, he is sympathetic to the case of premium wines. 'We should not put the duties that we do, on expensive wines. There is no point putting a 150 per cent duty on a wine that costs $50 in the first place. What we would like to see happen is that the entire ad valorem system that we currently have now, be replaced with a flat duty of say Rs 250. The cheaper wines would become more expensive while the expensive wines became much cheaper. That is what we would support," he adds.

Sula and Champagne Indage have, themselves, been the beneficiaries of cheap wine imports in bulk and bottling them in their own brands and marketing them at hefty mark ups. With the heavy duty on bulk wine imposed by the Maharashtra government over the years ceased to be remunerative. This practice has been reduced to a trickle and passed on to the scheming entrepreneurs from Goa to Bhatinda in Punjab .