August 11: Just as the hotels and restaurants had started getting dried up one after another, the Delhi Excise loosened their grip and released the first lot of excise licenses for imported wines for the current year 2011-12 but standing firm on charging the annual license fee of Rs.600, 000 for an effective period of at best seven months and a half, with no one daring to openly protest against injustice due the government inefficiency, writes Subhash Arora.
Ace BeverageZ, Hi Spirits, Hema Connoisseurs, Indo-Spirit (Distributor of Sula wines) were a few of those importers/distributors who got the license as well as the label registration certificates yesterday, possibly getting an edge over those that are still in the queue as the supply dries up and the on-trade customers ordering whatever quantity they can buy. Indian wines including Sula, Four Seasons, Nine Hills, and Luca had all received their licenses last month.
After extending previous year’s policy one month at a time for 3 months from April to June and allowing sales after depositing the pro-rata charges of the annual license one month at a time, the new policy for 2011-12 was announced finally in late June which meant the application process began in early July. There have been two primary reasons for the delay in processing the fresh applications.
Whole Sale Price related policy
For the first time the excise duty is being levied on the WSP (Whole Sale Prices) in 2 slabs of 65%/50% as reported in earlier columns of delWine, and not based on MRP (Maximum Retail Price). The WSP is based on all expenses and cost loadings of the importer excluding excise duty and the VAT as well as the Retail cost the maximum allowable amount of which has been pre-defined and restricted to unrealistic and impractical, low figures. There has been a lot of confusion and heartburn among the importers- the policy allowed a maximum of around Rs.15 to Rs.50 a bottle for Retail (15% of WSP or Rs.50 whichever is lower) whereas in reality, even the sales clerk making the sale on the floor, perhaps demands more than this amount-and there are nightmarish costs every step of the way, right from the excise warehouse to the customer.. and the steps are unfathomable by those not a part of this chain.
The Retail Cartels
Before one brands Retailers as unfair, working as cartels or simply acting as Mafiosi, they may have their own problems. They have high rents to pay for the stores (think Mall!), expenses to keep another set of government employees at arm’s length- and as every scam gets bigger their monetary demands get bigger. And they do spend a lot of money in both colours to get and keep their own licenses and stay afloat in business. That might even justify some of them indulging in a practice known in the trade as OC (over charge)- prevalent more in the private sector than the government run shops.
Excise Warehouse
The unarguable reason for the delay in issuing the license has also been because the government decided to be rigid about having a separately marked, physical warehouse approved and controlled by the excise department and insist n an L-32 license from this year. Several importers were caught unaware as they did not meet the basic requirements of the law as framed by the excise department last year. This issue seems to have been resolved by the importers who got their licenses yesterday.
Whatever be the reasons of delay, it is a recorded fact that the government delayed the policy and charged them the money for the period. It should be law bound to either refund or adjust the money towards the new license for 2011-12. The policy does say that the amount of Rs.600,000 will be payable for the whole year whatever is the date of issue of the license but most people outside the trade believe that this is in fact bad in law and needs to be challenge in the courts. All importers, without exception are very upset but no one is willing to protest in the open.
Subhash Arora
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