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Maharashtra Clarifies and Confuses Importers

Maharashtra has issued a circular clarifying the '4x' pricing policy on wines in the 'Officialese' English language which is confusing to most mortals, except those who have been following the Bombay Prohibition Act 1949 since inception.

Finally the fog and mist has been cleared! Maharashtra has separated grain from the chaff. If you want to do business here, better understand not only the policy but the official language of the notifications  as well, even if you were born after 1949 when the Bombay Prohibition Act was launched.

The Notification dated 28th August was issued on or around 13 September. It does take officials those many days to understand the language of the notification and then get the papers signed by various departments. Unfortunately, although a majority of them might be conversant with the matter therein, the taxpayers are not as sharp. Sample a few lines from the circular of 28th:

2. in rule 2 of the Maharashtra Potable Liquor (Fixation of maximum Retail price)      rules, 1996 (hereinafter referred to as "the principal Rules) in clause (d)

  (i) for the word and letter "Explanation I", the word "Explanation" shall be substituted:
  (ii)"Explanation II" shall be deleted

However, the example calculations carried out subsequently are quite crisp, making it a simple exercise to decide on the MRP for wines .

Excise Rules Made Easy

DelWine had made an attempt to explain the gist of the policy on August 23rd in the article titled  Maharashtra-Love It or Hate It.

The new policy procedure dated August 4, 2008 was made available couple of weeks later to the concerned people.

This policy dated August 4 did not clarify or specify the 4X policy which has been existent in Maharashtra for the last 7 years for the out-of-state wines. The current Notification of August 28 issued a few days back aims to clarify the policy of 4X MRP which the importers have not gotten fully grasp of. But Dharti Desai, Founder and CEO of Finewinesnmore is glad that at least they can go on with the business after 10 weeks of no sales from the excise warehouse even after payment of customs duty.

'We took a couple of days to understand the Notification regarding MRP, and are submitting our labels now with MRP and hope to get them registered in the next week or two when we can re-start selling.' After 6 weeks of no activity, the excise department had finally allowed to move the material from the excise paid warehouse to the customers (T2T only) a few weeks ago-a ruking which continues to govern the only sales as on date.

Sanjay Menon of Sonarys is not as clear. 'We have sent our Heineken labels for registration but are still trying to come to grips with the MRP policy for wine, clarified through this notification. Perhaps, the department should organise a seminar on this issue so that we can all understand the issue in totality,' he says.

Of course, the moment the excise issue is sorted out, the customs issue will be lurking on his head. Customs had asked for the bank guarantees covering the customs duties (reported by delwine earlier) from the private public bonders who were not in a financial position to do so. The department has kindly agreed to accept the bond from the importers now, like in Delhi. 'But where do we get the money to arrange the bank guarantees? We have already invested around Rs. 2 crores recently and with no business during the last 10 weeks, we feel hard-pressed to arrange fresh funds,' he adds.

Dharti has submitted the guarantee as other importers like Moet Hennessey, and the de-bonding will soon re-start for the warehouses sealed shut for 3 months.

So what effect will the new excise policy have on the wine prices? 'It will be ok for the hotel business but retail will be affected negatively. We find it tricky to determine the MRP for retail,' says Menon. Agreeing with him, Dharti says,' we are fortunate that our products are mostly either in retail or hotels with little overlap. Therefore we can re-organise the MRPs and stay afloat.

How about the prices of out-of-state Maharashtra wines? While Kapil Grover and Aman Dhall of Grover were not available for comments till the publication, it appears that the excise duty for these Indian wines will be also increased to 200% from the existing 150%, giving them the opportunity to increase MRP but putting the margins under more pressure as they will still have to compete with Maharashtra produced wines.

At lest one thing is clear without any confusion-the wine route through Maharashtra will be bumpy in the near future with a few slippery spots and the warning signs of debris of a few smaller importers falling on the wayside.

Subhash Arora

September 17, 2008

 

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