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Rediff News  All News  » Business » A swig of foreign liquor could still cost heady sum

A swig of foreign liquor could still cost heady sum

July 05, 2007 00:59 IST

Uncorking that bottle of champagne because the government has reduced duties on spirits? Well, hold the celebrations, dude, because it might turn out to be all song and dance about nothing or, at least, about very little.

The industry, for one, isn't ecstatic -- yet. Yes, additional duties have been scrapped to meet WTO commitments and total duty incidence is down from about 550 per cent at the highest level to 150 per cent flat (for wines) or from 230 per cent to 100 per cent (for spirits), but there's still state excise levies to consider.

To begin with, only 10 per cent of the 600,000 cases of imported spirits come in legally, duty paid, according to Amrit Kiran Singh of Brown-Forman India, who is the president of the International Spirits & Wines Association of India.

A little more than double that is made up of duty free sales, but a whopping 350,000 cases of imported spirits are smuggled in and sold through bootleggers.

Interestingly, 80 per cent of that total is whisky, of which three brands -- Johnnie Walker Black Label, Chivas Regal and Jack Daniel's – form the top tier of 80 per cent. With the duties now down from 230 per cent to 160 per cent (including local imposts), prices should have plummeted.

In effect, this means that prices have moved down for these three brands from approximately Rs 2,700 to Rs 2,200, a drop of 15-20 per cent.

But with the bootlegger willing to supply the same brands at Rs 1,400, the impact at vends will be minimal.

Also, unfortunately, the Centre has issued an advisory to states to levy excise at the level of domestic spirits to protect the domestic spirits industry.

"We will only know the real position in six to eight weeks," says Ashwin Deo of Moet Hennessy India. That's because states can decide to opt for the specific duty model (say, Rs 200 per bottle irrespective of the label or price), or ad valorem (as is the case in Delhi and Maharashtra currently).

"Perhaps there will be a slight reduction in the price of spirits, but it brings in the two-tier structural issue that will impact prices," Deo adds.

In the case of wines, customs duty has been uniformly fixed at 150 per cent (it was 100 per cent earlier) and all countervailing additional duties have been abolished.

"Earlier," explains Aman Dhall of Brindco, the largest wine importer, "an expensive Chateau Latour wine was charged at 180 per cent, while an ordinary vin de France or table wine was charged at a higher 268 per cent" -- this to protect the fledgling domestic wine industry from cheap imports.

The rationalised duty on wines will mean that better imported wines are available at a better price but, says Dhall, "The cheapest wine that earlier cost Rs 700 will now be available for Rs 500-600; but why would you buy a table wine when a better local wine from Grover or Sula is available for less?"

While the new policy does promise easier access to imported brands, it will eventually be left to state governments to write their own duties that will impact prices.

Any celebrations, then, could depend on where you live and how kind (or unkind) your state government has been to your spirits.