Triple whammy for wine in India(2)

Karnataka had the lowest duties on wines in India, charging the same duties for both imported and domestic wines, regardless of where the wines were being produced. Then came the new Wine Policy, which sought to stimulate wine production within the state. Local wineries (read Grover) were aggrieved by Maharashtra's discriminatory taxation on wine from Karnataka, and so lobbied the Karnataka Wine Board to push for retaliatory taxes on wines from outside to 'protect' local wineries from outsiders.

So, effective October 2008, the state government raised taxes on all wines from outside Karnataka (including imported wines) by Rs 300 per litre. The direct impact of this was reflected in wine sales, which declined by 55% for the quarter ending December 2008 as against the same period in 2007.

Goa was known to be the place for the cheapest wines and spirits - low taxes, lightly applied, meant that there was a wide variety of brands to choose from. Goa was also home to Indian port, ranging from quite authentic stuff made by Vinicola to concoctions made by mixing neutral spirits, flavours, colour and a bit of grape juice. However, sales of Goan ports were wiped out in 2001 when Maharashtra implemented its Wine Policy, and suffered the same fate this year in Karnataka with the state's new tax regime.

Goa raised taxes on wines in April 2008, doubling the import fee on imported wines to Rs 100 per litre "in order to protect the interests of the local industry", ie, wineries importing bulk wine from Portugal and bottling it locally. In October 2008 taxes on wines in Goa were again raised, this time on a sliding scale (based on the MRP) going up to Rs. 600/litre for wines priced above Rs 3,750 per bottle. So Goa, too, has joined the list of basket cases insofar as wine is concerned.

Delhi is the only major wine market to have resisted raising taxes on imported wine from the existing Rs 200 per litre to what had been proposed at 25% of the MRP. Thank heavens and a bit of adroit lobbying with the Chief Minister Sheila Dixit, who must be the only politician who has listened to reason on the subject.

Not that wine importers and vendors are entirely happy: the licence fee for operating in Delhi has been raised from Rs 200,000 to Rs 500,000 per annum from 2007/08 - a burden which most small winemakers or importers are unable to bear.

The litany of woes goes on and on. In state after state the powers-that-be seem to be meteing out step-motherly treatment to wine (and in particular imported wine) in sharp contrast to what's happening with imported spirits.

It's time to ask, "Where is the wine industry in India headed?"

Downwards, it would seem, since state government policies are geared to allowing only those with very deep pockets to survive. I, for one, do not expect any favourable changes when state or union budgets are announced this March/April. Domestic producers have confined themselves to selling wine largely within their own state, which is not enough to sustain a business, so some will go bust. Importers will reduce their exposure and wine portfolios, and perhaps some will also just shut shop.

Wake up, National Wine Board and state authorities - this is simply not acceptable.