Policy-making

THE WINE CLUB

This is the time of the year when budgets are being put together at both the centre and states "" a good time to talk about the wine industry in India.

Wine is a low-alcohol beverage that is farmer-friendly and good for health, and should be actively promoted as a desirable alternative to spirits. Grapes tend to thrive on unfertile soils, and a thriving wine industry could bring thousands of acres of currently-untilled land under cultivation. Consuming wine is widely regarded as the mark of a civilised society "" we Indians need to re-discover the ancient tradition of wine rooted in Amrit, Somaras, and Madira.

The wine industry in India is presently tiny: 6 lakh cases, a mere Rs 150 crore (net sales value) "" that's 0.1 per cent of the total alcoholic beverages market, a per capita consumption of 5 ml. Yet there's a huge amount of interest in this industry, out of all proportion to it's size "" could it be that people are interested in its potential?

And potential there certainly is: we have the land, the people, and the inclination. As usual, this potential is constrained and hamstrung by a myriad of controls and regulations (at both the state and central level) that inhibit competition and hence growth of the industry.

It is instructive to learn that the wine market in China in 2004 was about 72 million cases (0.5 litres per capita), and attracted $180 million in foreign direct investment. Their customs duty on wine now stands at 14 per cent "" as against our 250 per cent "" and yet total wine imports were less than 5 per cent of the market.

So what is needed? Deregulation, primarily, as well as a change in thinking re wine. Specifically:

Facilitate production. States need to follow the Maharashtra model and make it easier for people to set up vineyards and produce wine: Make licencing simple and cheap, enable bank loans for setting up wineries, actually disburse the subsidies applicable.

Encourage consumption. All states should reduce taxes and duties on wines including levies on label registration and inter-state movement "" and, like in Maharashtra, remove these entirely on locally-produced wine. This will in turn reduce the price-gap between wines and spirits, boost volumes, and encourage investment and further growth in a "virtuous spiral".

Promote competition. Reduce customs duties on imported wines progressively over the next five years from 250 per cent to around 25 per cent. The prices of imported wines are distorted by discriminatory customs duties that are inversely weighted "" the rationale being that "the fledgling domestic industry needs to be protected".

Actually, the key problems that start-up domestic producers face is the nature and structure of the domestic market "" with each state having its own rules and regulations and duties and taxes "" and not imported wines. Like in China, this measure will actually encourage the multinationals to invest in wine production in India.

Simple measures all that just need pushing by the concerned ministries (agriculture, food processing industries) "" in fact, Shri Sharad Pawar's reportedly having said that "wines need to be sold in department stores" elicited many positive comments from consumers. Let's hope that someone, somewhere, is listening. Cheers! l_chandra@vsnl.net )