Why are wines so expensive in India?” is a frequent moan. “In Europe or America I can get a nice, perfectly drinkable wine for ¤4 or $5. Why are Indian wines double that price, at Rs 450-500 per bottle?
That’s a valid grouse. However, when one looks at the matter in detail it becomes evident that not only is producing wine here more expensive than overseas, the bulk of the costs are due to high duties and taxes and trade margins and discounts. Most wine producers barely get back their cost of production, and any vintner seeking to distribute pan-India is likely to suffer losses for three to five years. Consider the following:
Variable costs: A bottle of wine typically costs about Rs 100 to produce in India, with costs almost equally divided between raw material, packaging, and processing. That’s about twice what many mass-produced wines cost overseas as they benefit from machine-harvesting of grapes (in India all grapes are hand-picked), lower packaging material costs (we have to import bottles and corks), and economies of scale in production.
Licensing, Duties and Taxes: Wine being a state subject in India, each of our 28 states and seven Union Territories has its own market structure and duties and taxes for alcoholic beverages — this is unmatched in any sovereign nation in complexity and opaqueness, and is the major contributor to the high cost of wines in India. Some states (Delhi, Haryana, Punjab and Maharashtra) require the producer to pay for a licence up front; all require that labels be registered annually (a colossal waste of time) with state excise on payment of fees that range from Rs 5,000 (Mumbai) to over Rs 1 lakh per brand (Delhi). In addition, there are import fees and export fees, and a bewildering plethora of excise duties and sales taxes (Andhra Pradesh charges a staggering 70 per cent!). Overall, taxes comprise anywhere from 20 per cent to 60 per cent of the final price paid by consumers for their wines.
Trade Margins and Marketing costs: While normal trade margins on FMCG products are 10-15 per cent (distribution + retail), since licensing of liquor vends is both costly and tightly controlled by state governments, for alcoholic beverages this is between 20 per cent and 40 per cent — and may go higher in “auction” states like Haryana, Punjab, and Uttar Praesh. In places where retail margins are restricted by state excise, the trade demands (and gets) high discounts from vendors — which, of course, are passed on to the consumer. The demand for higher margins is also driven by the fact that wines have a slower turnover than spirits or beer.
There are no quick or easy solutions to these issues. The most obvious (reduce taxes and licence fees on wines) has to be tackled state by state, where bureaucrats fiercely resist any attempt at rationalisation (on the grounds that this will reduce tax revenues, and that “the rich can pay”!)
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Wines I’ve been drinking
Luca Exotic Lychee Wine (Rs 760 in Delhi) is a fascinating new varietal from the improbably named winery Nirvana Biosys. The wine is made from fresh Lychee fruit, and in many ways is similar to a Riesling. A fresh clean aroma of lychees, pineapple, figs, and lime; a medium body, balanced acidity with a hint of sweetness, and a dry pleasant finish. Surprisingly drinkable with Indian and Chinese foods, this will be a hit with the ladies and younger wine drinkers.
Alok Chandra is a Bangalore-based wine consultant