 "Wine Economics 102: imported wines")
It's an oft-repeated plaint. "Gosh, I bought this Rs 2,000/bottle of wine for $15 when in New York!" If domestic Indian wines are expensive, imported wines are doubly (or triply) so - which is why sales of imported wines here are still a measly 300,000 cases annually, as against over 35 million cases in China (which has recently overtaken France in wine consumption - a total of 155 million cases in 2013-14)!
Basically, due to the impact of cascading customs duties and domestic taxes and of course the cost of marketing and distribution, a wine that costs $ 3.00 FOB overseas ends up retailing at between Rs 1,500-Rs 2,000 in India - a multiple of 8-11 times! The same wine would sell for $12-$15 overseas, where taxes are low and fixed.
The plethora of local imposts on imported wines includes:
Customs Duties: The basic customs duty of 150 per cent on the CIF value is supplemented by an additional duty that bumps-up the total duty payable to 161.5 per cent (yes, it's applicable on the cumulative value).
C&F charges: Unloading the goods, port & warfage charges, documentation, and movement to the bonded warehouse will cost about 5% of the CIF value.
Storage costs in-bond: Importers need to give a bank guarantee equal in value to the deemed customs duty, apart from storage and ex-bonding charges that add about Rs 50/bottle to costs; despatch to another state will cost an additional Rs 50-Rs 100/bottle (yes, carrying high-value alcoholic beverages across state boundaries is hugely expensive).
State duties: Although states are not supposed to charge any excise duty on goods that have already suffered Customs duty, all states charge varying rates of state duties that are given other names: for example Karnataka calls it "Special Duty" and "Additional Special Duty".
Lastly (but not least) are trade margins and marketing expenses which shave 40 per cent off the top, leaving precious little for the importer.
What can be done to reduce prices of imported wines? For a start, we should go back to the 3-slab system of customs duties in force till 2007. where duties at the lowest slab were as at present, and progressively reduced to 40 per cent at the highest slab - this will protect domestic wines from dumping by cheap imports while making higher-priced (and better-quality) wines more affordable.
Next, the Indian Grape Processing Board should take the lead in getting states not to charge state duties on imported wines - the difference to the state exchequers will be marginal, and the benefit to consumers manifold.
Let's see if anybody is listening.
Wines I've been drinking: The Saint Clair Marlborough Sauvignon Blanc 2013 (Rs 2,620 in Bangalore) from New Zealand's South Island is wonderfully expressive: the aroma of ripe guavas fairly leaps out of the glass, while the clean, crisp, and balanced taste rewards the drinker with a luscious though light feel. Wonderful on a warm summer day!
Basically, due to the impact of cascading customs duties and domestic taxes and of course the cost of marketing and distribution, a wine that costs $ 3.00 FOB overseas ends up retailing at between Rs 1,500-Rs 2,000 in India - a multiple of 8-11 times! The same wine would sell for $12-$15 overseas, where taxes are low and fixed.
The plethora of local imposts on imported wines includes:
Customs Duties: The basic customs duty of 150 per cent on the CIF value is supplemented by an additional duty that bumps-up the total duty payable to 161.5 per cent (yes, it's applicable on the cumulative value).
C&F charges: Unloading the goods, port & warfage charges, documentation, and movement to the bonded warehouse will cost about 5% of the CIF value.
Storage costs in-bond: Importers need to give a bank guarantee equal in value to the deemed customs duty, apart from storage and ex-bonding charges that add about Rs 50/bottle to costs; despatch to another state will cost an additional Rs 50-Rs 100/bottle (yes, carrying high-value alcoholic beverages across state boundaries is hugely expensive).
State duties: Although states are not supposed to charge any excise duty on goods that have already suffered Customs duty, all states charge varying rates of state duties that are given other names: for example Karnataka calls it "Special Duty" and "Additional Special Duty".
Lastly (but not least) are trade margins and marketing expenses which shave 40 per cent off the top, leaving precious little for the importer.
What can be done to reduce prices of imported wines? For a start, we should go back to the 3-slab system of customs duties in force till 2007. where duties at the lowest slab were as at present, and progressively reduced to 40 per cent at the highest slab - this will protect domestic wines from dumping by cheap imports while making higher-priced (and better-quality) wines more affordable.
Next, the Indian Grape Processing Board should take the lead in getting states not to charge state duties on imported wines - the difference to the state exchequers will be marginal, and the benefit to consumers manifold.
Let's see if anybody is listening.
Wines I've been drinking: The Saint Clair Marlborough Sauvignon Blanc 2013 (Rs 2,620 in Bangalore) from New Zealand's South Island is wonderfully expressive: the aroma of ripe guavas fairly leaps out of the glass, while the clean, crisp, and balanced taste rewards the drinker with a luscious though light feel. Wonderful on a warm summer day!
Alok Chandra is a Bangalore-based wine consultant