...blame it on very high taxes and restrictive government polices.
Once upon a time, you stocked up on whisky and beer for your average weekend party, and perhaps a bottle or two of wine. No longer. These days wine is the single largest item of expense when it comes to the ‘spiritual’ needs of your guests as it accounts for at least a third of the consumption. And this holds good whether you are buying Indian or imported wines.
Wine prices have gone skywards in most markets in the past two years: what used to be about Rs 300 a bottle now costs around Rs 500. Wines have an alcoholic strength of around 13 per cent (vs. 43 per cent for spirits), which means that a half-way decent wine costs three times as much as a comparable bottle of, say, Blender’s Pride.
That’s a pity. India’s wine market is currently between 1.5 million and 1.8 million cases, and growing at 25 per cent annually. The market should be 20 times that figure — China’s is over 70 million cases, of which 65 million cases are produced within the country. Despite this, their customs duty is only 14 per cent (nil in Hong Kong), whereas in India it’s 160 per cent, with another 200-300 per cent at the state level.
The high cost of wines is holding back growth, and the cost is largely due to high taxes, both import duties(160 per cent) and the myriad state taxes and regulations that are applied to wines without considering that wine is a low-alcohol product which is farmer-friendly and good for health.
In absolute terms, it costs about Rs 100 a bottle to produce a wine; another Rs 100 should take care of marketing, overheads, interest and margins — so the balance is really state duties and trade margins. Apart from Maharashtra and Karnataka, no state in India does any favour for wines — after all, “wine is an elite product, and must be taxed accordingly”.
In a recent issue of his DelWine newsletter, Subhash Arora, the prolific writer on wine, gives details of how it costs over Rs 5 lakh just to register with the authorities in Delhi. The situation is similar in most states of north India. The four south Indian states all have government-owned corporations acting as the canalising agency for alcoholic beverages, which generally adds another level of bureaucracy (and the attendant costs) to the supply chain. Witness Andhra Pradesh, which maintains the prohibition-era practice of calling for ‘tenders’ (for branded goods!) and holding ‘price negotiations’ with producers and vendors. In Delhi, Tamil Nadu and Kerala, retail liquor shops are run by the state. As anyone in the national capital will know, getting what you want in one of these vends is a nightmare; the less said about retail vends in Tamil Nadu and Kerala the better.
What is needed are policies that generate more competition, lowering the cost of market entry in every state, and applying the minimum possible taxes on wines. In Maharashtra, this has resulted in the setting up of some 60 wineries since 2001, eight of which exhibited recently at the London International Wine Fair. With the right policy environment, this figure could be 80 exhibitors in 10 years.
Wines I’ve been drinking:
Sula’s ‘Rasa’ Shiraz 2007 is a limited-edition barrel-fermented blockbuster of a wine — although the alcohol is a sedate 13.5 per cent v/v, this deep red (almost black) wine has an intense aroma of red fruits and spice and a full-bodied, complex taste, with fine-balanced tannins and an excellent finish that lingers. It retails in Bombay for only Rs 1,080, and I doubt whether it will be launched elsewhere anytime soon — grab it while stocks last. Cheers!
[Alok Chandra is a Bangalore-based wine consultant. The views expressed are his own]
