SWC threatens to close Orissa unit

Shaw Wallace Breweries Ltd (SWBL) has threatened to pull the curtains on its only brewery unit in Orissa complaining about the skewed excise policy of the state government.

The company owns East Coast Brewery and Distilleries at Paradip through acquisition. The installed capacity of the unit is 1.5 lakh cases per annum.

The new excise policy (2005-06) of the Orissa government, announced in the last week of February, entails a huge 133 per cent increase in the bottling and franchise fee for local manufactures while maintaining the import fee on beer at the previous level.

"This makes manufacturing of beer in the state unviable," said Richard Rushton, managing director of SWBL, an affiliate of SAB Miller Plc. "On the other hand, it is much more profitable to produce beer out side the state, bring in the stuff and sell it here," he added.

To drive home the point, he said, the manufacturing levies (bottling fee and franchise fee) in Orissa is highest at Rs 54.60 per case compared to zero in West Bengal, Bihar, Madhya Pradesh, Maharashtra, Andhra Pradesh and Karnataka and Rs 23.40 in Rajasthan and Hryana and Rs 7.80 in Uttar Pradesh.

Similarly, to discourage imports while most of the states have higher import fee, the same for Orissa is Rs 39 per case.

On the contrary, Orissa has a very high export pass fee at Rs 15.60 per case, which discourages manufacturers to produce beer in the state and export.

Some of the states like Rajasthan and Haryana even give abatement on manufacturing levies for the beer meant for export, Rushton pointed out.

To make the matters worse, the proposed increase in excise levies in the state is higher on beer (which has lower alcohol content) than on IMFL: 133 per cent versus 75 per cent for IMFL.

"In this backdrop, there is no option but to close down the brewery and relocate it to a more friendly state like West Bengal-where there is not manufacturing levy on beer," he said.

Meanwhile, industry sources said, two other breweries-Denzong Breweries of Danny Denzopa and Mikal Breweries- which had got licence to manufacture beer in the state have decided to shelve their projects in view of the unfavourable policy.

Shaw Wallace Breweries had made extensive representations to the excise department authorities sharing the findings of reputed economic institutes such as National Council of Applied Economic Research (NCAER). The research had called for an excise policy to instill social drinking habits with less alcohol content, such as beer.