We have just entered a new paradigm in The Indian Paradox, a term I coined a few years ago to express my anguish and amusement at the happenings in and around wine drinking in India. The government of Maharashtra, by virtue of the excise order which reduces the excise duty from the recently introduced controversial and unjustified 150% to 75% for scotch and increasing it from the same 150% to, hold your breath, 200% on Champagne has recommended its denizens to shift from Champagne and fine wines to Scotch.
While the excise duty has been increased to 200% across the board on wines, there have been graded reductions from 200% (where assessable value is less than Rs. 1000 per case of 9 bulk liters) to 150%, 100% and 75% (where assessable value is more than Rs.5000 per case).
By declaring the policy, the government has taken the Maharashtra residents to the sixties in India, the days of Ambassador and Fiat cars when Marutis, Hondas were unheard of and Mercedes and BMWs were seen either in glossy magazines or were available to the elitist few through STC- a government canalizing agency. Fiat was available in ‘black’ and was on waiting list due to the allocation.
We are about to see the same scenario in wine. A few domestic ‘Fiat’ wines would probably sell in ‘black’ while the other Ambassadors will be ‘available’ at discounted prices or as ancillaries to the established producers who will sell them as ‘Fiats’. As far as the Mercedes and other imports are concerned, thanks to the open general policy of the central government they will be available but the price tag will be huge; they will not be for ordinary citizens.
To say the least, in this world of global liberalization where Gucci and Louis Vuitton, Ferragamo and Armani, or even Rolls and Bentleys are available freely, the imported wines have been gagged- in the name of protecting the Indian wine industry.
Would the order protect the Indian industry? I think not. Partially, at best. Imported wines costing less than Rs.100 ($2.5) a bottle will still give the Indian wines run for their money. Barring a few labels from Nashik and Bangalore, I could name 10 wines for every single label produced in Maharashtra that would still be a better value than the quality they produce right now.
One hoped that the survival instinct would force the producers improve the quality to compete with the better quality imported wines. Sula’s Dindori is a case in point. They could increase the price of their Dindori to Rs. 700 ($ 17) because they believed and the market concurred that it was a good quality product, better than even a few of the labels they have been importing on their own account. But how many Dindoris does Maharashtra have in its portfolio?
I remember a time in the seventies when the Scotch was sold in Bombay through the confectionary shops. You went to these ‘distributors’ and ordered in advance. In the evening, you could pick up a bottle or two lying in the bottom of an empty biscuit tin box for Rs.100-135. Perhaps, happy days are here again for these ‘distributors’. Bootleggers will thrive again in a big way and perhaps the confectionary shops will become the distribution points again. But is that the way to go in this modern age?
The world is full of exciting wines from different countries. Not even considering the health angle, the premium wines have already been made more expensive, due to the increase of cutoms duty from 100% to 150% due to the duty bound structure of WTO after the withdrawal of duties. This order has made the fine wines a luxury product, beyond the reach of middle classes of Maharashtra.
Talking of WTO, which most seem to have forgotten about; let us not forget that the US has not withdrawn the case. One only assumes that they were not pitching in for Jack Daniels and the Bourbons to be allowed to come to India but were equally concerned abut their Napas and Oregons and will pursue with WTO with even more vigour. It will be interesting to see what way the tide turns now.
So is the imported wine industry doomed? Hopefully not. Again, it is the Indian Paradox that the same state (Maharashtra) has allowed the sale of imported wines through Retail. With big players like Reliance around, they will promote the sale of low end wines and private labels aggressively. They can well bring the Indian wine industry to its knees, if they chose to promote cheaper but quaffable imported wines, costing between Rs.80-100 FOB (about Rs. 600 retail). They have already broken all previous records of selling imported apples and are capable of repeating the same for imported wines- unless the government plays a spoil sport and clamps down on sales through Retail.
Surely, the hotel industry in Maharashtra is up in arms against the latest order too. Either they have to absorb the additional costs of 200% less Rs. 150 (they could do it, considering their mark ups have been upwards of 400-500%). Else, their business would suffer horribly. They could perhaps boycott and remove Indian wines from their menus. Their customers, in any case, are not likely to shift from Champagne to Scotch or to Indian wines if they want their Chianti Classico, Burgundy, Barolo or Barossa. They are certainly not going to pay over 10 times the price they have to pay in their country.
At a time like this, one cannot avoid thinking about Vijay Mallya’s purchase of the single malt company White and Mackay for £ 595 million and Bouvet Ladubay winery for €15 million. He gains tremendously from the Maharashtra policy. Did he use his charm to get this order passed or he just got lucky? I am too depressed to think about it right now.
Perhaps, the consumers in Maharashtra and other places should also boycott the domestic wines too as a mark of protest. Surely, drinking cheaper imported wines will not hurt for a while. It is not harmful for health anyway. But they should not forgo their rights to drink decent quality wines, like the rest of Indians have –at least as of now.
They say there is always light at the end of the tunnel. In Maharashtra, the train seems to have stopped and there is darkness all around- for decent, quaffable imported wines.
Subhash Arora
November 20, 2007
