OSBC to move govt for licence cancellation of major breweries

The beer producers feel that the stiff cut in the offer price would result in business loss of over Rs 100 cr per annum

The Odisha State Beverages Corporation (OSBC), the state-run wholesale distributor of beer and Indian Made Foreign Liquor (IMFL), may move the state government for cancellation of factory licences and label registration of breweries run by Carlsberg, United Breweries ltd and SABMiller India in the state for not signing agreement with it for supply of beer during 2015-16.

These leading liquor brands, which together account for about 80 per cent beer sales in Odisha, are opposing the reduction in offer price of beer to the extent of 20 per cent in the new excise policy of the state. The beer producers feel that the stiff cut in the offer price would result in business loss of over Rs 100 crore per annum. They also fear that agreeing to Odisha's demand would open the flood gate for other states to arm-twist them to sign agreements at lower offer rates.

"Today is the last day for signing the agreement with the OSBC. We will be moving the excise commissioner on Friday for cancellation of factory licenses and label registrations of the companies not signing the supply pact with us. They cannot take us for a ride by virtue of their market share," said Dwijaraj Kar, managing director, OSBC.

The state government had earned Rs 2,000 crore as excise revenue last year. It targets to earn Rs 2,500 crore this year following the implementation of the new excise policy.

Interestingly, the reduction in offer price of the liquor manufacturers and profit margins of OSBC and retailers, as proposed in the new excise policy, will have no downward impact on the MRP (Maximum Retail Price) of liquor brands due to rise in effective rate of excise duty. On the contrary, the MRP of most liquor brands has gone up due to rounding up of their sale prices to the next level divisible by 5.

The new policy has also prescribed introduction of a new system of collection of excise duty on ad-valorem basis and discarded the earlier practice of collecting excise duty on the basis of alcohol content in the liquor. This is expected to boost the excise duty collection substantially, Kar pointed out.

OSBC has approached some of the smaller players to increase their production and supply to make up the gap in demand supply of beer in the state. OSBC has threatened to strike out the names of major beer brands from its list suppliers, if they fail to sign pact with it by April 16, committing their supply for the current financial year. Under the present system, OSBC is the only authorised agent in the state which procures beer and Indian Made Foreign Liquor (IMFL) from different manufacturers from within the state and outside and supplies them to the retailers for sale.

In 2014-15, OSBC had supplied 90 lakh cases of beer to the retailers. Normally, March end to June is the peak season for beer sales and about 40 lakh cases of beer are sold during this period.

Though the new excise policy also prescribes a cut of 10 per cent in the offer prices of IMFL, it has not led to any standoff with the manufacturers in this segment unlike the case with beer producers. IMFL makers have signed supply agreements with the OSBC after some initial hesitation.

Leading IMFL companies like United Spirits, Pernod Ricard, Allied Blenders and Distillers (ABD), Grover Zampas, Diageo India have agreed to supply their quota of liquor. The grievances of IMFL manufacturers have been resolved, Kar added.

The state government has constituted a panel headed by secretary, Excise department to look into the grievances of liquor manufacturers. The other members of the committee included excise commissioner, special secretary, finance department and commercial tax commissioner.