Wine makers unhappy over special excise duty

Imposition of special excise duty of Rs 300 per litre by Maharashtra, Karnataka is affecting expansion

The dual excise policy adopted by states like Maharashtra and Karnataka is hampering the growth of the grape wine industry. Both states have imposed a special excise duty of Rs 300 per litre for wine manufacturers coming from outside the respective states which has impacted the operations of wineries that want to expand market in these states.

Maharashtra was the first state to impose the special excise duty to protect the local industry and Karnataka followed later in 2008. Both states put together account for a large portion of wine industry, which is estimated at about 16 million litres per annum. After Karnataka government imposed the special duty, the wine industry has grown manifold from two wineries to 14 with a combined installed capacity touching close to three million litres, said Vandita Sharman, principal secretary, department of horticulture, government of Karnataka.

“In order to help the wine industry we are in dialogue with the government of Maharashtra for removal of this duty because they were the first to impose it,” she said.

Maharashtra is the largest grower of grapes and producer of grape wine in the country which contributes almost 13 million litres of 16 million litres produced in the country. Almost 65 per cent of the total wine manufactured in the country is sold in Maharashtra. This is the reason for wine manufacturers to look at the state for sale, Raghavendra Gowda, managing director, Alpine Wineries Pvt Ltd, said.

“The imposition of special excise duty by Maharashtra is affecting our expansion plans more than the companies based out of that state because Mumbai is a very big market for any company. We cannot ignore this market and we will expand our business only after establishing in the south Indian market,” he said.

Echoing his sentiments, Sridhar Pongur, joint managing director and chief operating officer, John Distilleries, said, “There is a huge unutilised capacity in Maharashtra and we want to make use of that opportunity by entering contract manufacturing with wineries there. It would help us source good quality grapes and produce at lower costs both in Maharashtra and Karnataka.”

He said the company is presently in talks with a couple of wineries in Karnataka for contract manufacturing and it plans to enter Maharashtra after establishing the business in Bangalore, Kolkata and Delhi. It plans to launch its Big Banyan brand of wines in Bangalore later this year before heading to Kolkata, he said.

Arvind Jannu, commissioner, department of excise said the government of Karnataka would not remove the special excise duty on its own. “Maharashtra was the first state to impose it. Why should we do it when they are still holding on to their policy. We will wait for them to remove it first,” he said.

However, the industry is not happy with the policy of both the state governm-ents. The high taxation in Maharashtra and Karnataka, the industry feels, has denied wineries both the states an opportunity to expand their businesses. While Karnataka based wineries find it difficult to access Mumbai, the biggest wine market in the country; the special fee imposed by Karnataka has forced most Maharashtra wineries out of business here.

Gowda said, “I have raised this issue with the Indian Grape Processing Board and Karnataka Wine Board. We have been waiting for a positive response from the two states.”