The Hindu Business Line : New liquor policy in AP to make premium brands costlier

THE recent changes in the State liquor policy have pushed up the prices of some of the premium liquor brands, created distortions in the industry, encouraged bootlegging and is set to drill a hole into the overall revenues to the State exchequer.

For the consumer, the impact has turned out to be the highest, as the new tax structure, would push up the rates of several popular brands. In the Premium Scotch whisky segment, the increases are calculated at Rs 500 plus.

In what is perceived to be a rationalisation of the tax structure, the State Government has created three categories — Ordinary (less than Rs 400), Medium (Rs 401-700) and Premium (above Rs 700).

The sales tax (ST) per se has been jacked up from 70 per cent to 90 per cent in the case of premium brands. The margin of the Andhra Pradesh Beverages Corporation Ltd (APBCL), the main supplier, has been raised to a whopping 29.5 per cent from the present 15.75 per cent.

While this major change has led to a huge rise in prices in the premium segment, ST in the other categories remains same (70 per cent) and APBCL has not made much change in its margins on the other two categories.

In the earlier policy, there were five different categories - O (less than Rs 345), A (less than Rs 400), B (less than Rs 500), C (less than Rs 700) & D (above Rs 700). All these categories attracted the same ST, which was pegged at 70 per cent, plus the APBCL margins that varied with category, and was the highest for `D' at 15.75 per cent. This accommodated all sizes of players, industry sources argued.

The present rationalisation of categories and hike in premium brand duties is bound to aggravate the problem of the existence of the market with brand variants in Andhra Pradesh. In contrast, both Kerala and Tamil Nadu do not permit brand variants. Further, neither a similar brand nor an increase or reduction in price is permitted.

Mr Sunil Mehdiratta, speaking on behalf of the international liquor industry in India, felt that the new policy does not clarify itself on the tax structure on B.I.O. products (bottled in origin of country).

Similarly, for the bottled in India (BIO) brands also, there is no clarity in Andhra Pradesh. In New Delhi and Mumbai a flat rate of Rs 200 is charged, while Karnataka levies a 25 per cent on landed cost.

Therefore, if Johny Walker or Chivas Regal costs Rs 2,400-2,800 in Karnataka, in Andhra Pradesh it would cost Rs 5,000-6,000 now. This could encourage bootlegging and spurious liquor.

Mr Mehdiratta, who is also the Secretary General of the Indian Spirits and Wine Association of India, urged the State Government to bring in a rational duty structure so that the product is available to the consumer at a reasonable cost.

The estimated loss to the State exchequer would be to the tune of Rs 375 crore, according to the industry. Since, the consumers of premium brands are also frequent travellers, they would prefer to buy stocks from outside the State, which again would result in dip in sales and earning to the State.

The Andhra Pradesh Wine Dealers' Association has warned that the distortions in the policy have encouraged liquor syndicates from Tamil Nadu and Karnataka to pump in hundreds of crores to get a maximum number of licences.

They said the liquor trade was in deep crisis with low margins that hardly supported maintenance costs.

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