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High taxation on the Alcobev industry is threatening the future of the Indian alcoholic beverages market, The International Spirits and Wines Association of India (ISWAI), has said.
Taxation accounts for 67-80 per cent of AlcoBev product prices, leaving little for suppliers and trade to sustain and manage their operations, it noted. The Indian AlcoBev industry employs 1.5 million people and has an estimated market size of $52.5 billion (2020), which is the ninth largest in the world.
“The Indian AlcoBev industry is in deep crisis due to inflation on one hand and high taxation on another. Unless swift action is taken to reverse the situation by decreasing taxes or increasing product prices, India could soon be facing a situation that will be akin to killing the proverbial golden goose,” said Nita Kapoor, CEO, ISWAI.
The liquor industry has historically contributed 25-40% of revenues for state governments, but higher taxes without price hikes is pushing the industry into a crisis. While India has a comparative advantage in production because of the ready availability of raw materials like molasses and grains, the country needs to rehaul its policies that will encourage greater production of volumes for exports, she further noted.
Suresh Menon, Secretary-General, ISWAI, said that gross margins for makers of Indian Made Foreign Liquor during the quarter ended September were lower compared to the same period a year ago due to higher cost of ingredients.
SWAI estimates that alcoholic ingredients such as Extra Neutral Alcohol (ENA) and Barley are 12 per cent and 46.2 per cent more expensive than last year, while the cost of packaging materials such as glass and mono cartons rose by 24.9 per cent and 19 per cent, respectively, he said.
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