Bangalore: Karnataka, which sees itself as Maharashtra’s rival in the lucrative business of wine-making has decided to give its local wineries a fillip by making wine made outside the state more expensive.
Industry worried: A worker at a Nashik vineyard. Maharashtra wine makers have registered opposition to Karnataka’s proposed wine duty.
A legislation cleared by the state will increase the excise duty on wine made outside Karnataka to Rs300 a litre from Rs10 a litre. One expert said Karnataka’s move is a long-delayed response to Maharashtra which, seven years ago, implemented a wine policy that exempts wines made locally from a 150% excise duty that all other wines have to pay.
“This is essentially tit-for-tat,” said Alok Chandra, a Bangalore-based wine consultant who runs consulting firm Gryphon Brands Inc. Chandra added that the increase in prices could slow growth in the industry to 10% this year from around 30% last year.
Around 1.3 million cases of wine are sold every year in India — each case has 12 bottles, each with 750ml of wine—compared with more than 150 million cases of other liquor excluding beer.
Maharashtra, the largest producer of wines in India, has around 51 wineries which roll out brands such as Sula produced by Nashik Vintners Pvt. Ltd, Chateau Indage from Champagne Indage Ltd, and Zinzi from the Vijay Mallya led United Spirits Ltd, India’s largest liquor company by sales.
Through its new wine policy, Karnataka, which has just two wineries — Grover Vineyards Ltd’s in southern Karnataka and Hampi Heritage Vineyards Pvt. Ltd’s in Bijapur, a northern district bordering Maharashtra — wants to promote the wine industry in the state. Currently, the state has just 800 acres under wine grape cultivation while Maharashtra’s grape farms are spread over 12,000 acres mostly in the Nashik and Sangli regions.
Wine makers in Maharashtra have registered opposition to Karnataka’s proposed duty, a final notification on which is expected this month.
“We have been receiving objections from wine companies in Maharashtra, and the government will deliberate on them before the final notification of the policy,” said a government official who asked not to be named as he isn’t authorized to speak to the media.
“It’s extremely important that domestic industry also flourishes,” said Kapil Grover, director of Grover Vineyards which sells around 200,000 bottles of wine in Karnataka every year. He added that Maharashtra’s 150% excise fee on his wines, coupled with a Rs720,000 licence fee, forced him to move to Karnataka.
Consultant Alok Chandra said that high duties could hit smaller manufacturers who cannot afford to set up wineries in both states. “Only 10 (of the wineries in Maharashtra) are seen in Bangalore curently despite a level playing field so far,” he added.
“Nobody will benefit from this (duty),” said Abhay Kewadkar, business head (wines) of United Spirits, whose subsidiary, Four Seasons Wines Ltd, based in Baramati in Maharashtra, began crushing grapes earlier this year and currently markets Zinzi wines.
Kewadkar added that the two states ought to hold talks and find a solution before the issue spirals out of control. “Either the Maharsahtra government can increase duty further or it (the policies) may also trigger a reaction such that if tomorrow a winery is coming in Andhra, they can place a similar sanction.”
Meanwhile, an interim committee of the National Wine Board, a newly created body, held its first meeting on Friday at Pune. Though the constutition of the board and its agenda have not yet been decided, wine makers say it could be a forum for demands such as an uniform wine policy.