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Liquor sector wants lower CVD move rolled back

P.T. Jyothi Datta

NEW DELHI, March 31

IF it's the season for roll-backs, can the alcoholic beverages industry be far behind?

Drawing up the bogey of a deluge of "cheap foreign liquors" entering the country, the domestic liquor industry has urged a reversal of Budget 2002-03's reduction of additional duty on imported liquor.

In a letter to the Finance Ministry, the Food Processing Ministry and the members of the Standing Committee, the All-India Distillers Association (AIDA) has urged the Government to restore the additional duty on imported liquor, priced up to $25 per case, to 150 per cent.

This year's Budget proposed a reduction in the rate of additional duty or countervailing duty (CVD) on imported liquors to 75 per cent for imports priced at $25 and less per case.

Imports with a price tag above $25 would attract an additional duty of 50 per cent.

Last year's Budget appeased the domestic industry, when the additional duty was imposed on imported liquor at the following rates: 150 per cent additional duty on CIF value up to $20; 100 per cent on cases between $21 to $40 and 75 per cent on cases above $40 per cent, an industry watcher pointed out.

The association that is a platform for the big daddies of the liquor industry points out that in the past, the cheapest varieties of liquors priced up to $20 were subjected to duty at the highest rate, as they posed the most serious threat. This time around, however, "the additional duty has been reduced to half of what was imposed in the preceding year. This will stimulate large-scale import of cheap liquors," an industry official said.

Industry representatives point out that the subsequent reduction in the sale of Indian products would impact State revenues and further lead to the closure of factories and retrenchment of staff.

"The impact of the new duty rates on the 73 million case domestic spirits market will be felt in the prestige segment, priced at Rs 200 and above per 750 ml bottle," they said.

The AIDA's Secretary-General, Mr L.N. Batra, told Business Line that, "Imported liquor brands across all flavours will now stand to enjoy a price advantage over its IMFL counterparts, thanks to the Budget's largesse."

Cheap Scotch whisky brands such as John Barr, Northern Scotch and Scott Bard, priced between $15 and $20 per case in the country of origin, will cost between Rs 312 and Rs 416 to Indian consumers at the new proposed duties, he observed. "This would be on par with Indian brands like Royal Challenge, McDowell Signature, Peter Scotch and Aristocrat Premium, priced between Rs 300 and Rs 400 per bottle," he added.

And this, even as the domestic industry battles with duties of 693 per cent in Karnataka and 500 in other States, he said.

Further, he added, liquor companies may be forced to shift their production facilities abroad.

According to highly-placed officials in the Food Producing Ministry, foreign liquor companies were also asking for more than what the Budget had proposed. "More reduction in the basic customs duty," the official said.

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