United Breweries (UBL) chairman Vijay Mallya has sought removal of beer from the list of alcoholic beverages, seeking closure on a long-pending industry demand. At the company’s annual general meeting on Tuesday, Mallya said such a move will encourage consumption of low-alcohol beverages in the country.
“The single largest constraint to profitability remains intrusive government regulations which are erratic, with often unexplained changes to both regulations and taxation. In most of the world, beer is the preferred beverage of choice particularly for young consumers and internationally ranks third among all beverages after water and tea,” he said.
He also said that while the proposed Goods and Services Tax (GST) was a land mark legislation, exclusion of the liquor industry from GST would lead to “Balkanisation” of Indian states with regard to the industry and impose punitive costs on it.
Decades of “perverse taxation policy” that equates spirits and beer have resulted in beer being prohibitively expensive as a share of the consumer’s wallet. “I have been on the forefront of efforts to educate the state government on the need for a rational regulatory and taxation policy which will also bring long term benefits to our citizens,” Mallya said at the AGM.
He said the current taxation policy has been driving youngsters to prefer hard alcohol with attendant moral and social consequences in preference to beer which is a low alcohol social beverage. Currently, the annual per capita consumption of beer in India is below 2 litres while it is 27 litres globally, he added.
“I believe this industry can reach an inflection point and really explode and that depends on the government’s willingness to tax beer according to alcoholic strength. What I have been telling the government is that you are treating beer with 5% alcohol the same as hard liquor which has 40% alcohol. This is obviously irrational,” he said.
Beer contributes around 5% of alcohol consumed in India. Recent surveys show beer is the preferred alcoholic beverage for young Indians. UBL has a market share of around 52%, while its nearest competitor has less than half of UBL’s share, Mallya said.
* UBL shareholders on Tuesday approved the appointment of Shekhar Ramamurthy as MD. He had succeeded Kalyan Ganguly as MD from August 1
* The AGM approved the re-appointment of UBL chairman Mallya as director. Shareholders also approved the appointment of directors Sijbe Hiemstra and Frans Erik Eusman
* The UBL Board has declared 100% dividend (Re 1/equity share) for 2014-15 and the AGM approved the resolution