The price-value ratio

By: | Published: September 24, 2017 2:52 AM

If I had a rupee for every time someone sighed and exclaimed that wine is extremely expensive in India, I would be a rich man. If I collect GST on that rupee, I’d be considered even more legitimate.

GST, taxed commodity, FSSAI, Indian economy, wine drinking, socio economic sanity, india, customs duty, wine, wine industryThe wine industry, both for imported produce and the local stuff, is suffering. It’s like a child with a congenital condition. (Reuters)

If I had a rupee for every time someone sighed and exclaimed that wine is extremely expensive in India, I would be a rich man. If I collect GST on that rupee, I’d be considered even more legitimate. Considering how the wine industry is going at the moment, collecting rupees might soon become the only option left for me and my fellow sommeliers to keep putting some (stale) bread on the family table. I may try and make light of it—what, that was a joke, Magan?!—but the reality is rather grim, much darker than even my sense of humour. The wine industry, both for imported produce and the local stuff, is suffering. It’s like a child with a congenital condition. And every time this little burgeoning vine seems to get better, a new barrage of ridiculous laws or even more ridiculous people seem to cripple it further.

Allow me to explains sans the roundabout metaphors. To begin with, wine is a heavily taxed commodity. It is, in fact, so heavily taxed that it makes buying a sports car seem like a sensible decision and in no economy in the world is buying sports cars ever any measure of socio-economic sanity.
But these taxes could be avoided by outlets by declaring their foreign exchange earnings. This used to be a huge relief, but recently, this privilege has been withdrawn and each state has found its own innovative objection. In some states, this certificate can only be used by Indian hotel chains, implying that if you are the owner of a multi-billion-rupee hospitality establishment, but decided to get in a foreign management under a franchised format, you have betrayed the Indian economy and shown distrust in our indigenous capabilities. In other states, far more fair, nobody can use this licence any more. In other states, they are finding a new zanier way to top these existing anomalies. But the hotels aren’t all sagacious either, for when they were issued these certificates, instead of passing on the benefit of the reduced price (160% less customs duty), they decided to pocket it. Who could stop them? Most stand-alone outlets didn’t have this option, so they couldn’t have competed on price. Where else could the customer looking for a five-star experience go? So they made golden bales while the sun shone bright, eclipsing the custom duty.

But the entire industry, hotels and restaurants alike, is obsessed with beverage cost percentage. They want it real low and to do that they extract profits so high it’d give a guy vertigo to just look at the prices. A good hotel operates on 20% beverage cost, meaning that they go up to five times on their buying price. Abroad, the norm is three-four times, but at least they aren’t riddled with 200-plus percentage of duties and taxes, so it still seems less illogical. Most importantly, while this formula may work with regular whiskey or your everyday aerated beverage or soda, it certainly doesn’t fly with wines or more premium products under a heavily taxed regime. Sure, bars could drop prices, but why bother? The argument appears to be that if everyone is doing it, then surely it isn’t wrong. Also, have you seen what the rents are these days? Maybe, one needs to dig deeper to find a solution to the pricing conundrum.

Either way, the consequence of all this inflated pricing is that wine drinking remains stunted and far from becoming a cultural entity in India. People drink wines for all sorts of reasons, but for a country of 500 million potential imbibers, we barely drink at all. Now, I am not trying to encourage all to pick up the glass or pace up, all I am trying to draw attention to is the fact that heavy taxation, combined with nonsensical margins, leads to lowered consumption, which then puts the entire pressure on the last link in the chain, that is, the producer or importer. Most of the players I know in both fields are still bleeding cash while they wait it out, hoping that a new day will come when taxes, duties, registration and distribution costs, and FSSAI requirements will take a turn for the sensible. But if this doesn’t happen soon, many will prefer to give up entirely or keep bringing in cheaper swill, which is the last thing that a nascent industry needs. This is not the first time I have written about the high taxes or the ridiculous margins on alcohol charged by establishments. And while I say wine, I could well include local craft beers or premium whiskies in the mix. So far, nothing has changed. In dire times like these, the only thing left to do is to continue hoping even harder.

The writer is a sommelier

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