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CVD plays spoilsport for liquor import

Rashmi Das

The government's decision to impose a countervailing duty (CVD) on liquor imports once quantitative restrictions (QRs) are lifted on April 1, has poured cold water over the plans of MNC subsidiaries as well as some Indian liquor barons who had planned distribution of imported liquor in the country through their existing network.

However, Finance Minister Yashwant Sinha did not specify the CVD rates in his Budget speech on Wednesday.

The CVD will be benchmarked against the excise duty imposed by the various states, ranging from 200 per cent in Maharashtra to 40 per cent in Rajasthan. The Indian liquor lobby has been asking for a CVD of 200 per cent. More importantly the CVD will be launched on the MRP.

To add to the woes of the MNCs, the finance minister has ignored their demand to lower the customs duty on liquor from the per cent 222 per cent to 70 per cent. These companies had drawn up ambitious plans to expand import portfolio in anticipation of a surge in imports after April 1. Now, the same companies are convinced that the option is no longer viable.

Commenting on the issue, United Distillers and Vintners (UDV) CEO Deepak Roy said, "With the proposed introduction of CVD, it is unlikely that there will be any legitimate market for global premium spirits and the upper-end consumers will not have easy access to global premium brands."

Though Bacardi -Martini India Limited (BMIL) had tied up with William Grant & Sons for marketing, there could be a rethink on the issue.

BMIL managing director Jayant Kapoor says, "Since the duty structure is not clear, decisions on import volumes cannot be commented upon."

Allied Domecq chief executive officer Srikant Illuri added, "It came as a surprise. Right now, the window of opportunity doesn't show itself."

Most of these companies have now come round to the view that the CVD will make their products frightfully expensive. The Scotch Whiskey Association, an association of such companies, is likely to hold a meeting within the next couple of weeks to take stock of the situation.

Abhishek Khaitan, president, Radico Khiatan Limited, said it would not make economic sense to concentrate on developing an import portfolio immediately. Radico Khaitan has a joint venture with Whyte & Mckay and had drawn up plans for expanding its import portfolio.

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