Domestic liquor makers have requested the Maharashtra government to reconsider its decision to reduce excise duty on imported products.
The Confederation of Indian Alcoholic Beverage Companies (CIABC) in a letter to the Maharashtra government has said reduction on excise duty on imported products has created an ”unequal and unfair playing field” against Indian-made foreign liquor.
The state government should encourage products made in India, which historically has been the main contributor to its revenues and economic prosperity, said a letter addressed to Maharashtra Deputy Chief Minister and Finance Minister Ajit Pawar.
”Excise duty reduction of such scale on imported products is disastrous for the Indian industry. It so distorts the level-playing field against the Indian industry, that consequences may be far-reaching leading to disinvestment, job losses and farmer discomfort,” it said.
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In November, the Maharashtra government had announced to reduce the excise duty on imported liquors by half, which is from 300 per cent to 150 per cent on imported liquor. The move was done to bring its price at par with that in other states.
According to CIABC, this reduction will make premium Indian malt whiskies such as Amrut and Paul John and other niche products unsaleable in Mumbai.
The prices of these Indian made super-premium products used to be 80-90 per cent of comparable imported products earlier thus allowing them some competitive space.
”After this change, the prices of Indian made products will become 30-40 per cent higher than similar imported products,” said the letter, written by CIABC Director-General Vinod Giri, adding it is evident that with that kind of price difference, Indian super-premium products will find it difficult to sell.
Moreover, it also added the decision would also discourage investment in Maharashtra and lead to job losses.
”As the price difference with fully Indian made product narrows down significantly, most Indian products are likely to lose competitive ground to imported products. The result may be a widespread loss for the Indian industry.
Moreover, the premise that such a duty reduction will prevent the smuggling of imported liquors from other states is ”misplaced” as the prices of Maharashtra is actually lower than in Karnataka, the most prominent neighbouring state.
”With this excise duty reduction, the fear is that stock will be smuggled out of Maharashtra to other states, which may force those states also to reduce duty, thus creating a domino effect which will be disastrous for the Indian industry,” CIABC said.
The Indian alcoholic beverage industry contributes nearly Rs 2.40 lakh crore in taxes to the exchequers of the state governments and an overwhelming 99 per cent of this is contributed by-products produced in India.
”Considering that we believe that the governments should take proactive measures to support domestic production instead of offering preferential treatment to imported products which do no such service to the society,” it said.