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Updated: March 3, 2012 10:22 IST

Stakeholders unhappy with special fee on grape wine

Sharath S. Srivatsa
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A view of wine stalls at the Palace Grounds in Bangalore on Friday. The festival, organised by Karnataka Wine Board, aims at benefitting all stakeholders of the grape economy: grape growers, wineries and wine connoisseurs. PHOTO: G.R.N Somashekar
The Hindu
A view of wine stalls at the Palace Grounds in Bangalore on Friday. The festival, organised by Karnataka Wine Board, aims at benefitting all stakeholders of the grape economy: grape growers, wineries and wine connoisseurs. PHOTO: G.R.N Somashekar

Rs. 300 a litre is imposed on pure grape wine made outside the State

It was a move to protect the interest of local wineries that was criticised as being protectionist. The Karnataka Government's retaliatory move in 2008-2009 of imposing a special fee of Rs. 300 on a litre of pure grape wine manufactured outside Karnataka (mostly Maharashtra) to protect local wineries has achieved the desired results. Yet, not every stakeholder in the industry has been happy.

Sample this. While around 30 per cent of the total wine sold in Karnataka came from two wineries prior to the imposition of the special fee, now 13 wineries in the State contribute to more than 70 per cent of total sales.

Sales are expected to double at over 33,000 cases in this financial year from nearly 15,000 cases (12 bottles of 750 ml each, 9 litres) in 2008-2009. In the same period, the number of local brands (labels) went up from a mere 9 to over 55.

“Local wineries, especially the new ones have benefited from this policy, though it has remained as protectionist. It was in retaliation to what Maharashtra did to Karnataka wineries with a high octroi fee that the special fee was enforced,” M.G. Robin Somaiah, Chief Executive Officer of Dada Winery, told The Hindu.

This high fee has practically kept out Karnataka wineries from Maharashtra, he added.

“Wineries like ours have benefited with cost advantage. Otherwise, it would have been difficult for new entrants to compete with Maharashtra wineries, which have received abundant subsidies/ advantages from the Government,” said Mr. Somaiah, who has been associated with the industry for nearly 15 years.

Sources in the Karnataka Wine Board acknowledged that the protection had helped wineries here, and that the area under cultivation for wine-variety grapes also went up from a couple of hundred acres to nearly 2,000 acres.

Not everyone, however, seems to approve of this protectionist policy. The high taxation in Maharashtra and Karnataka, the industry feels, has robbed wineries in the two States of good markets. While the octroi in Maharashtra has made it difficult for Karnataka wineries to access Mumbai, the biggest wine market in the country; the special fee imposed by Karnataka has forced most Maharashtra wineries out of business here.

“When wine industry is growing here, why should high taxation remain to protect local industry. Large investments have been made by wineries. Unless big markets such as Mumbai and Delhi are available easily, it would be difficult for us to see returns on investment only from Karnataka market,” said T. Raghavendra Gowda, Managing Director of Alpine Wineries.

He said: “I have raised this issue with the Indian Grape Processing Board. We have been waiting for a positive response from the two States.”

Many wine lovers also rue the fact that their favourite wines became expensive, and that the protectionism went against consumer interest. “With an exception of a few brands, the quality of wine is not good,” a wine connoisseur said.

Principal Secretary of Horticulture Department Vandita Sharma said that talks are under way between the two States to solve the impasse, and that it would take some time to remove the barriers.

I can understand the protection of our wines to develop the consumption. But the problem is the quality of Indian wine which is not very good if you compare it with imported wines. I think the government should invest in the know-how of vitification process rather than quantity to have more taxes!!! Anyway i like imported wine better than Indian wine... Let me give you a tips, you can have french wine Merlot at an Indian price 967 Rs on yzury.com...Great!!!

from:  Santosh
Posted on: Jun 8, 2012 at 13:27 IST
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