ICRIER moots five-point policy for regulation of Indian alcoholic beverages sector

ICRIER moots five-point policy for regulation of Indian alcoholic beverages sector
Pic Courtesy : Paul John Single Malt

India's beverage sector is a key area for developing pricing models and policies. PLR Chambers and the Indian Council for Research on International Economic Relations have published a report, titled "Developing Principles for Regulations of Alcoholic Beverages in India".

This report offers five recommendations for policy to develop transparent pricing and regulatory principles that are predictable and predictable in the alcoholic beverages industry.

These include clear policymaking, technology intervention, consultations and tariff reduction. According to the study state excise departments need to establish clear policies at predetermined intervals of two-three years. This can help businesses grow, make long-term investment decisions, and encourage new business models. It is important that the tax slabs are updated regularly in order to keep up with inflation and changes in raw materials prices. More predictability and transparency would encourage competition and new players.

The state excise department should also switch to online applications for granting permits and licences. This can help prevent unaccounted transactions as well as corrupt practices. The sector should be monitored using technology, not physical monitoring.

The state excise commissions, finance ministers and other stakeholders should also engage in ongoing in-depth conversations to begin a transparent, predictable, consultation-based process for price determination.

Also, the government should concentrate on gradual reductions in tariffs and other duties and Indian companies should encouraged to export to increase the trade balance.

According to ICRIER, this report encourages evidence based policymaking and in setting the stage towards dialogue and discussion towards creating an environment that is predictable in the alcoholic beverages industry.

ICRIER's statement reads: "The recommendations in this report are designed to help the state governments in attracting more investment, creating employment, expanding the manufacturing potential, and creating a overall predictable policy regime, ease of doing business, and enhancing India’s position in global rankings. India's trade negotiations with key countries like Australia and the European Union are resuming. The issue of tariff reductions is a major topic for discussion. This report provides a framework that promotes exports and offers a mutually-beneficial tariff reduction framework.

Variation and sporadic regulation have (a), often caused a decline in or significant loss for state governments; (b), led the growth of illegal liquor market and death linked to it consumption; (c) increased compliance burdens for manufacturers and multiple permits, made it more difficult to do business, and forced consumers to choose lower quality products which can pose health risks. The sector has been dominated by few players due to the lack of monitoring, policing, and control of the supply chain from the manufacturers to the retailers. This has led to an oligopolistic structure in which only 30% of the logistics companies are involved in transportation of alcoholic drinks. The sector is highly dependent on imports and has low value-addition.

Pramod Bhasin, director and chief executive of ICRIER. He released the report and stated, "To improve transparency, the State Excise Departments must switch to an electronic system for registration, licencing and permits. Digitalisation allows for a more transparent and efficient monitoring of all revenue collection processes. Technology-based and data analytics are needed to track the supply chain. This will prevent leakages and help increase revenue collections. You can recruit innovative start-ups to help with 1-2 such pilot programs.

Rajiv Mehrishi was a former Comptroller & Auditor General of India. Nita Kaput, CEO, International Spirits and Wines Association of India, was also present. Dr. Sudipto Mundle was a senior adviser at the National Council of Applied Economic Research. Vinod Giri was DG, Confederation of Indian Alcoholic Beverage Companies. Suhaan Mukerji is managing partner at PLR Chambers.