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Last Updated : Sep 13, 2019 10:24 AM IST | Source: Moneycontrol.com

In India, an alcoholic beverage needs to be registered separately in every state of sale

The report identifies three interconnected sectors – sugar, alcoholic beverages, and tourism. The three specific sectors were chosen as all the three sectors are co-dependent

Kamalika Ghosh @GhoshKamalika

If an alcoholic beverage manufacturer in India wants to sell one product in ten states of the country, the manufacturer is required to register that brand separately with all ten state governments, a report by Pahle India Foundation, a not-for-profit policy think tank, has found.

The organisation has conducted research on an integrated value chain approach to ease of doing business and has found that a uniform implementation would lead to better results for states in achieving ease of doing business.

"The reforms that are being executed as detailed by the BRAP (Business Reform Action Plan) framework may not necessarily have the desired impact on certain sectors that are most important for the state, to increase its GSDP," the report says.

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The report identifies three interconnected sectors – sugar, alcoholic beverages, and tourism. The authors conducted interviews stakeholders across the value chain for all three sectors, like businesses houses, farmer groups, alcohol distributors, alcohol retailers, and restaurant owners among others.

The three specific sectors were chosen as all the three sectors are co-dependent.

"As an integrated value chain, the sugar industry acts as an input industry for the alcoholic beverages sector, and the tourism industry is the output sector. Problems in any of these three will have ramifications on the other two, given their co- dependent relationship," the report says.

The three sectors also present an interesting case of regulations. Sugar is regulated completely by the Centre, while alcohol is completely regulated by the states. Tourism, on the other hand, is regulated by both the centre and states.

The report says that as a standalone industry, sugar hasn't generated profits for manufacturers.

"It is important for the market for other by-products to be developed accordingly," the report says.

For the sugar sector, the report has found that one of the primary problems faced by the sugar industry is with regard to the pricing of sugarcane. The price for sugarcane, known as fair and remunerative price (FRP) is fixed based on the recovery rate and other parameters, by the Commission for Agricultural Costs and Prices (CACP).

However, state governments announce their own price, known as state advised price (SAP).

"SAPs are always set higher than the FRP, which according to the Price Policy of Sugarcane creates distortions in the industry," the report says.

The report also says that if commercial prices for sugar are market-driven, rather than controlled, there would be a greater chance of the miller being able to subsidise the retail price, the report says.

For the alcoholic beverages sector, the report finds that there is a lack of coordination between state excise, food safety and Standards Authority of India (FSSAI) and, Legal Metrology (Packed Commodities) Rules (LMR) on what goes on a label for registration.

"If any changes are introduced in the middle of the excise year, it becomes a hassle to register the new label and re-label or replace already labelled stocks," the report says.

Labels are different for all the states in India with each state having different rules and regulations for products sold in their state. Different labels for each of the brands, for different sizes of bottles, across all states have to be registered, the report finds.

The report also says that the price of the beverage is determined by government intervention, which varies across states and that it is common for states to deny manufacturers price increases to offset manufacturing cost inflation and levy changes.

"Price approvals and increases are swathed in opacity and discretionary powers, with little to no transparency, no clear process laid down in law and no guiding principles," the report says.

Finally, the tourism sector is the final link in the integrated value chain. It serves as an output sector not only for alcoholic beverages but also for sugar.

"Ease of doing business reforms introduced in one sector tend to have spill over effects for both the forward and backward linked sectors," the report says.

In the tourism industry, the hospitality and food services sectors largely cater to the leisure and MICE (meetings, incentives, conferences, and exhibitions) tourism segments, the report found.

"Both leisure and MICE tourism suffer when prohibition is applied. Not only do states lose revenue from excise, but also revenue from GST on food and non-alcoholic beverages," the report finds.

The report has found that the two major concerns of the hospitality and food services industries are prohibitive costs of starting a business and delays in obtaining licences and permits.

The report recommends reviewing the Excise Acts in order to remove redundancies and update the Acts according to the business requirements of the day. There is also a need for a separate pricing mechanism for retail consumption and commercial consumption for sugar.

"While the government can continue to control sugar prices for the retail sector, the price for commercial use must be market-determined," the report says.

The report also recommends a comprehensive sugar trade policy and that for alcoholic beverages, state governments that there should be an online portal (like Delhi) for applying and renewing of all licences through the portal.

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First Published on Sep 13, 2019 10:24 am
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