Global Alcohol Lobby Seeks Inflation-Linked Pricing Model In India

The International Spirits and Wine Association of India urged regulators to consider an inflation-linked supplier pricing model for the liquor industry as it flagged major issues in the alcoholic beverage sector.

An inflation-pricing model will likely ensure transparency and a consistent approach towards state-supplier pricing, it said in a statement on Monday.

The lobby, with investments and business operations across India, said the margins of manufacturers are shrinking amid high discriminatory taxes, rising inflation and high import tariffs. It sought urgent attention towards high excise duties that account for nearly 70–80% of the maximum retail price—the highest price that can be charged for a product.

As inflation rises, the alcoholic beverage sector faces significant challenges amid rising production costs, raw material costs, and very high import duties, ISWAI said. A surge in glass prices and packaging costs further contributed to rising supplier cost, it said.

Prices of extra-neutral alcohol, according to ISWAI, have risen 53% since the 2018 fiscal on the back of fast-tracking of the ethanol blending programme, where ethanol is mixed with petrol, as part of the country's efforts to slash its burgeoning fuel import bill.

Meanwhile, glass prices surged 79% since the year ending March 2018 and 11% during this fiscal. The cost of packaging has also gone up by 22–31% during this period, ISWAI said.

“The liquor industry has consistently and significantly contributed 25–40% of revenue for state governments and nearly 2% of nominal GDP," ISWAI added. “However, the current tax and tariff structure, characterised by high excise duties, limited supplier price flexibility and exorbitant import duties of 150%, is pushing the industry towards a crisis.”

Apart from considering an inflation-pricing model, ISWAI also urged regulators to rationalise ad hoc levies and taxes imposed by state governments and use operational technology for ease and approvals.

Such steps, the lobby said, will create new employment opportunities, enable consumers to access a variety of affordable and premium choices, and position India as a leading player in the global spirits market.