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ICRIER moots five-point policy for regulation of Indian alcoholic beverages sector
Thursday, 29 July, 2021, 08 : 00 AM [IST]
Ashwani Maindola, New Delhi
Aimed at developing transparent principles for regulation and pricing in alcoholic beverages sector in India, which can provide the basis for designing policies and pricing models by different states, the Indian Council for Research on International Economic Relations (ICRIER) and PLR Chambers have published a report titled ‘Developing Principles for Regulation of Alcoholic Beverages Sector in India’.

The report prescribes five-point policy recommendations towards developing transparent and predictable regulatory and pricing principles for the alcoholic beverages sector.

These include clear policy making, technology intervention, consultations with stakeholders, tariff reduction, and export opportunities.

According to the study, the state excise departments should lay down clear policies at predictable intervals of two to three years, which can help businesses to expand, to make long-term investments, and encourage new business models to flourish. The tax slabs need to be revised periodically in line with the inflation and raw material price changes. Greater transparency and predictability would encourage entrants of new players and competition.

Also, the state excise departments need to switch to online methods of granting licences and permits, which can prevent unaccounted transactions and corrupt practices. Technology should be used to monitor the sector through a robust traceability system rather than physical monitoring.

Besides, the state excise commissioners, finance ministers, and other stakeholders should engage in regular in-depth discussions to start off a process of transparent, predictable, and consultation-based price determination.

And, the government should focus on phased tariff and other duties reduction and Indian companies should be encouraged to export to improve the trade balance.

According to the ICRIER, the report encourages evidence-based policymaking, and in setting the stage for dialogue and discussion towards creating a predictable environment in the alcoholic beverages sector.

The statement by ICRIER reads, “The recommendations put forward in this report are aimed at helping the state governments in attracting more investment, create employment, expand the manufacturing potential and create an overall predictable policy regime and ease of doing business, enhancing India’s position in the global rankings. As India is trying to restart its trade negotiations with key partners like the European Union and Australia, tariff reductions will be a key area for discussion and this report provides a mutually beneficial tariff reduction framework, which can promote exports.”

The study found that variation and sporadic regulations have (a) often led to decrease in or significant loss of potential revenue for state governments (b) led to the growth of illicit liquor market and death related to its consumption (c) increased the requirements of multiple permits and compliance burden for the manufacturers, reduced ease of doing business and, (d) forced consumers to shift to lower quality products leading to health hazards. Due to excessive monitoring, policing and control over the supply chain of products from manufacturers to retailers, not many players have come up in this sector, resulting in an oligopolistic structure and only around 30 per cent of the logistics companies undertake transportation of alcoholic beverages. The sector has low value-addition and high dependence on imports.

Releasing the report, Pramod Bhasin, director and chief executive ICRIER, said, “To enhance transparency the State Excise Departments should switch to an online system of registration, licencing and permits. Digitalisation can help in better and transparent monitoring of the entire revenue collection process. Data analytics and technology-based solutions need to be adopted to monitor the supply chain and to establish traceability. This will help to address leakages and lead to higher revenue collections.  Innovative start-ups can be roped in for 1-2 such pilot projects.”

Present on the occasion were Rajiv Mehrishi, former Comptroller & Auditor General of India; Nita Kapoor, CEO, International Spirits and Wines Association of India (ISWAI); Dr. Sudipto Mundle, senior adviser, National Council of Applied Economic Research (NCAER); Vinod Giri, DG, Confederation of Indian Alcoholic Beverage Companies (CIABC); and Suhaan Mukerji, managing partner, PLR Chambers.
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