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The state government, in a measure to encourage wine producers, has waived the excise duty, currently levied at a rate of 50% of the manufacturing cost, for a ten-year period from September '01. A circular to this effect was issued last week.

This measure will help wine producers in the state who account for 60% of the total wine production in the country. Except for the Grover's group, based in Bangalore, all the other major vineyards in India are from Maharashtra, including Sula Vineyards and the Indage group. The country produced about three lakh cases of wine in the last fiscal.

Waiving the excise duty is expected to encourage grape farmers in the country. It may also result in reductions of the prices of domestic wine brands and thereby, an increase in sales. AM David, GM, Mohan Brothers, one of the largest wine and spirit distributors in the country, said, "This step will boost wine production in Maharashtra. This may also encourage other states to follow suit."

Waiving the excise duty will place domestic wine producers at an advantage against the importers of foreign wine. Domestic wine manufacturers are protected to a great extent by the basic customs duty and the additional duty levied by the Union government on the import of spirit and wine.

Last year, Indian tipplers consumed nearly 70,000 cases of imported wine, about 10% more than the previous year, despite a basic duty of 100% on imported wine, plus additional customs duty ranging from 40%-75%.

One of the reasons for the increase in the consumption of imported wines, is the permission the Union government has given to high-end restaurants and five-star hotels to import duty-free spirits and wines.

Although this has met with opposition from the domestic industry, the government has stuck to its original decision.

Ashwin Deo, who heads the operations of Moet Hennessy, the wine arm of LVMH group, said that the prevailing import tariff takes the price to 144%-267 % of the landed cost. He added that it was very difficult to sell the product at such prices.

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