Falling sales hit wine firms

The world's fastest-growing wine market for the past five years, has come crashing down.

The Rs 800-crore (Rs 8 billion) Indian wine industry is facing a situation where nearly half of what it produced this financial year, so far, remains unsold.

According to data compiled by the Nashik Valley Wine Producers Association, over 15 million litres of wine lies unsold.

India has a total wine production capacity of 34.5 million litres. Maharashtra tops the list with a production capacity of 31 million litres, while Karnataka accounts for about 3 million litres. The balance is produced in Madhya Pradesh and Tamil Nadu.

Industry sources attribute this situation to the global meltdown and the fall in tourist arrivals. Besides, exports to the US and Europe fell sharply. Then there are the steep tax rates, including VAT, excise duty, licence fees and registration fees charged by various states.

The woes of the industry are visible in their balance sheets. The revenues of wine maker Indage Vinters fell to Rs 13.8 crore (Rs 138 million) for the nine-month period ended December 2009, compared with Rs 144.4 crore (Rs 144 million) last year.

It reported a net loss of Rs 48.4 crore (Rs 484 million), compared with a net profit of Rs 18.30 crore (Rs 183 million) a year ago.

For the financial year ended March, 2009, Indage reported a net loss of Rs 60.7 crore (Rs 607 million) on revenues of Rs 148.11 crore (Rs 1.48 billion).

Pradeep Patil, a senior executive at Sula Wines, says the industry needs grape spirit licence. Besides, brandy produced entirely from grapes should have zero excise, VAT refund scheme and minimum licence fee.

Sanjay Holkar, director of Vinsura, which has a production capacity of 600,000 litres of red, white and sparkling wines at Nashik, said the industry was at a loss over the disposal of unsold stock.

Sadashiv Nathe, an office-bearer of the Nashik Valley Wine Producers Association, said India was expected to crush about 17 million litres of grapes to produce wine by the end of the current crushing season in April.

"It's high time that the government allows distillation of unsold wine to produce grape spirit, which can be used for manufacturing of alcohol," he said.

Rajeev Samant, CEO of Sula Vineyards, which has a capacity of 5 million litres, said the government should consider allowing wineries to distill some of the unsold wine into grape brandy, especially as India has hardly any grape brandy production at present.

"We want easy licensing procedures as well," he added.

Samant said since wine was basically an agri-product, the industry had been arguing against 20 per cent VAT. Lower VAT will give a huge boost to the wine market, the size of which is negligible at present (less than 1 per cent of all alcoholic beverages consumed in India).

Samant said the US and UK would continue to be difficult markets for Indian wines. He, however, felt that the industry fortunes had changed for the better in the past three months.