In Low Spirits

THIS is one industry that prefers to do without the spirit of economic liberalisation, five years after it was uncorked. Indian liquor manufacturers just can’t bring themselves to raise a toast to the competitive atmosphere brought about by the entry of transnational corporations (TNCs), apart from the supposedly imminent delicensing of the industry. They say, it’s not the competition per se that they fear, it’s what they call ‘the unfair competition’ that they would prefer to do without.

Shackled for years by the Government, dismissed as a low priority industry and inhibited by strict licensing and controls, the liquor industry says that it would have preferred it if the Government had removed the shackles first, allowed them to become more competitive and only then allowed TNCs to enter India. Importantly, they wish the Government had made sure that the TNCs complied with the stipulated norms. Since, they claim, the TNCs haven’t exactly played by the rules.

Represented by the All India Distillers’ Association (AIDA), the Indian liquor industry has two main grouses. Grouse number one: the Government is seriously considering delicensing the industry and the Industry Ministry has reportedly recommended this to the Cabinet, whose approval is awaited. Says L. N. Batra, secretary general of the AIDA: "We already have a licensed and installed production capacity of 2,824 million litres of alcohol in a year whereas the demand stands at 1,200 million litres. The bulk of the capacity therefore, is not utili-sed." Thus Batra questions the merit of deli-censing since there is no need to augment capacity. Adding that this move will be detrimental for the health of the local industry and the only beneficiary of this move will be the TNCs, who have so far been compelled to get domestic joint venture partners with a license to distil alcohol, since no fresh licenses were being given. "TNCs will do away with their Indian partners once the industry is delicensed," he warns.

Predictably, TNCs are extremely keen on delicensing. Says Deepak Roy, managing director, International Distillers India Limited (IDI): "I am all for it. If the country is liberalising and delicensing every industry, then why should the liquor industry be left out? Why should there be any protection?" Adding that he would like every player to compete in the Indian market.

 Grouse number two: Afflicted by the scarcity of molasses, which isn’t even enough to meet 70 per cent of the industry’s requirement, the AIDA has been sulking ever since the Government allowed TNCs—International Distillers India (IDI), and Macdonald and Muir—to produce molasses-based alcohol. And the TNCs are making full use of this. Of the 10 brands launched by IDI, six are molasses based, of which five are Indian Made Foreign Liqour (IMFL) products. This, local liquor manufacturers claim wasn’t what IDI set out to do in India, but was compelled to, since India is predominantly a whisky market

 In fact, the original Foreign Investment Promotion Board (FIPB) application of IDI’s parent company International Distillers and Vintners (IDV), clearly stated that IDV is a company centered on white spirits and wines and would be producing the same in India. There was no mention of distilling IMFL. By doing so, Indian liquor companies claim that IDI is violating the ’spirit’ of the FIPB clearance. But Roy contends: "it’s wrong to say that we’ve launched whiskies while the clearance is for white spirits and wines. We started with Smirnoff, which is IDV’s highest selling brand, then came Malibu, Gilbey’s Gin and Kelly’s liqueur. Of the 10 products launched, just three are whiskies which isn’t unfair considering that the Indian market is predominantly a whisky market." But the AIDA insists that IDI has launched four whisky brands and not three. But the fact is that in view of the lucrative whisky market in India, IDI’s whisky brands form a major portion of their liquor stable, which wasn’t what they initially set out to do. And that clearly hurts the local liquor manufacturers. 

To add further insult to injury, Pernod Ricard of France, which has yet to begin operations in India, and has got approval to produce non-molasses based alcohol, is keen that the Government give it approval to use molasses. In fact, United Distilleries India Ltd (UDIL), will also be entering the molasses based IMFL market in December this year. Clearly, other TNCs will use molasses the moment they get the opportunity to do so. And that’ll have the AIDA, fretting and fuming further.