Volumes will be under pressure post the hike in excise duty by the state government. Wine sales may jump to a new high as this segment has not been touched by the Budget
If you are thinking of spending a relaxed day this summer, with a glass of beer, watching a cricket match, think twice. You could end up shelling extra bucks as the prices of beer and whiskey are likely to be increased.
In the recently announced state budget, the Maharashtra government has announced a hike in excise duty on liquor products, including country liquor, Indian Made Foreign Liquor (IMFL) and beer that is sold in the state.
The duty has been increased by 50% for IMFL and over 100% for beer. Accordingly, the excise duty has been hiked by Rs35/proof litre for country liquor, Rs80/proof litre for IMFL, Rs18/bulk litre for mild beer and Rs22/bulk litre for fermented beer (or beer with alcohol content higher than 5% v/v).
This hike, industry experts say, would obviously result in a rise in the prices of liquor products, because the price hike would most probably be passed on to the end customers. It would also likely impact the volumes and margins of liquor players in the state. IDFC Securities, in its event update report has stated, "The increase in duty will surely lead to a material increase in the price of liquor products in the state."
As per the same report, for the IMFL segment, the pricing impact will be sharper for lower-end brands. "Regular and economy segment brands will see a 25-35% price increase, while the impact on premium and above segments will be 10-15% (for a 750ml bottle)," it says.
On the pricing of beer post the hike, the report states, "The average price for a mild beer bottle of 650ml stands at Rs60. We estimate a 20% increase in the MRP per bottle on the back of the duty hike for mild beer. For strong beer, the pricing is estimated to range from Rs65 to Rs90 per bottle. Thus, the price increase is estimated to be to the tune of 20% for lower value strong beer and 13%-14% for the premium/ultra category."
For the beer market leader in the state, United Breweries, post the hike the volumes are expected to be impacted. The IDFC report says, "With respect to beer, the industry leader, United Breweries, Maharashtra, is the largest volume contributor and forms 17%-18% of its total volumes. Thus, we see the excise duty hike impacting volumes for UBL."
Maharashtra is estimated to contribute less than 10% to the overall IMFL industry volumes in the country. "For United Spirits the market is estimated to contribute 7%-8% to its overall volumes. Thus United Spirits is likely to see some volume pressure in the state. For Radico Khaitan, the contribution from Maharashtra is less than 3% and hence the impact would be limited," the report says.
Meanwhile, wines which got 100% exemption from excise duty in Maharashtra, expect a boost in sales. Jagdish Holkar, president of the All India Wine Producers' Association, told Moneylife, "We will definitely witness a boost in sales of wine. But our cost of production is still high and we are working on measures to reduce it so that the end consumer doesn't have to pay more."
There is also fear in the liquor industry that such a hike in excise duty will have a recurring effect and that other states might follow suit. "The event is directionally negative for the industry as other states could follow suit. The extent of excise duty pass through and corresponding volume impact in the state will be the key monitorable," the IDFC report said.
The second part of the session has been dispensed with on account of the assembly elections scheduled in five states
New Delhi: The Budget session of Parliament closed today. It was the shortest Budget session in recent times and will be remembered more for the acrimony over issues like the appointment of the CVC to the cash-for-votes scam.
The highlight of the month-long session during which there were 23 sittings, was the setting up of the Joint Parliamentary Committee to probe the 2G spectrum scam, over which the entire winter session was disrupted, reports PTI.
During the just-concluded session, there were regular uproars over various issues which resulted in the Lok Sabha losing over 25 hours due to interruptions over adjournments. However, the members made up for this by sitting late for more than 26 hours.
In the Rajya Sabha 20 hours were lost due to interruptions and members also compensated for this by sitting late for over 12 hours.
In view of the "unfortunate logjam" in the previous session, Speaker Meira Kumar expressed satisfaction over the "successful" transaction of business in the Budget session.
For the first time since 2006, the Budgetary exercise was completed before the end of the current financial year.
The second phase of the Budget session, which was to be held in April, was dispensed with in view of the assembly elections in five states.
With elections scheduled in West Bengal, Kerala, Assam, Tamil Nadu and Puducherry, the rival sides utilised the session to score points over each other.
The BJP found itself isolated when it made Parliamentary Affairs Minister PK Bansal a target over the issue of allotment of kiosks in Chandigarh.
The evacuation of Indians from troubled Libya, radio collaring of Indian students in an American university, the Income-Tax notice to the Gujarat government and attacks on Indian fishermen by the Sri Lankan navy also figured prominently during the Parliament session.
All 85 licence holders have replied to show-cause notices over ineligibility or for missing roll-out obligations
New Delhi: The telecom ministry said today it will decide in a month's time on the cancellation of licences given by former telecom minister A Raja to firms that were allegedly ineligible, in 2008.
"We have received replies from all 85 licence holders who were issued show-cause notices. We are legally examining them and should be able to take a decision on it in a month's time," telecom secretary R Chandrasekhar told journalists. He categorically denied that any licence was cancelled so far, reports PTI.
The telecom ministry had issued notices to firms on two counts-ineligibility for licences and missing roll-out obligations within the stipulated timeframe. The DoT gave the operators 60 days to file their responses to the show-cause notice for cancellation of licences. "In certain cases, 60 days are over, while in some, there is till some time," officials said.
Mr Raja faces charges of issuing 122 licences in 2008 without auctioning the scarce resource spectrum, which caused a presumptive loss of over Rs1.76 lakh crore. The matter is being examined by various investigating agencies as well as a parliamentary panel.
Notices have been issued to Swan Telecom (now Etisalat DB), Datacom (now Videocon Telecom), S Tel, Uninor and others, either for ineligibility or missing roll-out obligations.
In its reply to the Public Accounts Committee (PAC), headed by Bharatiya Janata Party leader Murli Manohar Joshi, the Department of Telecommunications (DoT) rejected the allegation of any notional loss due to the issuance of 122 new licences in 2008 and said that the premium placed on the scarce resource from the perspective of a producer need not necessarily translate into a loss when seen from the view point of the consumer and public welfare.
"The concept of notional loss when spectrum is given at a price discovered a few years earlier, has to be balanced with the gains accruing to the consumers and the general improvement in public welfare in the form of faster economic growth," the DoT said. The PAC had sent 40 questions to the DoT relating to the 2G spectrum scam.
Suggesting that the notional loss reported by the audit report should be seen in the light of the benefit that it has given to consumers and general public welfare in the form of quick economic growth, the DoT said the objectives of the Telecom Policy since 1999 were to increase tele-density and affordability for consumers, while maintaining a level playing field for incumbents and new players, as well as revenue accrual for the government.