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Uncorking trouble: Wine glut swamps vineyards worldwide

There is a wine glut across the globe. The scenario may further worsen for Indian wineries—when they are already selling their products at depressed prices

In India, wine inventories are piling up, retail prices of wine have been falling and grape harvesters are stuck with their crop as winemakers are no longer looking at buying more grapes from them. The same situation is being faced across the globe.

The scenario is especially grim for Indian wineries. The unsold wine stored in their tanks has resulted in winemakers selling their produce at a lesser price, with some even providing discounts like ‘buy one bottle and get one free’. During the last week of November 2009 when Moneylife had contacted Indus Wines, it had around 90% of its wine lying unsold in its tanks, while Sula Wines had over 40%-50% of its wine still in its inventory.

In Australia, winemakers are also facing a wine glut and are looking to sell their produce in India. At a recent Confederation of Indian Industry (CII) conference, Peter Forby, Australia’s consul general and trade commissioner (western India) said, “There are a number of Australian companies who are looking to encourage the sale of wines in India and a number of Indian companies are looking at collaborating with Australian companies.”

The wine glut in Australia has forced grape harvesters to destroy nearly 40,000 hectares of the 165,000 hectares of wine-growing area in the country

The scenario is similar in other parts of the globe. For years, France produced a surplus amount of wine, which has resulted in global overproduction. But with Chile and Australia in recent years producing more wine for the world market, France ramped up its wine production. The end result is that French producers are turning their wines into ethanol.

In California’s wine country, Napa Valley, the scenario is also grim with the recession also affecting the wine industry. Napa Valley, which faced a property bubble, overstock of premium wines and rising competition from around the globe, saw premium wine brands dropping their prices.

According to Silicon Valley Bank's annual wine market report for the US market, domestic sales of bottles that cost more than $10 were estimated to have fallen 2% to 8%. Premium wines priced between $50 and $125 were considered as dead zones in 2009. Not just that, even the costs of raw material plummeted—grapes were being sold at $1,000 a tonne in 2009, when in 2008 the cost would have been $5,000.

The Napa scenario isn’t different from the one India is facing right now. The past two years have not been great for winemakers with the aftermath of the recession impacting the hospitality industry.

Before 2007, the wine market was growing at 28% on an annual basis. However, since 2008, the market has been dropping on an average of nearly 30%.

The problem facing the industry is not only the drop in demand and sales, but also the restricted marketing structure—both domestic and international—for Indian wine firms, according to Nasik Valley Grape Promotion Association president, Pradeep Panchpatel. With the current bleak export scenario—and the worldwide glut—Mr Panchpatel believes that winemakers can’t make any profit abroad. “Export duties are very expensive and hard to bear,” he said.

Mr Panchpatel added that the government should support vineyards by permitting them to produce brandy and also lower the current tax rates.

Grape farmers are still awaiting their payments for their supplies to wineries last year. But what is even worse is that this year, there are no buyers for their grapes.

Many farmers have started selling their grapes to wineries on credit in the hope of getting some cash in the future. Others have started selling their grapes at a price much lower than the market price.

Again, the Indian government has not been able to market domestic produce internationally. Farmers were earlier told that winemaking was a lucrative business. However, the government failed to mention that the business was one with a lot of risks involved.
 

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COMMENTS

Dr. D. P. Nerkar

7 years ago

Dear Sir,
I feel although what you have mentioned is a bitter fact. There will be good time coming for wine industry in India. as the economy is improving people particularly from IT will have liking for wines. What is required is good quality,marketing strategy and Govt. support by lifting the state wise duty. There should not be any duty on wines and it should be freely available without excise haseles. tehre is noexcise but the rules to be followed makes it difficult to market. It should be available as any food other article.

TDSAT declines relief to private telecom operators on CAG audits

As per the TRAI Act, the accounts of private operators can be audited by CAG and this provision was also incorporated in the licences of these players

In a blow to private telecom operators, who have been demanding that the Comptroller and Auditor General of India (CAG) be stopped from vetting their account books, the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) has declined interim relief, saying it had no powers to intervene, reports PTI.

Four leading operators, Bharti Airtel, Vodafone, Tatas and Reliance Communication (Rcom), besides state-run company Bharat Sanchar Nigam (BSNL), have been asked by the CAG to submit their accounts books for the last three financial years to ensure that they were paying what is due to the government in terms of licence fee.

The private operators, who were earlier subjected to a special audit after the government observed some irregularities related to fee payments, have been saying that CAG has no jurisdiction to audit the accounts of private operators and hence moved the tribunal.

Declining to grant any interim relief to the petitioners (private operators), the TDSAT said: "The power of CAG is an independent one flowing from a statutory rule and not out of a contract qua contract."

As per the TRAI Act, 2002, the accounts of private operators can be audited by CAG and the same was also incorporated in the licences of these players.

The operators had prayed for quashing of this order as also the one by Department of Telecom (DoT), directing them to submit their books to CAG.

CAG, however, said that it was not auditing the books of accounts of the private telecom service providers per se, but only those records which are related to the determination of their adjusted gross revenues to determine whether the share of revenues being paid by them to the government was correct.

Hence, in effect, CAG is auditing the receipts of the DoT which are payable to the consolidated fund of India to certify itself that the government is getting its due shares of revenues from these private service providers, it added.

The judgement quoted Tata Teleservices raising several constitutional issues in regard to validity of the said rule under which CAG can audit the books.

It said: "The recent communication of DoT asking us to provide our accounting records for period of three years starting from 2006-07 for an audit by the CAG is a matter of surprise and concern for us.

"We submit that a fresh audit so closely on the heels of the special audit by DoT appointed independent auditor is unwarranted and will result in duplication of efforts, time and waste of resources," it said.

The provisions of the CAG Act, 1971, which set out the duties and powers of the CAG pertains only to the audit of accounts of the Union or the states or government companies or corporations. The audit of accounts of private companies such as ours is not a part of duties and powers of the C&AG, one of the petitions said.

Tatas said that "It is therefore requested that while DoT can call for our books of accounts, the audit of those does not fall with the purview of the CAG."

While rejecting their plea for interim stay, TDSAT admitted their petition.

 

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