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No beating about the bush.
The industry body has estimated a growth of 35% by 2012 which has been contested as based on conflicting and unrealistic figures
The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has forecast that the wine industry is likely to grow at around 35% by 2012, but industry experts think this expectation is exaggerated and is based on wrong figures for the past couple of years.
Subhash Arora, a wine expert who also runs the Indian Wine Academy, told Moneylife, "The ASSOCHAM report is nothing but a conflicting, confusing and confounding report." He said, "The figures are conflicting with unrealistic and unlikely growth rate projection with a very pessimistic estimate for 2008."
The ASSOCHAM report, titled "Emerging Industry trends in Indian Wine Market", states that the Indian wine market (in value terms) stood at Rs800 crore as of 2008 and is likely to touch the Rs2,700 crore mark by the end of 2012. It also says that wine consumption in India is likely to reach around 14.7 million litres (in volume terms) by the end of 2012, from around 4.6 million litres in 2008, thus registering a growth of 35%.
Mr Arora, writes on his website Delwine: "There seems to be a basic lacuna in the figures. Whatever the figures for 2008 that have been assumed, 2009 was a disaster and 2010 barely reached the level of 2009. The current year has shown buoyancy and 30-35% annual increase is most likely in 2011 and 2012. But if the figures of 2010 are assumed to be close to 2008, it would be far-fetched to expect an almost three and a half times growth during the next two years."
"The report on sales value also does not clarify whether the figures are first point sales by the producers and importers and whether they include customs duty, excise duty, VAT and other government taxes, or (whether) they are estimates based simply on the MRP of wine sold, or are ex-factory prices," Mr Arora explains.
According to the ASSOCHAM report, "around 65% of the total volume of wine consumed in India is produced locally in states like Maharashtra, Karnataka, Andhra Pradesh, Tamil Nadu and the Punjab, as these regions are booming with a number of wineries." But Mr Arora points out that "the study fails to name Goa, which produces over 200,000 cases (1.8 million litres) of low-end fortified wine, a majority of which is consumed within Goa."
DS Rawal, general secretary of ASSOCHAM, while releasing the report said, "Favourable government policies, suitable tax structures, rising disposable income and a growth in the tourism sector are certain reasons for the burgeoning Indian wine market. Besides, the rapidly changing lifestyle and drinking habits of people (many from the middle and higher middle classes no longer prefer hard drinks) especially the younger lot, are paving the way for growth of the wine industry.
Mr Arora, who only prefers wine over anything else, jokingly says, "It is the most profound statement that people from the middle and higher middle classes no longer prefer hard drinks. If that is the case, we would be consuming over 50 million cases, not litres, annually. Such a category of people is very minuscule, though it has added to the growth of the wine industry. But to say such a thing is a purely wishful statement and a distant dream."
Report, made on the instruction of agriculture minister, is being studied by the government; wine producers’ association is optimistic about implementation
The wine industry in Maharashtra which is reeling under debt, is hopeful of receiving a bailout from the government, following the recommendation of a Rs100-crore restructuring package by the National Bank for Agriculture and Rural Development (NABARD).
NABARD has made its report on the directions of Union agriculture minister Sharad Pawar and Subodh Kant Sahay, who was then minister for food processing, in the context of the liquidity crunch facing the wine industry.
Several meetings were held between NABARD officials and state-level bank committees to assess the situation, and the report focuses on the financial requirements of the industry. The All India Wine Producers' Association (AIWPA) is optimistic that the proposed recommendations will be implemented.
An official source said, "The draft report addressing the restructuring package for the wine industry in Maharashtra has been submitted to the government of India."
Jagdish Holkar, president, AIWPA, told Moneylife, "We have received the draft report prepared by NABARD on the wine industry in Maharashtra. It is a draft report and everything is under consideration. The proposals mainly address the measures for the sustainability and stability of the industry. Accordingly, our association along with NABARD had asked for a Rs100-crore package of interest subvention at 4% and debt restructuring of the small-size wineries and grape growers. This has been considered in the draft report."
The association is optimistic over the implementation of proposals made by NABARD. "The wine industry is a forward linkage to agricultural production and prevailing high interest rates are unaffordable for us. Earlier, due to unpaid loans, banks were not ready to provide us fresh loans, but with these recommendations we are hopeful of further loan assistance," Mr Holkar said.
As per the draft report, working capital loans, term loans, working demand loans and grape growers' loan dues would be part of the interest subvention plan.
Mr Holkar also told Moneylife that "the state chief minister has spoken to the association and he has assured us that after studying the report the role of state and centre will be decided."
When contacted for his response over the expected assistance from the government, Subhash Arora, a wine expert who also runs the Indian Wine Academy, said, "Any help from any one to the Maharashtra wine industry is always welcome. But it should be a one-off thing and not be taken time and again."
From 1st April, those using the Pune-Mumbai Expressway will have to pay increased toll charges, which the IRB has been permitted to increase periodically. In the seven years since it took charge, the company has more than recovered the Rs918 crore it had invested initially, but it will continue to collect the toll for another eight years. So who decided this? And who is responsible to check the implementation?
While the toll charges for travelling on the Pune-Mumbai Expressway (now called Yashwantrao Chavan Expressway) will increase by from 1st April 18%, that is from Rs140 to Rs165 if you are travelling by car, the total absence of transparency in the toll collection system has again aroused suspicion and anger among commuters. In fact, people from across the country are puzzled as to why toll charges on highways/expressways are increased time and again and why they hardly ever have any authentic information on how much is the annual toll collection of the private agency who has been either awarded the contract on the basis of build-operate-transfer (BOT), or has been given the contract for operation and maintenance of the particular expressway or national highway after it is built.
In the case of the Pune-Mumbai Expressway, Ideal Road Builders (IRB) was awarded the contract of operation, maintenance and toll collection of the e-way (and NH-IV) for the period between 2004 and 2019. Between April 2004 and September 2010, it has already collected Rs949.45 crore by way of toll. The IRB paid an advance of Rs918 crore at the time of the contract agreement in 2004, to be recovered by it through toll collection by March 2019 when the contract terminates. The amount of recovery would include not only its capital investment and interest on it (the Rs918 crore), but also expenses towards operation and maintenance of the e-way. Funnily, there is no total figure of how much it should recover to ensure that it does not make a loss and that it is assured profits, but IRB has been allowed to keep on collecting toll till the end of its contract, with a hike in the toll charges at a regular interval of three years.
I used Section 4 of the Right to Information Act (RTI) between Friday, 25th March 2011 and Monday, 28th March 2011 to request for the inspection of files of the contract agreement between the Maharashtra State Road Development Corporation (MSRDC) and IRB, and I also asked for the year-wise data of the amount of toll collected from April 2004 to February 2011. I visited the MSRDC office in Pune for this.
As per the statement of IRB which it has sent to MSRDC, it has collected Rs949.45 crore up to September 2010. (See table for year-wise collection details.) But what about the authenticity of the toll figures supplied by IRB? Does MSRDC monitor the collections? The MSRDC officials threw their hands up saying that they were not responsible for this. However, I pointed out to them that this was in total contradiction to the information available on their website, www.msrdc.org, under 'duties and responsibilities of its toll monitoring unit' which states that MSRDC is responsible for: monitoring the toll receipts; scrutinizing claims of various toll collecting agencies and put for approval by competent authority; taking action against defaulters as per contract conditions; corresponding with regional offices regarding toll collection work and; giving replies under the Right to Information Act.
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Worse, as per the contract agreement which I procured during inspection of files on Monday, IRB has been provided with a chart for increment of toll charges, every three years, up to 2019, when its contract terminates. (In fact, MSRDC is to lease out operation and maintenance of the expressway up to 2030. Fresh tenders or renewal of IRB's contract will come up after 2019.) Hence, as per the chart that is a part of the contract document, a car owner who drives on the expressway will have to pay Rs195 between 1 April 2014 and 31 March 2017 and Rs230 from 1 April 2017 to 31st March 2020. (See chart, "Schedule of revision of toll rates on the Pune-Mumbai Expressway") Isn't this arbitrary? Could I see any reference document that allow for these increments? AP Abrol, executive engineer of MSRDC, Pune, explained, "IRB had taken a big risk in investing the initial Rs918 crore, as at that time the expressway was hardly patronised by people, and it almost seemed it would be deserted and MSRDC would incur huge losses. Hence, IRB was given the benefit of the risk factor.'' IRB keeps 100% revenue from the toll charges.
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The ambiguity in the volume and period of toll collection not only for the expressway, but for several national highways across the length and breadth of the country, has led former senior police official SM Mushrif to seek legal intervention, after efforts to procure information under the RTI Act failed. The public interest litigation (PIL) filed by him in 2006 is pending before the Bombay High Court.
When Mr Mushrif asked through the RTI, about the rule under which toll collection is done, the MSRDC provided him a copy of a central government notification dated 5 May 2005 (issued by the Ministry of Shipping, Road Transport and Highways) that states: "As per Rule 3 of the National Highways (collection of fees by any person for the use of section of national highways/permanent bridge/temporary bridge on National Highways) nothwithstanding anything contained in the Act'', the agency is "entitled to collect and retain fees at such rate, for services or benefits rendered by him as the central government may by notification in the official gazette, specify having regard to the expenditure involved in building, maintenance, management and operation of such national highway, interest on the capital invested, reasonable return, the volume of traffic and the period of such agreement.'' This rule applies to the highway departments of state governments too.
Similarly, Mr Mushrif stated that, "as per Rule 6 'verification of fee collection' sub-rule 1: it should be the responsibility of the person (the MSRDC in this case)…to strictly ensure that all fees leviable are levied, collected and correctly maintained. The person shall submit certified audited copies of the statements of fee collection at specified intervals as required under the notification for collection under sub-rule 2 of Rule 3. The auditor shall be appointed by the government. And as per sub-rule 2: The central government shall have the right to check the fee collection at any or at all times through their designated officers.''
Interestingly, the MSRDC has appointed an independent consultant for monitoring toll collection. However, the engineer of this consultancy company who was present while I was conducting inspection of files told me that, "We monitor everything else, like operation and maintenance, but do not look into the revenue from toll collection.'' Why? Government officials would not like to talk about this aspect, but it reveals favouritism towards this particular private agency.
A couple of months back, social reformer and activist Anna Hazare threatened to launch an agitation against illegal collection of toll. This was after a high-level committee of PWD chief engineers recommended that 31 out of 165 toll nakas in the state should be abolished as they were set up in blatant violation of norms prescribed by the Centre. Under pressure, the state government closed down 20 of them. For the record, Maharashtra has 165 toll nakas; 28 of which belong to the National Highways Authority of India; 61 belong to the MSRDC and 56 to the Public Works Department.
Vinita Deshmukh is a senior editor, author and convenor of Pune Metro Jagruti Abhiyaan. She can be reached at [email protected]