Karnataka to slash excise duty hike on wine

Bengaluru: Bowing to pressure from grape growers and wineries, the Karnataka government has decided to slash hike in excise duty on fortified wine by 120 percent from July 1, a top official said on Thursday. "The state finance department will be issuing a fresh order by Friday reducing the increase in excise duty on fortified wine by 120 percent to 57 percent from 177 percent notified on June 22," state Excise Commissioner S.R. Umashankar said here. In a unilateral decision without consulting stakeholders, especially growers and wineries, the government had notified on June 22 a whopping 177 percent increase in excise duty and additional excise duty on a bottle of wine with effect from July 1. "We have filed objections to the steep excise hike on fortified wine produced from blue variety of grapes by hundreds of growers across the state and threatened to lower production 50 percent if the hike was not reversed, as we cannot compete with wines from other states and overseas (French variety)," Karnataka State Wine Producers' Association president P.L. Venkata Rama Reddy said. In its objections, the association, representing growers and about 20 wineries in the state, said the steep hike would have a bearing on the production cost for growers and farmers, as the wine variety (blue grapes) was grown all through the year, which is unique. "The blue grapes our farmers grow in the state, especially around Bengaluru, are not grown anywhere in the world. As they grow only wine-making variety, the crop is cultivated and harvested every three months unlike fruit and other variety of grapes, which are seasonal the world over," claimed Reddy. Stressing that the state government should have consulted growers and wine producers before increasing the levy steeply, the state-run Karnataka Wine Board member secretary T. Somu said that the reduction by 120 percent would be a great relief to growers and wineries, as the additional burden would not be higher on them or consumers at the retail outlets. "As the state government wants to promote wine consumption and encourage growers to produce more fortified wine variety of grapes, the 120 percent reduction in the hike would minimise the additional burden on them," Somu said. Being the only variety of grapes grown round the year - in about 23,500 acres of land across the state, mostly in Chikkaballapur, Doddaballapur and Devanahalli, the central government has also issued a geographical indication (GI) tag to blue grapes in 2013. Prior to the proposed steep hike, the levy was Rs.17 per litre on fortified wine as against Rs.7 per litre on fruit wine. "We were shocked by the steep hike, as the additional burden would have gone up Rs.30 to Rs.47 per litre from July 1. If the government is reducing the hike by 120 percent, we welcome it and hope to absorb the modest hike of 57 percent, as the levy will go up to only Rs.27 per litre from Rs.17," Reddy pointed out.