Punjab’s Rs 2,500-crore liquor business is about to undergo a major policy shift wherein each manufacturer will be restricted to supply liquor to a single supplier only.
This exercise, as per the policy for 2016-17 beginning April 1, is set to put the existing 95 wholesale traders (L1 licence holders) in the lurch as the policy restricts the number of suppliers (L1-A licence holders) to three for lifting the Indian made foreign liquor (IMFL) and two for beer from manufacturers.
Currently, the wholesale suppliers (L1) procure the liquor directly from manufacturers as per the quota fixed for them.
Senior officials said this was being done “to regulate the system”, but the L1 licensees are crying foul and accusing the government of “pick and choose” in absence of a clear eligibility criteria to get the L1-A licence.
The new policy was given the nod at the state cabinet meeting on Tuesday. It restricts the number of L1-A licensees to two for procuring beers and three for Indian Made Foreign Liquor (IMFL).
An L1-A licencee can get the consent letters for procurement from any number of manufacturing companies, while a manufacturer will be able to choose only one supplier.
The conditions for an L-1A licencee is that he/they should be at an “arm’s length distance” from the manufacturer and both should not be related to each other in any way, with no further details.
With this, the units bottling the IMFL within the state as well as out of Punjab would have to choose their supplier from among the three L-1A licencees.
The existing 95 suppliers (L1 licencees), who were till now directly purchasing liquor from the manufacturing, would now be in the second line of the supply chain and need to procure from the three L-1A licencees, who can exploit the situation to jack-up their profits.
Also, the manufacturers would not be able to stock the produce in godowns unlike in the past when they themselves were the L1-A licencees.
“There is no set criteria for the manufacturers to give letter of consent if more than one licencees show interest in supplying liquor,” said Amarjit Singh Sidhu, a liquor trader. Sidhu has even challenged the new policy through a legal notice to the state’s excise department. “There is no clarity on how to select the L-1A licencees, whose number has been restricted to three for the entire state,” he said.
Voices of dissent
The ‘International Spirits and Wines Association of India’, an amalgamation of firms running distilleries, has raised the red flag against the policy and fixed a meeting with Punjab excise and taxation commissioner Rajat Aggarwal on Monday.
Confirming this, Jagbir Singh Sidhu from Pernord Ricard’s India group said he would not be able to comment on the issue at this juncture. Pernord Ricards manufactures premium brands such as 100 Pipers, Chivas Regal, Johny Walker, Black Label and Absolut Vodka.
Smaller manufacturers and outsourced distillers are also tight-lipped on the matter.
This will regulate liquor
Punjab excise and taxation commissioner Rajat Aggarwal confirmed the changes in the policy by restricting the choice of manufacturers for supplying their product.
“This has been done to regulate the system. Under the current system, we are not aware from where the liquor is coming and who are purchasing and supplying it,” Aggarwal said.
On the L-1 licencees being barred from purchasing directly from the manufactures, he said this decision was taken to “de-link the L1-A licence from manufacturers”. “Earlier, the L1 licencees were procuring liquor from manufacturers, who, actually, were the L1-A licence holders,” he explained.
Rajat said the L1-A licencees could be more than three as well, as the number was just a projection and yet to be finalised.
Additional chief secretary (excise and taxation) DP Reddy said he would not be available for a comment on the excise policy before March 22, which is the last date for the issuance of the L1-A licence.
Rs 2,500 cr: IMFL and beer business in Punjab
95: Existing L1 licencees
85: Projected L1 licencees for 2016-17
3: Projected L1-A licencees to buy from distilleries
15: IMFL bottling units in state
3: Beer manufacturing units in state
840-lakh bottles: Annual consumption (IMFL) in Punjab
504-lakh bottles: Annual beer consumption
Norms to get L1-A licence vague?
He should be at an “arm’s length distance” from the manufacturer and both should not be related to each other in any way.
New liquor policy at a glance
1 Manufacturer will choose a single supplier (L1-A licencee), while L1-A licencees will be able to procure liquor from any number of manufacturers.
Worry: L1-A licencees can exploit the situation and monopolise the business as a manufacturer can choose only one supplier.
2. L1-A licencees will then supply the product to L1 licencees (85 for 2016-17, 10 less than existing 95).
Worry: L1-A licencees can resort to arm-twisting and make L1 licencees pay more.