The Chhattisgarh High Court’s ruling in favour of two of India’s largest liquor firms, United Spirits Ltd (USL) and Pernod Ricard India, which had alleged that the state followed unfair distribution policies, is expected to pave the way for improvement in other states too, according to industry experts.
Whether those improvements come from the states themselves taking corrective measures based on the industry’s feedback, or from companies and industry bodies taking the legal recourse remains to be seen. But experts are confident the Chhattisgarh ruling signals a shift in the way states view the business of alcoholic beverages in the country.
Over the weekend, Justice Sanjay K Agarwal passed an order in favour of the alcoholic beverage industry and said the petitioner companies had been discriminated against due to lack of a proper procurement policy.
Chhattisgarh had set up a state-led marketing corporation on 1 April 2017, giving the government control over retail operations of the alcoholic beverage industry. But that change led to unfair practices, Diageo Plc-owned USL and Pernod had alleged when they approached the high court this April, which resulted in the state favouring other suppliers and restricting orders from the two companies to a minimum.
Although USL and Pernod continued to supply their brands to the depots, they were not available at retail stores and created an artificial shortage for consumers, forcing them to turn to other brands. In its judgment, the court has held that even in the business of liquor, the consumer ought to be the ultimate judge of what he or she wants to consume – a radical message in a country where liquor is viewed as a ‘sin industry’.
“States where the retail side is also in the government’s hands are where there are higher chances for these kinds of (unfair practices). That currently includes Tamil Nadu, Jharkhand and Delhi. But most governments are fairly receptive to feedback. It’s only when we come to a roadblock that we are forced to go to court,” said Amrit Kiran Singh, executive chairman of the International Spirits and Wines Association of India (ISWAI), the body that was at the forefront of the legal battle in the Chhattisgarh case.
It is on the procurement side that companies primarily look for transparency and accountability from states, according to Singh. Karnataka, for instance, is widely regarded as progressive when it comes to its liquor policies, despite following a similar corporation, or state-run, distribution model.
Singh said the industry was in talks with all three other states – Tamil Nadu, Jharkhand and Delhi – and was confident they would take corrective measures. Some states had already realized the error of deciding to put both retail and wholesale alcohol sales under government control and were looking at ways to change back to a free-market model, he added.
Of those states, Tamil Nadu is undoubtedly the largest in terms of its earnings from liquor. The excise department there rakes in around Rs 25,000 crore from liquor sales, the ISWAI estimates. That compares with around Rs 18,000-20,000 crore for Karnataka and Maharashtra, the largest liquor markets from a company’s perspective in terms of volume and value sales.