The new tax policy launched by the Punjab government on Wednesday has made smaller contractors fear that they will be excluded from the liquor trade.
The policy provides for the realization of the actual potential of the liquor trade by allocating 177 batches through a free, fair and transparent method of electronic bidding. According to the new policy, groups have been significantly reduced. The group size will generally be in the range of Rs 30 crore with a margin of variation of 10 per cent. However, the Excise Commissioner will be the final authority to make any changes. Earlier, the state had 700 groups in total.
The policy also states that the L-1 license, which is for a wholesale liquor merchant, will be granted only to those who have at least two years’ experience in wholesale liquor distribution in India and a minimum annual sales of Rs 30 crore in wholesale liquor trade distribution each year. For at least two years out of the immediately preceding three years in the State/UT of India. Earlier the present size of the groups was in the range of Rs 7 crore to Rs 8 crore.
With these two riders, the bid for a Rs 30 crore set and the L-1 license will also be awarded to a Rs 30 crore wholesaler, we feel the smaller dealers, who don’t have a crore turnover, can’t be part of the business.
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An unnamed liquor contractor said, “This is a policy specifically designed to help big fish in the trade, especially from other parts of the country. In Punjab, many contractors will not fall into the category that can claim a license or bid.”
The state liquor contractors union had already criticized the government before the policy was implemented. The contractors say this will also mean that there will be fewer jobs in the liquor trade as many of the smaller contractors will be phased out.
However, the government on Thursday sought to clarify its position on the issue, with Punjab Tax Commissioner Varun Rojam saying the new results-oriented excise policy would eradicate the liquor mafia in the state, along with checking the smuggling of liquor from neighboring countries.
Defending the larger groups, he said that they have been drastically reduced in order to optimize revenue and take advantage of economies of scale. He said that during the meetings with the licensees prior to the formation of the excise policy, the request of the existing retail licensors was that the batch size should be larger than the current size (Rs 7-8 crore) and it should be in the range of Rs. 30 crores. He further said that this would reduce competition between groups, which generally spreads when group size is small, adding that it would also help remove unscrupulous elements from the liquor trade and bring efficiencies in the business.
The excise commissioner said that in the new policy, the number of sales across the state was kept the same, so even if the number of collections decreased, job opportunities remained the same in the retail sector.
He said that this policy envisages creating new job opportunities for the Punjab people from the liquor manufacturing sector. He said the license to establish distilleries, packaging plants and breweries has been reopened and the policy has also allowed the establishment of malt processing units in Punjab with focus on setting up new ethanol plants, all of which will open up new employment horizons for the youth.