Financial Daily from THE HINDU group of publications
Thursday, Jun 12, 2003
Financial Daily from THE HINDU group of publications Thursday, Jun 12, 2003 |
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Industry & Economy
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Breweries Formation of State Beverages Corporation — Mallya's support leaves distillers wary Boby Kurian
BANGALORE, June 11 THE UB group Chairman, Mr Vijay Mallya, is at the centre of a new storm that is swaying the liquor business and the State politics here. Karnataka's liquor industry is in serious churn with Mr Mallya reiterating his support to the formation of the State Beverages Corporation and a section of the local liquor industry sitting in hectic confabulations behind closed doors to stall the same. The beverages corporation, for which an official notification has been issued following the State Cabinet approval, is slated to begin managing the wholesale trade of Indian Made Foreign Liquor (IMFL) from July 1 onwards. What is adding a political tinge to the drama is the fact that disgruntled distillers are claiming the support of five Ministers in the State Government - whose interests in the liquor business is widely known - and are playing up Mr Mallya's political aspirations to an increasingly wary establishment. Mr Mallya, a Rajya Sabha member, recently took over as the national working president of Janata Party. A group of mid-sized distillers, who did not want to be identified, have been in parleys to stop the corporation from coming into effect fearing it would adversely impact their prospects. The State Government had cited large-scale tax evasion as the main reason to float a corporation, which would arrest the flow of cheap `seconds' — defined in industry parlance as liquor hitting the market other than through the official channels. It is learnt that `seconds' outsell official sales in Karnataka at a ratio estimated at 6:1. The IMFL market in Karnataka, now considered as a black hole, could account for roughly 15 million cases annually and emerge as one among the largest domestic markets, the liquor marketers said. Mr Mallya told Business Line that he has extended full support to the Chief Minister, Mr S.M. Krishna's, efforts to get the corporation running. ``I am all for the corporation,'' he said when attention was drawn to efforts of a section of the industry to stall it. The UB group companies, McDowell & Co and Herbertsons, together constitute the fifth largest liquor marketer in the world, and the setting up of the corporation is expected to strengthen its presence in the local market. When contacted, some of the mid-sized and small distillers maintained they would ``neither welcome nor condemn the corporation. We feel that the government knows best and will take action accordingly.'' The main fear of this section is that the new corporation may lack the necessary infrastructure to check the flow of seconds from neighbouring markets and the retail trade may take advantage of the State machinery gearing up for elections next year.
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