Vice Squad
Tuesday, February 03, 2004
Some Liberalisation in Alcohol Markets in India

OK, maybe just one more post based on my recent Indian sojourn. Imports of food and liquor pay a substantial duty in India. High class hotels have been largely exempt from these duties, however, on the grounds that they cater to foreign tourists (whose visits are essentially exports from India's perspective), and there is no need to discourage such "exports" by taxing them. But cheaper hotels and stand-alone restaurants (of which, my limited visual inspection suggests, Delhi (population some 13 million) has a paucity) have had to pay the import fees, leaving them at a competitive disadvantage compared with the Hyatts of Delhi. Last week, the Indian government extended the tariff exemption to these smaller hotels and stand-alone restaurants. But the regulations remain pretty convoluted. Among other things, the exemption only applies to up to 5% of foreign exchange sales that are paid for with international credit cards -- apparently, any system based on cash or receipts other than from international credit cards would be too subject to abuse. Further, the exemptions will only remain in place if the cost savings are passed along to customers. Just keeping track of this condition should provide employment for a hefty percentage of Delhi's 13 million people. Most of the smaller hotels and restaurants have international credit card sales that are too small for the exemption to make any noticeable difference whatsoever. The big hotels can count their room rentals towards their 5%, so the exemption is worth much more for them. [Access to the linked articles from the Economic Times (Delhi) requires a free registration.]

Delhi and Chicago share one piece of alcohol control policy: it takes ages for a new restaurant to secure a liquor license! In Delhi, new restaurants have found a way around the license requirement, by securing a "party" license and not reporting their liquor sales. Will this avoidance be the spur to reform? From the linked Times of India article: "In other words, Delhi continues to be in high spirits with scant regard to official sanction. So, why not legalise what is going on by issuing bar licences, specially when more bars translate into more revenue for officialdom?" Gee, you don't think that the licensing requirements are being circumvented in Chicago too, do you?

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