Delhi High Court to give Judgement Tuesday on the Plea of Retailers barred giving Discounts

Under the new policy’s clause 3.5.1, all the licensed liquor stores were permitted to give discounts and concessions on the MRP fixed by the excise commissioner. However, a few of the licensees went ahead, in an attempt to liquidate their stocks, and offered discounts from 30-35%, even offering BOGO (Buy one get one free) on Indian wines and liquor, resulting reportedly in a chaos at these retail shops, according to the government, and also resulting in bootlegging across Haryana, UP and as far as Gujarat. Passing off the adulterated liquor also became an issue.

The government passed an order banning discounts totally from march 1. A group of disgruntled retailers approached the High Court taking the plea that they had followed all the rules including discounts that were being given to improve their liquidity.

Discounts and the new Policy

Under the new policy’s clause 3.5.1, all the L-72 licensees were permitted to give discounts on the MRP of liquor. According to the vendors, they paid excise duty upfront and even 10 per cent extra, besides the license fee under the new policy, so it would give them more leeway to operate.

Vendors also plead that the ban on discounts may have reduced crowds but hasn’t stopped anyone from drinking. They also complain that people have started going back to Gurgaon for cheaper liquor, as they did earlier when the new Policy had not been announced in Delhi.

Government bans discount suddenly

To stop overcrowding and long queues outside liquor shops, the Delhi government issued an order banning all concessions on the MRP. It said the discounting was also leading to an unhealthy market practice deployed purely for short-term business gains by some licensees, causing distortions in the market. The discounts on liquor prices almost doubled the sales of the liquor industry.

“The increase in sales due to discounting cannot be logically attributed to only an increase in consumption as the average sales during the discounting period is showing a significant spike and the chances of illicit hoarding, black marketing and interstate movement of liquor cannot be ruled out.

Senior advocate Abhishek Manu Singhvi, representing the government, contended that the government, under the excise policy, has the power to prohibit discounts. “If I have the power to fix the price, I have the power to fix the components of that price and that must include a discount,” Singhvi submitted. No such power seems to be allowed according to the papers accessed by delWine. It is surprising that a senior counsel like Singhvi would make a Statement that the government could come up with a new circular in the near future allowing 5-10% discounts. “We can’t have neck-deep and bone-deep discounts,” he said, adding the government will not allow discounts such as ‘get one free’.

The court had asked the Delhi government to file its response to the challenge by Friday evening. The Honourable Judge Reserved the Judgment today and will announce it tomorrow afternoon. The petitioners have pleaded to stay the government order and by all accounts, the Court is expected to give the judgement on these lines.

The Petitioners have also referred to Article 14 of the Constitution, which says ‘Equality before law The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India Prohibition of discrimination on grounds of religion, race, caste, sex or place of birth.’

Our View

In our view, the government became too greedy when it announced the new Policy for ‘selling’ vends at around Rs. 300 Crores for each zone with about 30 shops in each zone. The bidders were allowed to open the shops any place they wanted -no directions or rules were strictly followed. In Defence Colony alone, 2 shops are right next to each other, with another one at 100 meters away and yet another one about 400 meters away, in South Extension.

The Policy attracted big money (with or without dubious means) but certainly experience of sales and marketing was practically ignored. The Delhi government even boasted of collecting a record Rs. 9000 crores without a bottle being sold and a shop being available. They had announced the legal age reduction from 25 years to 21 years but intoxicated by the money collected, they sit on the decision even today.

They also overlooked the fact (like most of us did) that the bidders being inexperienced in the wine business could resort to such a level that liquidity, not profitability would become their first priority, especially those who are either new to this trade or have deep packets.  

Although the case is subjudice, the court’s hands are tied too as they go by the book. Once the government has allowed discounting on the MRP (with no limit on the discount) and it would not have any qualms about rejecting the arguments by the government which would be feeble in any case.

With the Gurgaon retailers now Masters of the Marketing Game, they would look for any opportunity to draw the customers to their Stores once again and unless there is level playing field, the Delhi Stores would find it almost impossible to compete with them. Besides, the Retailers in Delhi are known to squeeze 25-35% discounts from the producers/importers, thanks to their cartelisation. The only difference is that they never parted with a rupee of discount under the guise of local laws but are not forced to part with the discounts.

The government needs to allow the discounting but keep a strict check on those Stores. They need to watch out that there should be no spurious liquor sold. If caught, the penalty must be severe. At least one store was sealed last week, ostensibly for selling spurious liquor (we cannot confirm the actual reason), but the government must take severe, punitive steps including immediate cancelling of the License, checking Ads on Social media.   

Competition if good for the consumer. Gurgaon has proved it. With the increasing inflation, let the consumers enjoy some respite in their drinks business.

Voluntary Disclosure-I am a Vinotaler- i.e. a teetotaller who drinks only wine. I am principally against alcohol but do not make any moral judgements and believe in live and let live policy. I am certainly against illicit liquor being sold-editor

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P.S.- The High Court refused to Stay the government order today. The Next Hearing will be on 25 March.

https://www.barandbench.com/

Subhash Arora 8 March, 2022

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