The Confederation of Indian Alcoholic Beverage Companies (CIABC), the apex body of the Indian alcoholic beverage industry, has written to the Meghalaya government seeking immediate end to the creation of Central Bonded Warehouse (CBW) which is to function as the sole wholesaler for all alcoholic beverages products to be sold in Meghalaya.
In its letter to Sarika Aggarwal Synrem, Commissioner and Secretary, Excise Registration Taxation Stamps (ERTS) Department, a copy of which has also been sent to Meghalaya Chief Minister Conrad K. Sangma, the CIABC has demanded that implementation of the Central Bonded Warehouse be put on hold “until the time its commercial rationale and legality is validated”.
Stating that the Meghalaya government has neither consulted stakeholders including the CIABC before introducing the Central Bonded Warehouse nor has it has given reasons that warrant the introduction of this Central Bonded Warehouse in the supply chain, CIABC Secretary General Vinod Giri said: “Central Bonded Warehouse is an additional layer added in the distribution chain which will add to the cost of operation in the State. Current market structure is working fine without glitches and it is very unclear what purpose will Central Bonded Warehouse serve.”
“It is a commonly held principle that an additional cost must deliver additional benefit and the additional cost must be borne by the party which gets additional benefits. Therefore, if the Central Bonded Warehouse is being created by the Government for its own benefit, then its margin should come out of government revenues. Alternatively, if it is being introduced for a benefit to the consumers, then this cost should be passed on to the consumers,” the CIABC said in its letter to the Meghalaya Government.
“Under any circumstances, if the government believes there is sufficient justification for the Central Bonded Warehouse, then it also must clearly articulate its role, responsibilities, and in consideration of such services, its approved margin, as it does for other entities such as bonders and retailers. The referred notification(s) do not specify margin for Central Bonded Warehouse,” the letter added.
Pointing out that the Central Bonded Warehouse was created in a very arbitrary manner, Giri said creation of the single point wholesaling entity for the entire State would lead to creation of a privately held monopoly. “Such arrangements are known for monopolistic abuse and are legally questionable as evidenced in several directions and orders from higher courts against them,” he added.
Stating that the CIABC might move court if the Meghalaya government fails to reconsider its decision, Giri said not only the company in charge of the Central Bonded Warehouse has been appointed in contravention of the tender rules and regulations, it has also approached several of CIABC member companies demanding 17 per cent as its margin, besides stating other restrictive terms.
“In absence of clarity on services being provided by it or incremental value being added by it, such demand is clearly exorbitant, exploitative and an abuse of monopoly power,” he added.
The CIABC has demanded that the Meghalaya government should clearly notify responsibilities of the Central Bonded Warehouse and the margin payable to it in the same manner as it is done for all others, i.e. bonders and retailers, as part of the published price structure.
CIABC has also urged the government that the margin to the Central Bonded Warehouse if any should be paid either from the government revenues or through proportionate increase in end consumer price.
The Meghalaya Cabinet in October 2020 has approved the proposal for introduction of the Central Bonded Ware House and creation of new rule 211 (a) in the Meghalaya Bonded Ware House Rules.
Chief Minister Conrad K. Sangma said that having a Central Bonded Ware House will ensure that the revenue collection is from one source and it would reduce chances of leakage of revenue.
All the 44 bonded warehouses in the State would purchase products from the Central Bonded Warehouse and even the ad valorem tax will be paid by the warehouse.
