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CAG flags Rs. 58-crore loss as Excise department failed to ensure IMFL yield

The Comptroller and Auditor General (CAG) has detected failure on the part of the Excise department to notify norms for production of Indian Made Foreign Liquor (IMFL) from ENA, which led to the shortfall in the IMFL yield during production and resulted in a revenue loss of Rs. 57.83 crore.

ENA is the primary raw material for making alcoholic beverages such as whisky, vodka, gin, liqueur and alcoholic fruit beverages. It typically contains 95% alcohol by volume and is derived from sources such as sugarcane, molasses and grains.

The CAG report for the year ending March 31, 2020, was tabled in the autumn session of the Assembly.

The report said the records (June 2020) of one distillery (CMJ Breweries Pvt Ltd) and bottling plants of the same firm and four others – North East Bottling Plant, MDH Beverages Bottling Plant, Marwet Bottling Plant and Oaken Gold Bottling Plant – from 2015-16 to 2019-20 were audited to assess the correctness of excise duty collected based on data relating to production and stock.

The audit revealed that four of the five bottling plants utilised a total of Rs. 3.58 crore BL of the ENA during this period. Taking the 1% wastage norm (0.5% for blending and 0.5% for racking) into account, the bottling plants were expected to produce 90,96,457 cases of IMFL, the report said.

“However, four bottling plants disclosed production of 87,17,511 cases of IMFL. This resulted in the short-production of IMFL by 3,78,946 cases. These plants failed to maintain any records of ENA procured and consumed; nor were such reports submitted to the Excise authorities,” the report stated. The audit report observed that the rate of excise duty notified by the state Excise department during the review period was fixed at a uniform rate of Rs.810 per case. It noted that the rate of VAT (40%) fixed by the Taxation department varies from brand to brand ranging from Rs.716 to Rs.787.59 per case.

“The failure of the government to notify norms for production of IMFL from ENA, despite lacunae pointed out in the audit report for the year ended March 31, 2014, resulted in a shortfall of 3,78,946 cases during production, involving loss of revenue to the tune of Rs. 57.83 crore in the form of excise duty (Rs. 30.69 crore) and VAT (Rs. 27.13 crore) over a period of five years under scrutiny,” the CAG report said.

It further said the failure of the state government to notify norms for production of IMFL from ENA and norms for production of ENA from raw materials (grains) resulted in the loss of Rs. 57.83 crore in revenue. Besides, concealment of actual production and sale of IMFL cannot be ruled out, it added.

The CAG stated that the matter was reported to the state government in November 2021. “During the exit meeting in February 2022, the commissioner and secretary of Excise department assured that the norms for production of IMFL from ENA and norms for production of ENA from raw materials will be notified latest by May 2022,” it said. 

India Glycols Ltd forays into IMFL

India Glycols is a leading company that manufactures green technology based bulk, specialty and performance chemicals and natural gums, spirits, industrial gases, sugar and nutraceuticals. After becoming a market leader in the Country Liquor segment with the famous brand Bunty and Bubly, the company is now ready to make their foray into the IMFL with their new launches, Amazing Vodka and Single Reserva Whisky. Ambrosia spoke to the Management Team of the brand in an exclusive interview.

With chemicals being the primary cornerstone of India Glycols Ltd business, the company continues to enjoy an undisputed leadership position in certain segments over two decades. And liquor being a by-product of the chemical distillation process, it was only natural to foray into this business.

While country liquor industry was the mainstay of the liquor division with their popular brand Bunty and Bubly selling 1.32 crore cases per month as against the next best-selling brand, which is less than 50%, the company will shortly launch their first 2 products in the Vodka and Semi Premium Whisky category, Amazing Vodka and Single Reserva Whisky.

The Chairmanof India Glycols Limited (IGL), Mr. U S Bhartia felt that IMFL Division should also be nurtured and brought up especially following the success of its country liquor. These sentiments are also echoed by Rupark Sarswat, CEO, India Glycols Ltd ‘the logical step for us when we started to explore consumer market was to look at country liquor and then much more market intensive areas like IMFL. We are looking to engage in the market, continue to take feedback but make sure that the way we build our business is slow, steady and solid.’

With the consumers constantly looking to upgrade and premiumisation being the focus for IGL ‘the vodka will be launched in three variants Amazing Plain Vodka, Amazing Green Apple Vodka and Amazing Orange Vodka for the time being while the Single Reserva Whisky will be launched in the semi-premium category with a unique blend and offering’ said Raju Vaziraney, Advising – President, IMFL for India Glycols Ltd.

Despite the flat growth in the vodka industry, the decision to foray into the vodka market stems from the fact that the consumer is moving towards flavours adds Vaziraney. “You will be happy to know the vodka market is 60% flavours and 40% plain and the consumer is looking to flirt. Flavours are the future of the vodka market and they will drive the growth of vodka.”

Although the precise price point for the Vodka isn’t known yet it is expected to be in the popular category where it will compete with the likes of the most popular brands by market share in the segment. However what’s interesting about the vodka is that it is five time distilled liquid which IGL feels will provide a very smooth and refined taste to the consumer.

When it comes to the Single Reserva Whisky, it will be a unique offering which is expected to be priced under Rs. 1000 depending on the State that you are in. The whisky is blended with Indian Single Malts making it a unique offering. This is a new concept of blending with Indian single malts which was done after doing extensive blend research with the help of the known blender Peter J. Warren.

Currently IGL plans to focus on these two brands and are looking to grow their portfolio stepwise following the success of these brands. ‘We are not going to take any shortcuts to success, put more money, gain volume and build stocks. We want the consumer to be delighted’ adds Vaziraney.

The IMFL brands are manufactured at the company’s Gorakhpur plant. S.K. Shukla, Head of Operations & Business Manager said that, “I have been at the Gorakhpur plant from where we started our IMFL journey since last year May 2020. Besides that global pandemic till date the achievement has been excellent and we hope that this new product Single Reserva Whisky and Amazing Vodka will be great success in the future with the help of Ambrosia’s support.”

B. P.Singhal, Procurement and Projects engineering, IGL adds that we have selected best of the packaging material, bottle design, which can create a stir in the market, mainly for the Vodka. We are looking to target the youth because vodka is typically consumed by the youth. Keeping these factors in mind we have selected the bottle and packaging for both the products.

With the overall market for Vodka estimated to be about 6 million cases, IGL is looking to grab 15% market share in the vodka segment. A success that T P Sharma, Sales Head(HOD), IGL is confident in replicating following their Bunty Vodka Green Apple Flavour Tetra Pack launch in UP, which has already cornered a market share of 42% in six months.

Both the products will be rolled out in the UP and Uttarakhand markets first with Delhi and few other States as the next options in four-five months time. By the festive period IGL is looking to have their products in more States. Both Amazing Vodka and Single Reserva Whisky will be sold via the on-trade channels with IGL looking at ATL and digital activities to promote them.

Shriharsha Bandaluppi, EA (Executive Assistant) to CMD and General Manager Strategy, said, “we are coming up full throttle by using the social media channels like Facebook, Instagram. We are also identifying the key influencers, all sorts of new age trends etc. specially strengthening the brand position with shoots, signage, posts etc.”