A week after the Delhi government banned rebates, or rebates on the MRP (maximum retail price) of spirits in the national capital, on the grounds that such rebates encouraged “bad market practices” among licensees, spirit retailers in Gurugram have started to stockpile are selling wholesale prices, in an apparent “price war” with Delhi, according to industry sources.
Liquor vendors in Gurugram have put up liquor wholesale price placards to attract customers, prompting complaints to excise officials. On Tuesday, the department issued instructions to crack down on those who mention their businesses as “L1 (the term used for a wholesale license).”
Deputy Excise and Taxation Commissioner (East) VK Beniwal said they had written to all licensees not to put up billboards outside of shops or strict action would be taken against them.
“We removed around 200 billboards across the city on Monday and Tuesday where shopkeepers were offering spirits at wholesale prices. There are only four wholesalers in the East Zone and five in the West Zone,” he clarified.
This comes a week after Delhi banned all discounts and offers on retail sales of spirits in the national capital on February 28. Delhi’s Excise Authority said the decision came amid congestion in and around stores causing law and order problems and also because licensees were resorting to “unhealthy market practices” by offering discounts of up to 60% on the MRP offered .
According to industry sources, the recent price war started in the National Capital Region (NCR) after Delhi introduced a new excise tax policy from November 16, 2021. Liquor retailers in Delhi were allowed to sell bottles at a discount or with offers for the first time. Until then, spirits could only be sold at the price prescribed by the state excise agency. The old regime had pushed customers to Gurugram where discounts are the order of the day and to stop this business exodus Delhi had introduced competitive pricing in its new excise policy.
But when Delhi retailers started offering deep discounts, the trend reversed. People from Gurugram, Noida and Faridabad, among other NCR cities, made their way to Delhi to pick up bottles at bargain prices. As a result, queues stretched several feet and storefronts were filled to the gills with people as supplies flew off the shelves.
So much so that Delhi sold 24.5 million liters of spirits in February this year – almost double the average monthly sale of 13.2 million liters in 2019-20.
All that changed on February 28 when the Delhi Excise Board issued an order halting any rebates or rebates on the MRP of spirits, saying such prices would distort market forces, create a monopoly and encourage alcoholism.
“Now we only sell spirits at the MRP set by the Delhi government. It’s been a week since ordering and we’ve already started to feel the pinch. Our sales have dropped resulting in daily losses of tens of millions of rupees. Customers are buying from Gurugram again, as they did during the old regime, because they can get good deals there,” said a senior official at one of Delhi’s largest liquor retailers
“But that’s unfair. The government in Delhi has at least cleaned up €9,000 crore from us upfront and now resorting to knee-jerk decisions. We did nothing wrong by offering discounts. We have fully complied with Delhi’s excise policy,” the official said.
Several retail licensees went to the Supreme Court to seek a stay of the Feb. 28 order, but on Tuesday the court dismissed the motions and declined to stay the government order.
In Gurugram, liquor vendor owners said they had started handing out the discounts mimicking Delhi.
Krishna Kumar, manager of a sale in Sector 40, said they keep a regular eye on prices in Delhi to stay in the game. “We send our salesman at least twice a week to get a list of prices and discounts offered in different shops in Delhi. When customers ask us for a discount, we can make sure we offer them the most competitive price. Our goal is not to lose any customers to Delhi,” he said.
Gurugram shopkeepers also said they recovered losses incurred during the Covid-19 lockdown in just two months, when Delhi shops were closed until November 16 due to the transition to the new excise regime. Later, liquor prices in Gurugram fell again by 30% as shops in Delhi opened and started offering discounts.