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Liquor manufacturers asks Kerala Govt to tweak commision conditions
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SME Times News Bureau | 27 Jan, 2022
The Confederation of Indian Alcoholic Beverage Companies (CIABC) on
Thursday urged the Kerala government to reduce the "exorbitantly high"
commission under the new tender conditions.
It has asked
the state government to review the tender conditions in order to create
an excise policy ecosystem which works for the benefit of all
stakeholders.
"Under the new tender conditions, brands are being
asked to pay up to 33 per cent commission to KSBC (Kerala State
Beverages Corporation Ltd), consisting of up to 25 per cent of CD (cash
discount) and 8 per cent of wholesaler's margin. Is a total margin of 33
per cent for the wholesaler justifiable?" CIABC, the apex body of
Indian liquor manufacturers, said in its letter to the KSBC.
It
pointed out that the cash discount was introduced as an incentive for
faster payments, meaning companies willing to give up that amount would
be paid immediately and ahead of the due payment cycle.
The KSBC
initially started with a CD of 2 per cent which is a common practice
all over, but later increased it to 7.75 per cent without any
justification or discussion with suppliers. "It may be noted that the
cost of carrying inventory for 2 months, which is the time it takes for
fast moving products to sell out, is 1.5-2 per cent. Hence 7.75 per cent
to begin with, was far too excessive," the letter said.
The
CIABC has also raised concern on the KSBC taking a cash discount but
still paying the supplier only after stocks are sold out.
"Is it
fair to charge a cash discount when the KSBC pays back the supplier a
couple of months later and only after the stock is sold out? If the CD
is being charged for providing wholesaling services, then what is the
wholesaler commission of 8 per cent for?"
Stating that the role
of the KSBC is to be a neutral channel for wholesaling services, CIABC
Director General Vinod Giri said that by offering to sell all stock of a
product if it pays a CD of 25 per cent, the KSBC seems to be promoting
certain products at the expense of the others.
"Is this not
depriving consumers of their preferred brand choice and forcing them to
choose unknown brands? Further, by promoting unknown and new products if
they pay higher CD, is the KSBC actively promoting products of unknown
quality and poor provenance, thus putting consumer health at risk for
small commercial gain?" he asked.
Giri also said that the
wholesale margin in the state is also highest in the country, be it for
government-owned or privately-owned wholesale.
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