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.