NEW DELHI: A spate of political promises of waivers on farm-loan repayments in Indian states has an unlikely sufferer: alcohol firms.
States are expected to hike taxes on liquor -- one of the crucial top 3 revenue assets -- as they want to plug the fiscal hollow arising from bearing the weight of farm-loan repayments. Any rise in tax will affect alcohol demand as firms will have to go the extra levy to shoppers, in keeping with Edelweiss Securities Ltd.
Farm waivers are on the schedule of all political events as Prime Minister Narendra Modi struggles to alleviate agrarian misery forward of a countrywide election round May. PM Modi-led Bharatiya Janata Party (BJP) was voted out in 3 key states final month by way of the Congress which right away announced the waiver program after forming governments in Madhya Pradesh, Rajasthan and Chhattisgarh.
Raising liquor taxes -- which herald nearly 25 according to cent of revenue -- is the most likely choice as state governments are unlikely to borrow and irritate their debt to GDP ratios, Abneesh Roy and Alok Shah, analysts at Edelweiss wrote in an investor word January 1. “In the previous, there have been a couple of circumstances where volumes have taken a beating owing to worth hikes emanating from an increase within the tax rate,” they wrote.
Maharashtra increased the tax on Indian-made liquor by way of 20 according to cent from Tuesday, the Times of India reported, mentioning a bureaucrat it didn’t title. Seven states have announced waivers totaling Rs 1.75 lakh crore ($25 billion) to this point, in keeping with Edelweiss.
The brokerage remained underweight liquor stocks and retained its dangle advice for United Spirits Ltd.
States are expected to hike taxes on liquor -- one of the crucial top 3 revenue assets -- as they want to plug the fiscal hollow arising from bearing the weight of farm-loan repayments. Any rise in tax will affect alcohol demand as firms will have to go the extra levy to shoppers, in keeping with Edelweiss Securities Ltd.
Farm waivers are on the schedule of all political events as Prime Minister Narendra Modi struggles to alleviate agrarian misery forward of a countrywide election round May. PM Modi-led Bharatiya Janata Party (BJP) was voted out in 3 key states final month by way of the Congress which right away announced the waiver program after forming governments in Madhya Pradesh, Rajasthan and Chhattisgarh.
Raising liquor taxes -- which herald nearly 25 according to cent of revenue -- is the most likely choice as state governments are unlikely to borrow and irritate their debt to GDP ratios, Abneesh Roy and Alok Shah, analysts at Edelweiss wrote in an investor word January 1. “In the previous, there have been a couple of circumstances where volumes have taken a beating owing to worth hikes emanating from an increase within the tax rate,” they wrote.
Maharashtra increased the tax on Indian-made liquor by way of 20 according to cent from Tuesday, the Times of India reported, mentioning a bureaucrat it didn’t title. Seven states have announced waivers totaling Rs 1.75 lakh crore ($25 billion) to this point, in keeping with Edelweiss.
The brokerage remained underweight liquor stocks and retained its dangle advice for United Spirits Ltd.
Why farm loan waiver could be a huge blow for liquor companies
![Why farm loan waiver could be a huge blow for liquor companies]()
Reviewed by Kailash
on
January 03, 2019
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