The Confederation of Indian Alcoholic Beverage Companies (CIABC) has urged the Kerala Government to reduce 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% commission to KSBC (Kerala State Beverages Corporation Ltd), consisting of up to 25% of CD (cash discount) and 8% of wholesaler’s margin. Is a total margin of 33% for the wholesaler justifiable?” CIABC, the apex body of Indian liquor manufacturers, said in its letter to KSBC.
“Cash Discount (CD) 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. KSBC initially started with a CD of 2% which is a common practice all over, but later increased it to 7.75% without any justification or discussion with suppliers. This 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%. Hence 7.75% to begin with, was far too excessive,” the letter said.
CIABC has also raised concern on KSBC’s charging a ‘cash discount’ but still paying the supplier only after stocks are sold out. “Is it fair to charge a ‘Cash Discount’ when 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% for?” CIABC said in its representation to the Kerala Government.
Stating that the role of KSBC is to be a neutral channel for wholesaling services, CIABC Director General Vinod Giri said: “By offering to sell all stock of a product if it pays a CD of 25%, KSBC seems to be promoting certain products at the expense of the others. Is this 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 KSBC actively promoting products of unknown quality and poor provenance, thus putting consumer health at risk for small commercial gain?”
Giri also said for providing wholesaling services, i.e. warehousing and shifting stocks to the retail shops, KSBC charges 8% as wholesale margin which is over and above the CD. That wholesale margin is also highest in the country, be it for Government owned or privately owned wholesale.
Giri also noted that in the new tender for 2022-23, KSBC intends to charge 20% as CD from all brands with annual sales of more than 10,000 cases. “This means CD applicable on fast-moving brands is being increased from 7.75% to 20%. It also means that no distinction would be made between a slow-moving and fast-moving brand which is against established notions of Cash discount. It has also been proposed that if a brand agrees to 25% as CD, KSBC will ensure that its stocks are sold out…this does not sound fair and responsible. KSBC seems to be leveraging its monopolistic position,” Giri added.
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