Sucheta Dalal :Grape farmers reel under excess wine
Sucheta Dalal

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Grape farmers reel under excess wine  

May 6, 2010

 Throughout the world, there seems to be a glut of wine. On one side of the globe, in Australia, wine producers have been compelled to destroy nearly 40,000 hectares of vineyards, while in France, winemakers have turned their wines into ethanol. Even India’s wine-making pioneer, Indage Vintners, burnt its fingers when it tapped Australian and South African vineyards, leaving them severely leveraged.

Back home, the scenario is grim for Indian grape harvesters. A number of farmers are looking at destroying their crop, and a few are looking at selling their harvest at a much lower price than the market price.


“The supply and demand for grapes is the issue. The supply for grapes is abundant but there is no demand for them among winemakers,” says Violet D’souza, co-owner and managing director, Indus Wines.


Maharashtra’s grape cultivation has been steadily rising 10% every year, with currently over 3,000 acres under grape cultivation and making the State the largest contributor to the Rs 300-crore winery industry in the country.


Grape farmers are still awaiting their payments for their supplies to wineries last year. But what is even worse for these farmers this year is the fact that there are no buyers to buy their grapes. Wineries are not ready to buy the grapes due to the recession.


Many farmers have started selling their grapes to wineries on a credit basis in the hope of getting some cash in the future. Others have started selling their grapes at a price lower than the market price. “They are ready to do it because there are no takers and also they can’t be sold in the open market. The only ones, who can take their wines, are processors but they are not willing to do it,” says Nerraj Agarwal, head of agriculture, Sula Wines.


According to Ms D’souza, many farmers have given up hopes and are considering destroying their acres of land and cultivating new crops. “Nearly 40% to 50% of farmers have given up on their vineyards and switched over to other agriculture produce,” she said. Farmers are switching over from wine variety grapes to table variety grapes.


Farmers who have not signed any contracts with companies are the ones enduring the pains of the current scenario. “The very serious farmers will sustain and keep it going and the others might destroy their grapes,” said Ms D’souza.


Considering the circumstances Indage Vintners is facing, the only notable brand making its presence is Sula, which has been coming out with cheap and affordable wines. However, even Sula is suffering, according to a producer in the region whom Sula has approached to buy their grapes.
With the current state of affairs, state intervention seems to be a likely solution. “I have been told that some associations and farmers are planning to take these issues to the State government,” said a senior official from a major wine-making company.


That being said, this seems to be an error made by the government itself. Seduced by the promise of lucrative returns, mixed with glamour and agriculture, and added to the fact that some political heavyweights are involved in the industry, the government gave out incentives lavishly to the sector.


With concessions like zero excise duty, no stamp duty & registration fees, and concessional rates for land, the sector was expected to grow. The Maharashtra Industrial Development Corporation (MIDC) was appointed by the State as an agency to develop winery parks in Sangli and Nashik.


Retailing for wine became a lot easier when wine and beer licences were made available both for individual retailers and supermarkets. Then, just ahead of the State Assembly elections, the Congress-NCP government became more generous by reducing value added tax (VAT) to 4% from 25% on wine last October.


Out of the 58 wineries in the State, more than half have either shut down or stopped producing wine due to the glut in the market. In the last week of November when Moneylife had contacted Sula Wines, the winery still had over 40%-50% of its wine lying unsold in its tanks, while Indus Wines has around 90% of its wine still in its inventory.


( The market for wine before 2007 was growing at 28%. Ever since 2008, the market has come down by 30%. — Aaron Rodrigues

-- Sucheta Dalal