Decrypting the Indian Made Foreign Liquor (IMFL)Supply Chain in India

Shagun Khurana 13th July 2018

In India, liquor falls under List II or the State List in the Seventh Schedule to the Constitution of India. In other words,anything pertaining to production, manufacture, transport, sale or purchase of liquor falls under purview of state administration. The control and regulation exercised by the states on liquor production and supply makes an interesting case for improving the ease of doing business in the liquor industry. The liquor industry in India has been broadly divided into two distinct segmentsi.e. the Indian made foreign liquor (IMFL) and country liquor commonly known as hooch. For the purpose of this piece, only IMFL segment has been considered. The entire production and supply chain in the IMFL industry including distilleries, warehouses, distributors and retailers falls under the jurisdiction of an excise official.

Let us take an example to understand how an order is processed during an interstate trade of IMFL. Consider a wholesaler in Karnataka (KA) wants to buy stocks of 500 cases from a distillery based in Maharashtra (MH). The wholesaler approaches the excise superintendent under whose jurisdiction he falls, with an application and challan of the already paid import (permit) fee of KA for bringing those 500 cases to the state. The excise superintendent issues a permit after scrutinizing the submitted documents, post thatthe wholesaler sends the original copy of the permit to the distillery in MH via courier. Simultaneously, the excise superintendent has to send a duplicate copy of the permit to the excise official “guarding” the distillery in MH.

While the original copy of the permit may reach MH in a day or two, the duplicate copy may take few more days. Once the original permit is received, the distillery can start producing the 500 cases, bottle them, put the required labels and get the shipment ready. It can plan to supply but not actually do so, until the duplicate copy has reached the excise official at the di...

Note: Views expressed in this blog are those of the author.