INSUBCONTINENT EXCLUSIVE:
By Ameya KarveA spate of political promises of waivers on farm-loan repayments in Indian states has an unlikely victim: alcohol
companies.
States are expected to hike taxes on liquor -- one of top three revenue sources -- as they need to plug fiscal hole arising from
bearing burden of farm-loan repayments
Any rise in tax will impact alcohol demand as companies will have to pass additional levy to consumers, according to Edelweiss Securities
Ltd.
Farm waivers are on agenda of all political parties as Prime Minister Narendra Modi struggles to alleviate agrarian distress ahead of a
national election around May
immediately announced waiver program after forming governments in Madhya Pradesh, Rajasthan and Chhattisgarh.
Raising liquor taxes -- which
bring in nearly 25 percent of revenue -- is most likely option as state governments are unlikely to borrow and worsen their debt to GDP
ratios, Abneesh Roy and Alok Shah, analysts at Edelweiss wrote in an investor note Jan
Seven states have announced waivers totaling 1.75 trillion rupees ($25 billion) so far, according to Edelweiss.
The brokerage remained
underweight liquor stocks and retained its hold recommendation for United Spirits Ltd.
