KOCHI: Keralam is losing potential investments in the liquor and beverage sector to other states with entrepreneurs citing regulatory costs, limited industrial space and an uncertain policy environment as major deterrents to setting up manufacturing units on home soil.
Many argue that the state’s regulatory framework makes it difficult for new brands to enter and scale. They point particularly to the cost of label and brand registration and the procedures involved in selling products outside the state.
“The cost of obtaining approval for labels here is a burden for startups. For a glass bottle, approval for the front and back labels costs Rs 50,000 while brand registration costs another Rs 50,000. For plastic bottles, the corresponding cost can go up to Rs 2 lakh,” said Indo Pacific Beverages LLP founder and CEO Rajkumar T P. The Goa-based company recently won medals for two of its spirits at the Asia Wine Challenge.
“The combined charges in states like Goa, Karnataka and Tamil Nadu are substantially lower, with the overall cost around Rs 25,000,” Rajkumar, who hails from Kochi, said.
Entrepreneurs also face additional costs and procedures when they try to take their products to other states. Rajkumar said Keralam requires brands to pay around Rs 1 lakh when seeking approval to introduce products in another state, while Goa allows manufacturers to send products across the country for a much smaller fee — at around Rs 5,000.
“A regulatory system designed around the local market becomes a constraint when companies attempt to scale,” co-founder Saj Viswanath said.
Pointing to Goa and Karnataka, where beverage production is also linked to tourism and brand-building through winery and distillery visits, entrepreneurs say Keralam has not developed the ecosystem.
Former excise minister M B Rajesh argues that Keralam’s existing industrial capacity provides an opportunity that the state is yet to fully exploit. “Though Keralam has nine distilleries, we do not manufacture extra neutral alcohol (ENA) on the scale required for its liquor industry and depends on other states. Keralam imports ENA worth around Rs 3,000 crore from other states annually. We are losing an opportunity for domestic production and value addition,” he said.
He cited the proposed distillery project in Palakkad as an example of how Kerala could lose large investments to neighbouring states. The project had faced legal hurdles, but Rajesh said the issue was technical rather than a fundamental regulatory objection.
He also criticised using liquor as political currency, arguing that UDF governments have failed to balance the state’s dependence on liquor revenue with concerns over alcohol consumption.
Gautam Menon, founder of India’s first premium rum brand ‘Wild Tiger Rum’, which is now based in Coimbatore, alleged that all governments prefer maintaining the status quo as they want the revenue generated by liquor while avoiding controversy around the sector.
“‘Nokkam nokkam’ [we will look into it] is the favourite phrase of ministers,” said Gautam, a Palakkad native, referring to repeated assurances without changes.
Pointing that UAE is one of the largest overseas markets for Indian liquor, Gautam said around 90% of the liquor sent to the UAE comes from Uttar Pradesh though Keralam has the potential.