Teamlease Regtech Explained Licensing and Regulatory Process to Set Up Manufacturing for Acoholic Beverages

TeamLease Regtech, India’s leading Regulatory Technology (Regtech) solutions company, has released its report titled ‘Simplifying Compliance Management for the Alco-Beverage Industry.’ The report provides an overview of the complexity of compliance and the challenges entrepreneurs and employers face in the alco-beverage industry. It also delves deep into the present regulatory framework and suggests actionable recommendations for enterprises and policymakers.

India is one of the fastest-growing alco-beverage markets in the world, with an estimated market size of $52.5 billion (2020) and is expected to grow at a CAGR of 6.8%. The alcohol consumer base is set to reach 386 million people in India by the end of the decade, with almost 13 million people reaching the legal drinking age in the country every year. The growing demand is mainly contributed by multiple factors such as rapid urbanisation, favourable demographics, changing social norms and consumer preferences, mainly among the younger population, rising disposable income for the middle-class population, and increased accessibility and availability.

This new report takes a deep dive into the regulatory requirements and challenges enterprises face. It further looks into the compliance management obstacles employers face and the regulatory framework around consumption. For instance, the quantum of punishment for drinking and driving corresponds with the blood-alcohol content.

It finds that an enterprise needs at least 99 licenses and registrations under 67 Acts for setting up a manufacturing facility from scratch. While some of these licenses can be obtained within 15 days, a majority of licenses have no attached timeline for approval. As such, getting all required approvals may take anywhere between 3-4 years for an entrepreneur. Once the enterprise starts operations, it needs to adhere to over 3,000 compliance obligations in a year. These include maintenance of records, returns, and filings under the specific state excise policy; Food Safety & Standard Act, 2006 and Food Safety & Standard Rules, 2011; State Excise Bonded Warehouse Rules, and State Liquor Licence Rules, among others.

A says, “The $50+ billion Alco-Beverage sector contributes significantly to the state tax revenues. With an ever-increasing consumer base that will continue to boost revenue and market size, it is pertinent to understand the ground realities of operating an enterprise in this space. Compliance obligations vary depending on the positioning of the enterprise in the supply chain. A manufacturer needs at least 99 licenses and permissions before even beginning operations, whereas warehouse operators require 8 licenses. Retail sellers can need 9-13 licenses based on whether they sell the alco-beverage or serve it as part of a food business operator. Operating in just one state can require an employer to deal with over 3,000 yearly obligations. With this report, we have dug deep into what an entrepreneur faces when he/she enters this sector and how this complexity is replicated in over 30 heterogenous alco-beverage markets that are present in India.”

Enterprises need to abide by state-specific acts, rules, and regulations such as the Bombay Prohibition Act, 1949 and Bombay Foreign Liquor Rules, 1953; Maharashtra Prohibition Act, 1959 and Maharashtra Rectified Spirit Rules, 1951; Maharashtra Country Liquor Rules, 1973;  and at the central level Prevention of Food Adulteration Act, 1954 and Prevention of Food Adulteration Rules, 1955; and the Food Safety Standards (Alcoholic Beverages) Regulations, 2018 among others.

The report reveals that an enterprise operating an alco-beverage manufacturer chain must comply with at least 986 unique compliance obligations. Out of these, 202 obligations must be compiled on a monthly basis and 736 on an annual basis. Tracking and managing all applicable regulatory obligations can be exceedingly difficult when done with Excel sheets which are dependent on people and done on an ad-hoc basis. The report concludes with recommendations for compliance reforms that can further improve the ease of doing business and provide a new-age solution for compliance management for employers.