Hefty tax hike saps Aarey of Energee

With 12.5% VAT slapped on Energee, dairy officials fear the demise of Aarey's best-selling product, accuse state officials with vested interests for scheming against the product

20,000: Number of Energee bottles manufactured daily

With tax officials slapping a cripplingly high VAT -- up by 7.5 per cent now -- on Aarey's best-selling flavoured milk product, Energee, the drink may soon become history.

Senior dairy officials at Worli informed MiD DAY that recently, the sales tax department has issued a letter, asking Aarey to pay value-added tax (VAT) of 12.5 per cent on Energee, instead of regular five per cent on the MRP.

Confirming the revision, Dairy Commissioner R D Shinde said, "I do not have a copy of the letter in front of me and cannot comment on the technicalities of the issue offhand. All I can say is we will have to look into the matter as it involves government-to-government dealing."

However, a senior official, requesting anonymity, said, "The letter also demands imposing the tax on arrears since 2008, at 12.5 per cent of the MRP per bottle. Nearly 20,000 bottles are manufactured daily, and annually the number may go over 70 lakh. Calculating the penalty since 2008, it may work out to be well over Rs 3 crore, excluding fine."

He added, "Currently, Energee, sold in disposable bottles of 200 ml, is being promoted by Sheetal Arch in public private partnership."

'Schemers at work'
Besides, some dairy workers feel that the tax hike is a deliberate attempt by certain people in the state government, with vested interests, to kill the sales methodically. At present, Energee is the only profit-generating product manufactured by Aarey. They feel that by imposing such a hefty penalty - while Aarey's other brands continue to pay just five per cent -- the dairy will be forced to hike the MRP, which may force consumers to give up the drink, eventually leading to the product's demise.

"With milk prices going up, we had already proposed an increase in the MRP by 30 paise. With VAT being imposed on the current MRP, we may have to increase the price by Rs 2, leading the customers to shell out Rs 18 instead of Rs 16. However, our competitors may continue to sell their product at their current MRP," the officer said.

No ad revenue
Adding insult to injury, the state has withdrawn all kinds of ad revenues, approximately Rs 90 lakh per annum, to promote Aarey products. The amount does not include the yearly expenses of about Rs 30,000 to maintain Energee stalls. Thanks to the brand loyalty exhibited by customers, even in today's age of colas, Energee is a profitable brand. "It is unfortunate that when there is high-level competition from private players, we have no budget to promote our successful brands," rued a Mantralaya official from the dairy department.
Despite repeated attempts, Anup Puri, director of Sheetal Arch, remained unavailable for comment.

Birth of Energee
Energee, the most popular brand of Aarey, was introduced in the market prior to 1965. Then called government milk, it was marketed by MAFCO. The government had imported semi-automatic machinery from Denmark at the drink's Worli dairy. It was Roger C B Pereira (70), former CEO and managing director of R&PM Edelman, who came up with the name. He was then running an ad company, Shilpi. It was during a brainstorming session that his colleague, Cyrus Bharucha, had suggested the name 'Energy'.  But it was already registered as a trademark. Pereira then deliberately misspelt it to 'Energee', and the brand was born.

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