Russian ministry does not rule out higher wine prices due to excise hike, but expects 'balanced' decision

MOSCOW. April 17 (Interfax) - Russia's Industry and Trade Ministry does not rule out a slight increase in prices for Russian wines due to a looming excise hike for wine, but the decision should be "balanced" so as not to hurt the interests of businesses and consumers, Deputy Industry and Trade Minister Viktor Yevtukhov was reported as telling journalists by the Agroexport website.

"If there is an increase in some tax, including the excise, there will probably be some slight growth [of prices]," Yevtukhov said, commenting on reports that wine prices in Russia could increase after May 1 following the tripling of excises.

"I think that a balanced and reasonable decision will be made so that this does not affect either consumers or producers," he said, adding that the situation must be discussed with the industry, with associations and producers before any such decisions are made.

Media outlets reported earlier that Abrau-Durso Group , Russia's leading sparkling wine maker, had announced plans to raise prices for its products.

Company president Pavel Titov told Interfax that the price adjustment was made under the influence of general economic factors, including the "increase in the cost of debt financing due to the high key rate, the growth of prices for components, logistics, equipment and the increase in payroll." He said the company's production costs have risen by almost 30% in the past 18 months.

However, Titov also said that the excise hike is a "good measure for the protection of the domestic market and support of Russian producers, for whom there is a tax deduction."

Russia currently has a system where wine producers can apply a tax deduction for used grapes when paying excises.

The excise on still wine is set to triple to 108 rubles per liter as of May 1, and the excise on sparkling wines, including Russian ones, is also supposed to triple to 141 rubles per liter.

However, the State Duma passed a bill on April 9 that would slow the pace of the planned excise hike for sparkling wines, including Russian ones, and also modify the system for collecting excises on fortified wine and the mechanism of tax deductions for Russian winemakers.

Under the passed amendments, the excise on sparkling wines, including Russian ones, will be 119 rubles per liter as of May 1.

The bill also provides for other changes that would help reduce the financial burden on producers of Russian wine made from Russian grapes.