Liquor Baron\'s Death Opens Market in Uttar Pradesh

Courtesy of Wave GroupBusinessman Gurdeep Singh Chadha.

Just hours after the politically connected businessman Gurdeep Singh Chadha was killed in a shootout in a Delhi farmhouse this month, thousands of liquor stores in Uttar Pradesh shut down, as did half a dozen movie theaters he owned.

Mr. Chadha, who was known as Ponty, exemplified crony capitalism in India, analysts and businessmen say, pointing to his close relationships with the state government and his control over various industries. His death, reported to have been at the hands of his younger brother Hardeep, could mean significant changes in several of them, particularly the liquor market in India's most populous state.

The Chadha family's wealth has been estimated at anywhere from $1 billion to $10 billion. Much of that is said to come from liquor, real estate and sugar mills, with most of the businesses located in Uttar Pradesh. The state, which borders Delhi, consumes about a fifth of the liquor drunk in India.

Many in the state's liquor industry have characterized Mr. Chadha's influence over it as a “virtual monopoly,” although state officials dispute this.

His empire of liquor stores and manufacturers was immense: Besides 16,000 liquor stores in Uttar Pradesh, Mr. Chadha controlled three distilleries, which produced beer and “country-made liquor” â€" that is, indigenous Indian drinks like arrack - as well as what is known as “Indian-made foreign liquor,” spirits like rum and whiskey, under the Raffles and Wave brands.

In the state capital Lucknow alone, Mr. Chadha owned 18 beer stores, 92 country liquor stores and 115 foreign liquor stores, according to the Indo-Asian News Agency.

A liquor store owner in the Mahanagar neighborhood of Lucknow, who spoke on the condition of anonymity because he said he feared repercussions from the Chadha group, estimated that 60 percent of the liquor stores in the capital were owned by the group. He said the product from Mr. Chadha's distilleries was promoted and sold by these stores, as well as being pushed on to
other store owners.

According to four people in the liquor industry, including V. N. Raina, president of the All India Distillers Association, as well as Mr. Chadha's business partner Vijayant Jaiswal, Mr. Chadha's company was the only firm with an official Uttar Pradesh liquor distribution contract, which insured that his product received priority.

“He would also not allow companies who didn't agree with his policy to enter the state,” said the liquor store owner, “for example, the Aristocrat brand” made by United Spirits.

According to people in the industry, the Chadha group required its liquor stores to buy a certain amount of its Raffles and Wave brand spirits. Once they had met that quota, according to these people, the stores were allowed to carry certain brands from outside Uttar Pradesh, as part of an arrangement under which Raffles and Wave would be sold in those brands' states.

Mahesh Kumar Gupta, excise commissioner for Uttar Pradesh, said Mr. Chadha's influence had been exaggerated by his competitors. “Chadha's group had control over the liquor distribution business in only four divisions of U.P., namely Saharanpur, Moradabad, Bareilly and Meerut, worth not more than 18 to 20 percent of the total liquor distribution business,” he said.

But some members of the Liquor Association of Lucknow and the All India Distillers Association say Mr. Chadha's control was even more vast, amounting to an effective monopoly across North India. Had he lived, “we were afraid that he would take over Delhi's market as well in two years,” said a member of the liquor association who, like the liquor store owner, said he feared retaliation from the Chadha group if he were identified. “That is how strong he was politically,” this person said.

The Chadha distribution contract in Uttar Pradesh expires on March 31, and when it does, several competitors will jump into the fray, said Mr. Jaiswal, who was Mr. Chadha's business partner in the liquor business for 22 years. Mr. Jaiswal said the state would not be able to continue to grant effective monopolies in the liquor business.

Many analysts and businessmen say the governing Samajwadi Party will be under immense pressure to distribute licenses to various distributors, largely because Chadha's political influence is no more.

In India's four southern states, liquor distribution is the sole monopoly of the state governments. Distillers lobbies have been pushing for similar policies in states in North India. “This will ensure there is no private monopoly,” said Mr. Raina, president of the All India Distillers Association.

“The liquor business earns the most revenue for the states after sales tax,” Mr. Raina said. A decade ago, the Uttar Pradesh government earned 20 billion rupees a year in liquor licensing, taxes and levies. Today they earn more than five times as much, according to state figures.

Mr. Chadha's younger brother Rajendra Singh Chadha , his 30-year-old son, Manpreet ‘Monty' Chadha, and his wife Lovely Chadha are expected to divide the management of the family businesses among themselves. Manpreet Chadha is seen as being primarily interested in real estate; in April he announced two projects in Noida and Ghaziabad worth 40 billion rupees in total.

Mr. Jasiwal said that Monty's first job will be to reassure investors that their money is as safe with him as it was with his father.