As per a TOI report, the Siddaramaiah-led government in Karnataka is planning to implement a 10 percentage point increase in the duty on beer from the first week of February. This initiative is geared towards boosting the sales of Indian-made liquor, which serves as a substantial revenue source for the state exchequer. Notably, this move by the Congress-led government represents the second hike in beer duty within a span of seven months.
The excise department has released a notification outlining a planned duty hike, and citizens are urged to express their objections until January 27. According to T Nagarajappa, additional excise commissioner, if no substantial concerns are raised during this period, the state excise department plans to move forward with the implementation of the decision.
The proposed increase in the additional excise duty (AED) comes just a month ahead of the state budget. This adjustment is projected to elevate the cost of a 650ml beer bottle by INR 8 to INR 10 as the AED climbs from 185% to 195%. Nagarajappa foresees an extra monthly revenue of INR 20 crore resulting from this modification.
After coming to power and succeeding the BJP government, Congress implemented a 20% AED hike on liquor sales in its first full-fledged budget soon after taking charge last year.
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With the recent surge in prices, Karnataka is poised to have the highest liquor prices among the southern states. Despite consumers attributing the hike to the traditional summer season surge in beer sales, excise officials contend that the increase is strategically aimed at revitalizing the sales of Indian-made liquor (IML), which has witnessed a decline over the past year.
Sales of non-Indian Made Liquor (IML) with a lower contribution to government revenue than Indian beers have reached a peak. In 2023, beer sales experienced a 15% surge compared to the previous year, while IML sales saw a modest increase, slightly surpassing 2%.
Significantly, areas like Belagavi North, Belagavi South, Dharwad, Gada, and Udupi recorded negative growth, with 10 districts witnessing less than 1% growth in Indian Made Liquor (IML) sales. Despite excise officials asserting that the strategy intends to enhance IML sales by raising beer prices, aficionados find this explanation puzzling.
The Karnataka excise department argues that an upturn in beer prices may not necessarily lead to a surge in Indian Made Liquor (IML) sales. Instead, they suggest that the government should consider lowering IML prices as an alternative to bolster revenue, which is crucial for funding the envisaged expansion of the five poll guarantees in the upcoming fiscal year.
Bar owners suggest that the decrease in Indian Made Liquor (IML) sales can be attributed to the rise of budget-friendly beer brands in the market. Three recently introduced brands, priced at INR 100 per bottle, have become popular, particularly among the working class. This change in consumer preference toward affordable beer options has affected the demand for low-cost variants of IML liquor. In contrast to beer, IML carries a higher Alcohol by Volume (ABV).