The excise revenue generated from liquor sales in Karnataka has experienced a significant surge of 65% within the past five years. Starting from INR 17,948.5 crore in 2017-18, it has reached INR 29,600 crore in the fiscal year 2022-23. Projections indicate that the revenue is expected to double by March 2024, aligning with the budgetary goal of achieving INR 36,000 crore from liquor sales, as presented in CM Siddaramaiah’s recent budget proposal on Friday.
Over the past fifteen years, there has been a remarkable surge in revenue generated from liquor sales, with an astounding increase of 600%. This upward trend is expected to persist as successive state governments perceive alcohol consumers as a convenient source of revenue whenever they confront the task of generating funds. In his budget proposal, Siddaramaiah proclaimed a 20% escalation in the additional excise duty imposed on liquor to gather resources for fulfilling the five poll guarantees put forth by the Congress party.
Starting from next month, the upcoming hike will mark the 11th increase since 2008 and the eighth one within the past decade. The state government has implemented a significant 52% hike in AED over a span of just three years, seemingly in response to a revenue shortfall caused by the pandemic.
Consequently, the revenue generated from liquor sales has surged from INR 4,812 crore in the fiscal year 2007-2008 to an impressive INR 29,600 crore in 2022-2023. The estimated revenue projection for the current fiscal year stands at a staggering INR 36,000 crore.
While the government enjoys its financial gains, consumers and liquor manufacturers bear the brunt of the situation. As per Siddaramaiah’s declaration, the maximum retail price (MRP) of liquor will witness an increase ranging from INR 7 to INR 177 per quarter, depending on the brand. Furthermore, if the same brand and quantity of liquor is consumed at a bar or restaurant, an additional service charge of INR 10 to INR 15 will be levied.
“The consumption of cheap liquor accounts for 60-70% of total liquor sales in Karnataka and it is the poor and middle class that consume it. So, a regular hike in liquor taxes will hit them hard as they will have to spend a minimum of INR 500-INR 1,000 extra every month on an average,” said a wine merchant.
Instead of increasing AED, the government ought to have brought in reforms in the liquor business, said B Govindraj Hegde, General Secretary, Federation of Karnataka Wine Merchants Associations. “The government should focus on plugging leakages in revenue as liquor is being sold illegally in dhabas, hotels and shops. Bringing in more efficiency in the administration of the excise department is the need of the hour,” he added. Manufacturers are also concerned that this uncontrolled increase in taxes may lead to a dip in liquor consumption, thereby affecting business.