Tag Archives: alcohol policy

Court Allows PLL Holders to Register Labels, Pending Final Order

Government defends ‘Maharashtra Made Liquor’ (MML) policy citing increase in revenue by 17%
On December 16, United Spirits Limited applies for new label license – McDowell’s Century Blended Whisky, under MML category
64% of the total liquor manufactured in 2024–25 is from nine potable liquor license (PLL) holders
MML necessary to revive struggling domestic license holders, government contention
Section 49 of Maharashtra Prohibition Act Invoked, Questions Locus Standi of ISWAI

The Bombay High Court in its hearing on December 23 has allowed all companies to apply and directed the Excise Department to process their application for Maharashtra Made Liquor (MML) license, irrespective of earlier conditions. The Interim direction is subject to the final order.

The Court has posted the next hearing to January 19, 2026.

Justice Revathi Mohite Dere and justice Sandesh Dadasaheb Patil are hearing the case. It must be mentioned here that Justice Dere has been recommended as Chief Justice of Meghalaya starting mid January.

The December 23 directive basically states that all potable liquor licenses (PLL) holders should be allowed to apply for production and sale of MML and the Department must process their applications as if the exclusionary clauses 2 and 3 of the Government Regulations don’t exist (examples being Registered Office should be in Maharashtra; minimum 25% locally resident Directors; no foreign investment etc).

Department Cites Revenue Increase

On December 16, the Government of Maharashtra, had defended in the Court the MML policy, stating that it had led to a nearly 17 per cent increase in excise revenue. The government informed the Court that it had invoked Section 49 of the Maharashtra Prohibition Act, which gives it ‘exclusive privilege on trade in excisable articles’, thus questioning the locus standi of the International Spirits and Wine Association of India (ISWAI) which has filed the petition challenging the MML policy.

The government made the submission in response to the petition of ISWAI which represents several companies including global giants such as Pernod Ricard, Diageo and Bacardi.

The State Government took shelter under Section 49 of the Maharashtra Prohibition Act to argue that trade in excisable articles remains the exclusive privilege of the government, which may be conferred only upon license-holders for consideration.

While acknowledging that one ISWAI member, Pernod Ricard India, holds two potable liquor licenses (PLL), in Nashik and Kolhapur, the government affidavit said that most other members do not operate manufacturing units in Maharashtra. The State questioned ISWAI’s locus standi to challenge the policy, pointing out that ISWAI does not hold any potable liquor license.

“The State government has not imparted this privilege to ISWAI, it does not hold the right to bring an action against the policy decision on behalf of the alleged members of the association.”

Excise Revenues Surge

The Government representatives also made out a case of how excise revenue had surged post introduction of the policy. The excise collections between July and November 2025 rose from ₹9,665.64 crore in 2024–25 to ₹11,299.40 crore in 2025–26, it mentioned.

This growth contrasts with the average 12% rise recorded between April and June 2025, before duty revisions and the rollout of MML. “This shows positive growth after introduction of new policy,” the government said. The government further argued that the policy was aimed at addressing an uneven competitive landscape, promoting local liquor manufacturers and reviving idle capacities in domestic distilleries.

The government said that about 64% of the total liquor manufactured in 2024–25 came from nine potable liquor license (PLL) holders, many linked to ISWAI members or their subsidiaries. The State argued that these figures justified creation of the MML category and a reserved, incentive-based policy was necessary to revive struggling domestic license holders.

ISWAI had challenged the policy as arbitrary and discriminatory, arguing that it violates Article 14 of the Constitution by creating “a preferential class” of PLL holders who alone may manufacture MML, while excluding similarly placed licensees, including its members.

ISWAI argued that this criteria defeats the purported objectives of employment generation, investment promotion, full-capacity utilisation of distilleries and enhancement of excise revenue. It added that the same policy goals could be achieved by allowing all PLL holders to produce MML rather than reserving lower taxes and a price brand for a narrow class of locally structured licensees.

Even while, the Court is hearing the case, United Spirits Limited with unit in Chikhalthana in Aurangabad taluk has applied under MML category a label by name ‘McDowell’s Century Blended Whisky to be sold exclusively in Maharashtra.

Court Directs Department to Open Portal for Label Registration

On November 24, the Court had allowed the State and other stakeholders to go ahead with preparatory steps for execution of the policy decision, but clarified that the same will be without prejudice to the outcome of the case.

The Court had directed the Government representatives to open the portal for any alcobev player from within the state. However, till December 9, the excise department had not facilitated that process, forcing the Court to take notice of that and cautioning the government. A two-judge bench headed by Senior Judge Revathi Mohite Dere asked why the excise department had not followed the court directive and cautioned the government that it would take serious notice of the lapse.

Department Holds Right to Accept or Reject Application

Sources in the Excise Department clarified that the portal is open for anyone to file an application for registering their labels, but it is the department’s prerogative to accept or reject the application.

MML Category Doing Well

As of now, reports from the ground indicate that the products launched under the MML category are doing ‘extremely well’ with product quality being good. Some of the MML players or the consultants who are guiding them come with enormous experience in the liquor industry, either having worked in major companies or having bottling plants or ethanol units. Some of them also own retail shops across Maharashtra where they can give good shelf position for their products.

The ISWAI source said that many of the players were ‘commodity players’ and not ‘brand players’ and they would flood the market having a good lead over the established companies. The source acknowledged that the MML players had drafted consultants who have had strong background in the liquor business and are helping the licensees to set up the businesses, thus giving ‘undue advantage’ to them.

In mid-2025, the Maharashtra government introduced policy changes to incentivise local investment. It brought in the MML category, to include grain-based spirits produced exclusively by local manufacturers. The tax rate for MML is 270 per cent with zero foreign investment/ownership. The government believes that this will spur the local industry.

ISWAI then filed a lawsuit against the Maharashtra government, challenging the sharp hike in excise duty on premium affordable liquor brands and also for exclusion of brands of major players such as Diageo India and Pernod Ricard India from the newly-created lower tax category of MML.

The court also asked the government lawyer why the report of the Varsha Nair Committee was not submitted earlier on MML. The report highlights certain salient points to encourage those distilleries which are closed or underutilised in Maharashtra to produce cheap liquor. The report added that this would generate additional revenue to the excise department as well as generate employment provided it is made in Maharashtra for distribution in Maharashtra. It also prescribes certain minimum shareholding pattern for owners.

Eleven Licenses Approved, Several in the Pipeline

So far, the department has approved eleven MML licenses and many more are pending. Companies, both International and nation, are keen on jumping on to this MML bandwagon to produce economy liquor priced between Rs.160 and Rs.205 for the Maharashtra consumers even while their focus is on premium brands. These companies could launch similar products in this price range with some brand extensions and so on.

The Government is represented by Advocate General Milind Sathe with government pleader Neha Bhide and additional government pleaders Shruti Vyas and GR Raghuwanshi. ISWAI is represented by senior advocate Rohan Shah and advocates Darshan Bora, Chirag Shetty, Anchal Mundada, Kanika Birje, Surabhi Prabhudesai, and Vidhi Shah.

Trilok Desai / R.Chandrakanth

Ambrosia

Section 49 in The Maharashtra Prohibition Act

Exclusive privilege of Government to import, etc., intoxicants, etc., and fees levied include rent or consideration for grant of such privilege to person concerned.

Notwithstanding anything contained in this Act, the State Government shall have the exclusive right or privilege of importing, exporting, transporting, manufacturing, bottling, selling, buying, possessing or using any intoxicant, hemp or toddy, and whenever under this Act or any licence, permit, pass, thereunder any fees are levied and collected for any licence, permit, pass, authorisation or other permission given to any person for any such purpose, such fees shall be deemed to include the rent or consideration for the grant of such right or privilege to that person by or on behalf of the State Government.

Section 49 of Maharashtra Prohibition Act Invoked, Questions Locus Standi of ISWAI

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• Government defends ‘Maharashtra Made Liquor’ (MML) policy citing increase in revenue by 17%

• On December 16, United Spirits Limited applies for new label license – McDowell’s Century Blended Whisky,under MML category

• 64% of the total liquor manufactured in 2024–25 is from nine potable liquor license (PLL) holders

• MML necessary to revive struggling domestic license holders, government contention

The Government of Maharashtra, on December 16, defended in the Bombay High Court its newly introduced Maharashtra Made Liquor (MML)’ policy, stating that it had led to a nearly 17 per cent increase in the excise revenue. The government informed the Court that it had invoked Section 49 of the Maharashtra Prohibition Act, which gives it ‘exclusive privilege on trade in excisable articles’, thus questioning the locus standi of the International Spirits and Wine Association of India (ISWAI) which has filed the petition challenging the MML policy.

The next hearing is on December 23.

The government made the submission in response to thepetition of ISWAI which represents several companies including global giants such as Pernod Ricard, Diageo and Bacardi.

While acknowledging that one ISWAI member, Pernod Ricard India, holds two potable liquor licenses (PLL), in Nashik and Kolhapur, the government affidavit said that most other members do not operate manufacturing units in Maharashtra.The State questioned ISWAI’s locus standi to challenge the policy, pointing out that ISWAI does not hold any potable liquor license.

“The State government has not imparted this privilege to ISWAI, it does not hold the right to bring an action against the policy decision on behalf of the alleged members of the association.”

Excise Revenues Surge

Court Directs Department to Open Portal for Label Registration

Department Holds Right to Accept or Reject Application

MML Category Doing Well

The ISWAI source said that many of the players were ‘commodity players’ and not ‘brand players’ and they would flood the market having a good lead over the establishedcompanies. The source acknowledged that the MML players had drafted consultants who have had strong background in the liquor business and are helping the licensees to set up the businesses, thus giving ‘undue advantage’ to them.

The court also asked the government lawyer why the report of the Varsha Nair Committee was not submitted earlier on MML. The report highlights certain salient points to encourage those distilleries which are closed or underutilised in Maharashtra to produce cheap liquor. The report added that this would generate additional revenue to the excisedepartment as well as generate employment provided it is made in Maharashtra for distribution in Maharashtra. It also prescribes certain minimum shareholding pattern for owners.

Eleven Licenses Approved, Several in the Pipeline

The Government is represented by Advocate General Milind Sathe with government pleader Neha Bhide and additional government pleaders Shruti Vyas and GR Raghuwanshi.ISWAI is represented by senior advocate Rohan Shah and advocates Darshan Bora, Chirag Shetty, Anchal Mundada, Kanika Birje, Surabhi Prabhudesai, and Vidhi Shah.

Trilok Desai / R.Chandrakanth

Ambrosia

Bombay High Court Directs Maharashtra to Open Portal for Label Registration

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The Bombay High Court has directed the Government of Maharashtra to open the excise department portal for online registration of labels for all alcobev companies, a request filed by the advocates representing the International Spirits and Wines Association of India (ISWAI). This is a temporary directive, pending the hearing of the case filed by ISWAI against the State Government. The next hearing of the case is on December 16. ISWAI went to court, seeking, among other issues, a level playing field in the manufacture of ‘Maharashtra Made Liquor’ (MML).
The Court on November 24 had directed the Government representatives to open the portal for any alcobev player from within the state. However, till December 9, the excise department had not facilitated that process, forcing the Court to take notice of that and cautioning the government. A two-judge bench headed by Senior Judge Revathi Mohite Dere asked why the excise department had not followed the court directive and cautioned the government that it would take serious notice of the lapse.Sources in the Excise Department clarified that the portal is open for anyone to file an application for registering their labels, but it is the department’s prerogative to accept or reject the application.
Only the application for label registration will be accepted once the applicant fits in into the Guideline criteria set by the government. As of now 13 manufacturers are eligible and got the permission to produce MML.

The ISWAI contention has been that the process for companies to get their labels registered is time-consuming, not less than 45 days, and with the court case going on there would be further delay. This, the ISWAI source mentioned would give undue advantage to the eight players who have been granted licenses to set up MML units. They are already marketing MML in the price band of Rs. 160 and Rs. 205 where brand really does not matter to a particular segment of consumers.
As of now, reports from the ground indicate that the products launched under the MML category are doing ‘extremely well’ with product quality being good. Some of the MML players or the consultants who are guiding them come with enormous experience in the liquor industry, either having worked in major companies or having bottling plants or ethanol units. Some of them also own retail shops across Maharashtra where they can give good shelf position for their products.
The ISWAI source said that many of the players were ‘commodity players’ and not ‘brand players’ and they would flood the market having a good lead over the established companies. The source acknowledged that the MML players had drafted consultants who have had strong background in the liquor business and are helping the licensees to set up the businesses, thus giving ‘undue advantage’ to them.
ISWAI went to the court stating that some domestic and international players were producing brands in Maharashtra and selling exclusively in the state and hence should be considered a local player, a criteria to get MML license.
In mid-2025, the Maharashtra government introduced policy changes to incentivise local investment. It brought in the MML category, to include grain-based spirits produced exclusively by local manufacturers. The tax rate for MML is 270 per cent with zero foreign investment/ownership. The government believes that this will spur the local industry.
ISWAI then filed a lawsuit against the Maharashtra government, challenging the sharp hike in excise duty on premium affordable liquor brands and also for exclusion of brands of major players such as Diageo India and Pernod Ricard India from the newly-created lower tax category of MML. ISWAI is represented by Darius Khambatta and Rohan Shah.
The court also asked the government lawyer why the report of the Varsha Nair Committee was not submitted earlier on MML. The report highlights certain salient points to encourage those distilleries which are closed or underutilised in Maharashtra to produce cheap liquor. The report added that this would generate additional revenue to the excise department as well as generate employment provided it is made in Maharashtra for distribution in Maharashtra. It also prescribes certain minimum shareholding pattern for owners.

So far, the department has approved 13 licenses and many more are pending. Companies like Radico Khaitan; Diageo India; Pernod Ricard India and some more are keen on jumping on to this bandwagon to produce economy liquor priced between Rs.160 and Rs.205 for the Maharashtra consumers even while their focus is on premium brands. These companies could launch similar products in this price range with some brand extensions and so on.
The State government is insisting that the policy changes will fetch in more revenue, encourage local industry and create new jobs. MML category is expected to fetch additional excise revenue of Rs. 3,000 crores.

Taxes could affect Indian Alcobev Industry

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High taxation significantly burdens the Indian alcohol industry by increasing production costs, impacting profitability, and potentially driving consumers towards illicit alternatives. While GST doesn’t directly tax alcohol, increased taxes on input materials and logistics contribute to higher retail prices. This, coupled with state-specific excise duties and other levies, leads to a complex and fragmented market with varying prices and access points.

Indian alcohol market is estimated to be valued at 60.11 bn in 2025 and is expected to reach USD 101.10 bn in 2032, exhibiting compound annual growth (CAGR) 0f 7.7% from 2025 to 2032.

India’s alcoholic beverage industry faces regulatory hurdles like liquor bans and high taxation, impacting revenue and market share. Despite these challenges, the industry is projected to grow significantly, driven by premiumisation and evolving consumer preferences.

High taxation, particularly state-level excise duties and other levies, significantly burdens the Indian alcohol industry, impacting both producers and consumers. The industry contends with high tax burdens, with taxes often comprising 65-80% of the final retail price. This complex taxation structure, including state excise duties, VAT, and various fees, restricts financial flexibility and profitability.

In addition, the industry is hobbled by significant compliance overheads and a fragmented distribution ecosystem, where regulatory variations across states create logistical inefficiencies and increased costs. The working capital cycle is often elongated due to delayed payments from distributors and high inventory carrying costs, disproportionately affecting small and medium-sized enterprises (SMEs). For these players, who typically operate on EBITDA margins as low as 10–12%, any downward pressure on pricing can be economically unsustainable.

Indian spirits—particularly whisky, rum, and country liquor—have only a marginal share in global markets. According to data from the Agricultural and Processed Food Products Export Development Authority (APEDA), India exported alcoholic beverages worth USD 322 million in FY 2022–23, with Indian-made foreign liquor (IMFL) comprising a major portion. In comparison, the UK exported over £6.2 billion worth of whisky alone in 2022, highlighting the asymmetry in export capacities. The entry of global players with deep pockets, established branding, and premium positioning will make it impossible for Indian brands to compete against them and scale sustainably or capture premium market share. This reduced market share could ultimately lead to downsizing, plant closures, and stagnation in rural supply chains that depend on the sector for income. If local manufacturers lose market share, states could face a decline in excise revenue and employment generation.

Tax increases on alcoholic beverages can negatively impact the alcobev industry in several ways. They lead to higher prices for consumers, potentially reducing demand, and can also increase the costs for producers due to taxes on inputs. Furthermore, tax increases can lead to a decrease in sales volume, impacting the industry’s revenue and potentially leading to job losses.

Reduced Demand and Sales Volume: Higher taxes translate to increased prices for consumers, which can make alcoholic beverages less affordable, particularly for budget-conscious consumers.

This price sensitivity can lead to a decrease in the quantity of alcohol purchased, impacting sales volume for manufacturers and retailers. Some consumers might switch to cheaper brands or even substitute with other alcoholic products, impacting specific segments of the industry.

Increased Production Costs: Even if not directly taxed, the production process of alcoholic beverages involves various inputs like bottles, labels, and packaging materials, which are subject to taxes like GST. The cost of these inputs can rise due to higher taxes, increasing the overall production cost for manufacturers.

This cost pressure can be particularly challenging for smaller or craft producers who may have less financial flexibility to absorb these increases.

Impact on Revenue and Employment: Reduced sales volume and increased production costs can significantly impact the industry’s revenue and profitability. This can lead to potential job losses in the manufacturing, distribution, and retail sectors of the alcobev industry.

The industry might also face challenges in terms of cash flow and working capital, especially when dealing with tax refunds for input costs.

Potential for Unintended Consequences: Some studies suggest that higher taxes may lead to increased illicit production and sale of alcohol to avoid taxation, which can pose public health risks and further impact legitimate businesses. Consumers may also resort to cheaper alternatives or reduce consumption in other areas to afford alcohol, potentially impacting other industries.

While the industry may argue that tax increases do not reduce alcohol-related harm, some research suggests that price increases can lead to reduced consumption, especially among heavy drinkers and young people.

Industry Arguments: The alcoholic beverage industry often argues that tax increases unfairly burden the industry and consumers, and may not be effective in reducing alcohol-related harm. They may also highlight the potential negative impact on employment and tourism, particularly in areas where the industry is a significant contributor to the local economy.

The industry may also argue that other measures, such as public awareness campaigns and responsible drinking initiatives, can be more effective in addressing alcohol-related issues.

Policy Considerations: Policymakers need to consider the potential economic and social impacts of tax increases on the alcobev industry when formulating policies. Balancing the need to generate revenue and address alcohol-related harms with the potential negative consequences for the industry and consumers is crucial. Consultation with the industry, public health experts, and consumers can help to develop more effective and balanced policies.

Overall, while higher taxes on alcoholic beverages can be a tool to address public health concerns and generate revenue, they can also pose significant challenges for the alcobev industry and potentially lead to unintended consequences. A careful and balanced approach is necessary when considering tax policy changes in this sector.

Maharashtra Made Liquor (MML) Guidelines Announced to Boost Local Industry

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In a move aimed at reviving underutilised liquor manufacturing units and offering consumers more affordable choices, the Maharashtra Government has formally introduced a new category of alcoholic beverage—Maharashtra Made Liquor (MML). The decision, approved by the State Cabinet in July, has now been formalised through a Government Resolution (GR) amending the Bombay Foreign Liquor Rules, 1963.

The policy positions MML as a distinct sub-category under the Indian Made Foreign Liquor (IMFL) framework. To qualify, the liquor must be grain-based and produced using rectified spirit sourced exclusively within Maharashtra.

One of the biggest attractions for producers and consumers is the reduced excise duty, 270% for MML compared to 450% for IMFL. At an assumed manufacturing cost of ₹400 per litre, IMFL retails at roughly ₹2,200 (including ₹1,800 in excise), while MML is expected to cost around ₹1,480 (with ₹1,080 excise), making it about ₹700 cheaper per litre. The government has set a minimum retail price of ₹148 for a 180 ml bottle of MML, compared to ₹205 for IMFL and ₹80 for country liquor.

Under the new guidelines, MML manufacturers must have their registered head office in Maharashtra; maintain at least 25% state-resident shareholding; avoid producing or marketing MML outside the state; and register their brands within one year. Third-party production is not allowed, though leasing of plant capacity is permitted if the facility remains dedicated to MML production. If sold outside Maharashtra or if rules are violated, the MML status will be revoked, the guidelines state.

Economic Impact

According to reports, Maharashtra currently has 48 licensed IMFL manufacturing units, but only 10 dominate production; many operate at minimal capacity just to retain their licences. The government hopes MML will revive idle plants and generate up to ₹3,000 crore in additional annual revenue. The move is part of wider excise reforms targeting ₹14,000 crore yearly collections through measures including AI-powered monitoring of production and sales; new divisional excise offices; revised duty structures, IMFL at 3× to 4.5× manufacturing cost (capped at ₹260/litre), country liquor up to ₹205 per proof litre; and higher licence fees for FL-2 (retail) and FL-3 (bars) outlets.

In 2024-25, Maharashtra excise revenue stood at ₹25,467.96 crore. Of the six excise regions, Nashik region (Nashik, Nandurbar, Dhule and Jalgaon) earned ₹6,186.82 crore; followed by Chhatrapati Sambhajinagar region (Chhatrapati Sambhajinagar, Beed, Jalna, and Dharashiv) at ₹5,995.07 crore; Pune region (Pune, Ahilyanagar and Sholapur) at ₹5,809.79 crore; Thane region (Mumbai City, Mumbai suburbs, Thane, Palghar and Raigad) at ₹4,513.02 crore; Kolhapur Greater Region (Kolhapur, Satara, Sangli, Ratnagiri and Sindhudurga) at ₹1,265.21 crore; Nagpur region (Nagpur, Wardha, Bhandara, Gondia, Chandrapur and Gadchiroli) at ₹874.43 crore; Nanded region (Parbhani, Latur, Nanded and Hingoli) at ₹592.73 crore; and Amravati region (Amravati, Buldhana, Akola, Washim and Yavatmal) at ₹230.09 crore.

Unlike IMFL’s foreign-style blends, MML will feature simple, traditional flavours such as orange, cumin and herbs. Popular varieties are expected to include Santra, Chandni and Sugandhi. Packaging is expected to be basic, in bottles or sachets and to be labelled “For sale only in Maharashtra”. Distribution will focus on rural and semi-urban markets, though MML will also be available in urban centres. Production is said to be undertaken by state-run units, cooperative sugar factories, and private distilleries.

By creating a regulated, lower-cost option, the government hopes MML will help curb illicit liquor trade and reduce consumption of illicit brews.

UK Tax Burden Hurting Scotch Whisky

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75% of companies expect to defer investment, or invest outside of the UK due to the high tax burden
One in four Scotch distillers expect to make job cuts as a result of economic headwinds
76% say an increase in duty would make them less likely to take forward capital investment and recruitment

Three in four Scotch Whisky companies will defer UK investment, or invest elsewhere, due to the high tax burden, according to research undertaken by the Scotch Whisky Association (SWA). The SWA represents over 90 companies from across the Scotch Whisky industry, that collectively account for the majority of Scotch Whisky production (around 97% of the industry).

India is likely to be one of the destinations for investment as enunciated earlier by the SWA Chief Executive, Mark Kent who had stated after the India-UK free trade agreement was signed that “The deal is good for India too, boosting federal and state revenue by over £3bn annually, and giving discerning consumers in a highly educated whisky market far greater choice from SME Scotch Whisky producers who will now have the opportunity to enter the market.”

Kent had mentioned how “India is Scotch whisky’s largest export market by volume, with the equivalent of more than 192 million bottles exported there in 2024. The volume of Scotch whisky exports to India have grown by more than 200% in the past decade alone, and whisky is hugely popular in India. In fact, India is the largest whisky market in the world. But while many Indian consumers are keen to add a bottle of Scotch to their shelves, bars and collections, Scotch whisky has just a 3% share of the Indian whisky market. There is huge potential for that to grow with the free trade agreement announced in Spring 2025.”

Over two thirds of price goes in taxes

Going back to the research, undertaken between February and June 2025, reveals the extent of concern companies face about the current levels of alcohol duty in the UK – with over two thirds of the average-priced bottle of Scotch Whisky collected in tax.

Following a 10.1% rise in duty in March 2023, and a 3.65% rise announced in October’s Budget, 87% of respondents to SWA’s members’ survey expressed concern that the rate of excise duty will rise once again in this Autumn’s Budget.

Any further rise in duty will have an impact not only on investment, but also recruitment, according to the companies – at a time where the whole industry employs or supports 66,000 jobs across the whole UK. A quarter of companies now expect their overall headcount to decrease given the current levels of alcohol duty.

As well as direct job impacts, there is increasing risk of knock-on job losses across the extended supply chain as distillers reduce production in the face of global tariffs impacting exports.

This research comes as the industry faces significant strain. At the start of the year, over half of those surveyed expected operational costs from Government policies – for example, EPR fees, NIC increases, and tariffs – to increase by 10%; with 40% now expecting that figure to be over 20%. Despite the increased duty levels, HMRC data shows that Treasury spirits duty receipts have not increased and failed to deliver the forecasted revenue growth.

Kent added, “The Scotch whisky industry has a long track record of investment and growth that has benefitted communities across Scotland and the supply chain across the UK. It is also an optimistic and confident sector that believes in creating future growth.

“However, the positivity of the industry is being severely tested by the relentless impact of domestic policies and global circumstances.

“The industry is facing the significant challenge of US tariffs and increasing domestic pressures at a time it would otherwise be looking to support the Prime Minister’s growth mission. This high tax burden is not delivering the expected additional revenue for the Government, but it is costing jobs and investment.

“At a time when the country needs economic growth, we cannot fail to back one of the UK’s longstanding successes.”

Alcobev Sector Soft Target, Governments Keep Hiking Taxes Arbitrarily

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Telangana government’s delay in settling dues, liquor industry in dire straits
Cash-strapped Congress government mulling increase in liquor prices
Third tax hike in the last five years

With the exception of States which have prohibition, all other States, if they need to shore up their revenues, first target alcobev sector. State government after state government have increased excise duties, license fees etc without batting an eyelid and in most cases without taking the industry into confidence. The alcobev sector is the milch cow.

The latest news is that the cash-strapped Congress-led Telangana government is looking at the liquor industry to come to its rescue. Telangana’s alcobev sector, which is a major revenue earner for the state, is now faced with two major issues – government’s inability to clear outstanding dues of over Rs. 4,700 crore and its impending decision to increase taxes on liquor – both of which adversely impacting the sector.

To give a perspective, the Telangana government is depending on Overdrafts, Ways and Means Advances and Special Drawing Facility (SDF) from the Reserve Bank of India to meet its expenditure. The Congress government which came to power in December 2023 in Telangana has so far raised Rs. 12,358.48 crores through these routes.

In many states, excise is a major revenue generator and in Telangana revenue from liquor sale doubled from Rs. 12,703 crores in 2015-16 to Rs. 31,225 crores in 2021-22. For 2022-23, the state government had projected a revenue of around Rs. 37,500 crores from liquor. In 2023, the Telangana Excise Department managed to collect Rs. 2,639 crores without selling a single bottle of liquor, the money coming from nearly 1.32 lakh applications charging Rs. 2 lakh non-refundable application fee for the allotment of 2,620 liquor shops.

Fiscal deficit up

Despite the increase in revenues, the government has not been able to reduce the fiscal deficit as the Congress government has announced quite a few freebies that is costing the exchequer. To shore up revenues, the Congress government is planning to increase tax on liquor which in turn will push up the prices. The proposal made recently is expected to come into effect soon. The previous Bharat Rashtra Samiti (BRS) government in its term had hiked the liquor prices twice and now the Revanth Reddy government is contemplating, in five years that would be the third tax hike.

An industry veteran told Ambrosia “Nobody likes a tax increase. As liquor is a discretionary product, people slip down the value chain or they resort to alternate sources of supply, so both of which have implications to both the state government and the suppliers. In that respect, it is not the best of moves. This kind of thing is happening in other states, given that they have made electoral promises and have to fund that and alcobev is the soft target.”

The veteran who has held top posts in various companies said “As of now, we don’t know what levels the tax is going to be increased. Somewhere, there is a mention of license fee going up, we don’t know whether it is tax on consumer or manufacturers/suppliers or both we don’t know yet.”

The CEO of the International Spirits & Wines Association of India (ISWAI), Nita Kapoor in an interview with ET Hospitality has called for urgent attention to the critical issue of high state excise duties that account nearly 70- 80 percent of consumer MRP, inflationary pressures adding significant pressures on the industry. As inflation rates rise in the country, the alco-bev sector faces significant challenges due to escalating costs of production, transportation, raw materials, and exorbitant import duties. This combination poses a dire threat to the industry’s sustainability.

Ms. Kapoor said, “The liquor industry has consistently and significantly contributed by generating 25-40 percent of revenues for state governments and nearly 2 percent of nominal GDP. However, the current tax and tariff structure, characterised by high excise duties, limited supplier price flexibility, and exorbitant import duties of 150 percent (50 percent BCD + 100 percent AIDC), is pushing the industry toward a crisis. Regulators must recognise the necessity of inflation-linked adjustments in supplier prices as the Alcobev industry is a cornerstone of economic activity.”

Beer suppliers due Rs. 1,200 cr

On the one hand hike in liquor prices and on the other the government not releasing outstanding dues, both are hitting the industry hard. Beer suppliers, it is estimated, are to get nearly Rs. 1,200 crores, pending since October 2023. The alcobev sector has urged the government to resolve the issue as some of them were finding it difficult to go ahead with production.

The Director General of the Brewers Association of India, Vinod Giri said, “In absence of immediate resolution of this problem, I fear some companies may be forced to opt out of the state.” Of the Rs. 1,200 crores due to beer suppliers by Telangana State Beverage Corporation (TSBCL), around Rs. 900 crore is beyond tender credit terms of 45 days, he said, adding some of it is even 120 days overdue. “Payments are being released but amounts are too small and don’t even cover new outstandings, leave aside past ones.”

The alcobev companies in a statement said, “Delayed payments is creating a stressful cash flow situation for the manufacturing companies, hindering their ability to invest in operations, buy raw materials, pay employees and continue supplies to the consumers. Despite repeated attempts by industry leaders to meet key ministers in the state, the issue remains unresolved. This lack of communication and action is causing frustration and uncertainty amongst manufacturing companies in the state.”

It said that this might force companies to curtail supplies to Telangana. Unless the government does something soon, some companies may be forced to cut costs, including job retrenchment. This situation, the alcobev sector said would further dent industry confidence and dampen investor sentiment in Telangana.

As regards the delay on the part of the government on outstanding dues, the industry veteran mentioned that “All suppliers put together beer, spirits and wine, as of May 31^st the outstanding was over Rs. 4,700 crore. That itself is an additional cost the supplier is bearing and if consumers resort to alternate sources, it is not good for the suppliers. The suppliers have held on for quite some time, the question is for how long can they hold on.”

Telangana major liquor consumption state

Liquor consumption in Telangana is high as the state guzzles over 6 crore cases of beer or 15% of 40 crore cases sold across the country per annum. As regards Indian Made Foreign Liquor (IMFL), Telangana’s consumption is about 3.4 cases or 9% of 39 crore cases sold.

The non-payment of dues and the constant hike in liquor prices had left some in the trade to sell liquor above the maximum retail price (MRP) to make up for the losses. Besides, some licensed vendors were reported to have opened bars in the guise of permit rooms. The Bar Owners Association complained to the Excise Department against the wine shops which were allowing consumers to drink on the premises. The Association argued that they were already burdened by the excise rules of the government and adding to the woes were the so called ‘permit rooms’. In the process, the government was also losing revenue. The bar owners, on the other hand, complained that bars with retail outlets on the premises was affecting their business.

Despite woes, AP traders planning to move to Telangana

Whatever the issues, the consumer in Telangana continues to patronise the alcobev sector and this has enthused some liquor manufacturers to move or add liquor businesses from Andhra Pradesh to Telangana. According to reports, some of the liquor dealers in Andhra Pradesh were selling unknown brands at exorbitant prices through the state-run AP Beverages Corporation Limited (APBCL). Brands such as President’s Medal, Capital, Timer, Boom Boom, Classic Blue, Old Admiral, Royal Green and Sentinel were out in the market, particularly rural, in large numbers.

There have been allegations that out of 100 liquor companies, the APBCL procured 75% of its liquor from only 15-16 manufacturers like SPY Agro, Adan Distilleries, PMK Distilleries, etc., which are controlled by the erstwhile ruling party leaders of YSRCP. It now remains to be seen how the Telegu Desam Party which has come to power in Andhra Pradesh will take a call. However, the Telangana market being a lucrative one, the AP businesses are looking at Telangana.

Meanwhile, in Telangana there are charges and counter charges from the ruling dispensation and the BRS. In an open letter to the Telangana Chief Minister, A.Revanth Reddy, the BRS leader M.Krishank urged the Chief Minister not to introduce adulterated liquor in Telangana. Krishank said that on May 21, minister Jupally Krishna Rao stated that no proposals had been made to allow new liquor companies to operate in Telangana State. He warned that if anyone reported such news, a defamation suit of Rs 100 crore would be filed against them. However, on May 27, the BRS party exposed minister Jupally Krishna Rao’s falsehood, revealing that the government had indeed granted permissions to a company named Som Distilleries, pointed out Krishank. The Minister acknowledged stating that the decision was taken by the Beverages Corporation. It is now reported that the government has decided to cancel the permission given to Som Distilleries to sell its liquor in Telangana.

The liquor industry not just in Telangana is looking for stability in policy making but also to ensure that the government takes care of the liquor industry which is a revenue-spinner.

Karnataka increases beer prices again within six months, to fund freebies

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On July 7, 2023, the Congress (I) government in Karnataka gave a jolt to the alcobev sector by hiking existing rates of excise duty on Indian Made Foreign Liquor (IMFL) by 20% and on beer from 175% to 185%. And within six months, the government has announced yet another increase to the beer industry. A draft notification of the government mentions that additional excise duty on bottled beer manufactured in Karnataka or imported into the state will be increased by 10 percentage points from 185% to 195%.

As per the notification, the hike would result in every 650 ml bottle to cost an extra ₹8 to ₹10. The government has proposed the hike in a draft notification to amend the Karnataka Excise (Excise Duties and Fees) Rules, 1968. The new rules allowing the hike are likely to be finalised this month or early February as the department is seeing ‘a big growth in strong beer sales’, even as summer is approaching.

Government desperate to raise revenues

The Congress (I) government is desperate to raise resources as it is not able to fund the freebies it offered to the electorate just before elections. The Congress party came to power on the five election guarantees (read as freebies) it offered to the people – free electricity up to 200 units; free bus travel for women; 10 kg rice for every member of a below poverty line (BPL) household; ₹3,000 every month for unemployed graduate youth and ₹1,500 for unemployed diploma holders; and ₹2,000 for every woman head of a family.

Five guarantees draining exchequer

These five guarantees are going to cost the newly elected Congress government headed by Chief Minister Siddaramaiah, a whopping ₹52,000 crores. Excise revenue is crucial for the state government. In the 2023-24 fiscal, Karnataka has set a target of earning ₹36,000 crore from excise.

Excise revenue registers 13.43 growth in 2022-23

As per the annual report for 2022-23 of the Karnataka Excise Department, the excise revenue has been steadily increasing from ₹7.11 crores in 1967-68 to ₹26,377.68 crores in 2021-22. In 2022-23 the excise revenue collected was ₹29,920.37 crores, an increase of ₹3,542.69 crores when compared to the previous year, registering 13.43 growth. It said that the department’s salary and other expenses was ₹247.88 crores which is 0.83% of the total excise revenue.

Source	2020-21	2021-22	2022-23
IML	20,217.80	22,889.10	24,663.85
Beer	2,438.16	2,757.30	4,460.60
License Fee	643.87	684.10	745.84
Others	32.27	37.18	50.08
Total	23,332.10	26,377.68	29,920.37

Source wise excise revenue in Karnataka

Excise revenue from liquor sales in Karnataka has seen a 65% jump over the last five years, increasing from ₹17,948.5 crores in 2017-18 to 29,920 crores in 2022-23. The revenue is estimated to double by March 2024, given the budgetary target of ₹36,000 crores from liquor sales, as enumerated in CM Siddaramaiah’s budget proposal.

Expenditure is just 0.83%

Of the total revenues realised the expenditure of the department is just 0.83% and that expenditure is also seeing a downward trend.

Particulars	2020-21	2021-22	2022-23
Revenue	23,332.10	26,377.68	29,920.37
Expenditure	222.87	234.43	247.88
Percentage of expenditure	0.96	0.89	0.83

The department also reported growth in sales of both IML and beer (in lakh carton boxes). It can be seen from the statistics that beer has seen a quantum jump from 2021-22 to 2022-23 from 22.40 lakh carton boxes a month to 32.5 lakh carton boxes a month respectively, indicating the growing trend for beer, particularly strong beer.

Liquor type	2020-21	2021-22	2022-23
IML	583.23	660.16	698.46
Average per month	48.60	55.01	58.21
Beer	237.82	268.83	390.66
Average per month	19.82	22.40	32.5

For the excise year 2022-23, the renewed licenses were 32 distilleries, 12 breweries; 23 wineries; and 68 microbreweries. The number of trade licenses (12 categories) has gone up from 11,457 in 2021-22 to 12,454 in 2022-23.

In an earlier article, Ambrosia had raised this issue as to how the government would fund these guarantees. One is through increased borrowings and two through hike in excise duty and other taxable methods. Immediately, after coming to power the Congress government increased electricity tariff by ₹2.89 per unit and several industries are up in arms, stating that it will render many units economically unviable due to high cost of production. Then came the hike on IMFL and beer. The Chief Minister who holds the finance portfolio had levied 20% on all 18 slabs of excise.

However, draught beer has remained untouched which is currently at 150% of declared price. For microbrewery it remains unchanged at 50% of the annual installed capacity at the rate of ₹25 per bulk litre. The Chief Minister had then said “Even after the increase in excise rates, the price of liquor in our state would be lower when compared to the neighbouring states.”

Karnataka among highly taxed, industry

However, the liquor industry states that Karnataka is among the highest in excise duty rates. The Confederation of Indian Alcoholic Beverage Companies (CIABC) in a statement had then said the hike in the additional excise duty (AED) may not increase the revenue for the state exchequer. “Consumer prices in Karnataka are already very high. I think further increase, that too to that extent, is going to hit sales in a big way,” said CIABC Director General Vinod Giri.

***Vinod Giri, Director General, CIABC***

CIABC said that there is enough empirical data to show that the liquor demand turns quite elastic after 8-10% increase in price. “We may also see consumers downgrade to cheaper products. Considering that we fear that this tax increase may actually not lead to more tax collection as expected by the government, but will turn out to be counterproductive as many such increases in the past in other states have been. If that happens then all major stakeholders, i.e, the Government, the industry and the consumer will come out poorer.”

***Nita Kapoor***, ***CEO, International Spirits and Wines Association of India (ISWAI)***

Similarly, the CEO of International Spirits and Wines Association of India (ISWAI) Nita Kapoor had urged the state to rationalise AED, reduce the MRP of premium brands in line with its neighbouring states. But the government has its own plans, considering that it has to keep its election promises. The government cannot falter at this moment as the Lok Sabha elections are round the corner and it can’t be seen faulting on its promises. The axe has to fall on alcobev sector which continues to be an easy target.

– R. Chandrakanth