Just ahead of the Karnataka budget for the year 2024-25, the Siddaramaiah government has proposed a 10% increase in duty on beer, meaning a 650ml bottle could cost an extra Rs 8 to Rs 10. This follows prior increases under the Congress government, including a 10% beer duty rise and 20% across all Indian Made Liquor (IML) slabs in July 2023.
Why the sudden hike? The proposed 10% additional excise duty (AED) hike in beer prices, set to take effect from the first week of February, aims to spur demand for IML, a significant revenue contributor for the state. Excise department officials told TNM that a portion of Indian Made Foreign Liquor (IML) drinkers have moved to stronger beer - after the 20% AED hike in IML last July. By increasing the beer price the government wants to entice these consumers back to IML.
This technically means that sales of non-IML beverages, which make a slightly smaller contribution to the state's revenue, have experienced a significant increase. In 2023, beer sales experienced a significant increase compared to the previous year, while IML sales only saw a marginal uptick. Several districts, including Belagavi North, Belagavi South, Dharwad, Gada, and Udupi, reported negative growth in IML sales, with 10 districts experiencing sub-1% growth. Excise revenue data for the fiscal year 2022-2023 shows that IML made a significant contribution of Rs 24,663.85 crores, while beer brought in Rs 4,460 crores before the price hike in July 2023. In the previous fiscal year 2021-2022, IML contributed Rs 22,889.10 crores, while beer revenue stood at Rs 2,757.30 crores.
The state excise department has now issued a notification inviting objections from the public until January 27, following which the decision is expected to be implemented.