It is often said that ‘Alcohol is injurious to health’. Now Indian states witness alcohol turning harmful to their financial health. Ironically, it is not because of the presence of liquor, but of absence. For many states in India, alcohol sale is the easiest way to generate revenue. But the coronavirus and the subsequent lockdown have pushed the liquor industry, into a crisis, which in turn, burdened the state governments.
To beat that, recently, Delhi, Andhra Pradesh and West Bengal governments have raised tax duty on liquor. Delhi levied a ‘Special Corona Fee’ of 70% on liquor. Andhra and West Bengal governments raised the taxes by 75% and 30% respectively. Excise duty on liquor is the 3rd largest source of a state’s own tax revenue. In FY20, states have earned a total of Rs. 1.75 Lakh Cr via tax on the sale of liquor. Taxes from liquor sale accounts to 15-25% of states’ own Tax revenue.
Annually, 34 Cr cases of distilled spirit, 33 Cr cases of beer, 30 Cr cases of local alcohol and 2.7 Cr cases of wine are sold in India. Last year, Kerala got revenue of Rs 14,504 Cr from the sale of Indian made foreign liquor and beer, which is an additional1,567 Cr compared to the previous year. In the last year, over 2.1 Cr cases of liquor were sold in India.
However, the liquor ban implemented by the central government during the lockdown has caused a loss of Rs 30,000 Cr in the past one and a half months. Shares of major players like United Spirits, United Breweries and Radico Khaitan have fallen between 6 to 8 per cent.
With more states preparing to follow the suit of Delhi, Andhra and West Bengal, liquor companies are concerned about the future of the sector, which is already trailing.
