Alcohol Prices To Go Up, Expect Upheaval In Next Four Weeks: CIABC On Maharashtra Excise Duty Hike
The Maharashtra government should have hiked the excise duty on beer as well, according to CIABC Director General Anant S Iyer.
The Maharashtra government’s decision to hike excise duty on certain alcoholic beverages will cause “momentary upheaval” in the industry in the next four weeks, according to Anant S Iyer, the Director-General of the Confederation of Indian Alcoholic Beverage Companies (CIABC).
The full impact will be clear once the government order (GO) is released, Iyer said.
“The business will go through momentary upheaval in the next three to four weeks. After that, I think it will stabilise… liquor cost cards are not a very simple exercise…it's going to take at least 24 hours before companies react once the GO comes in hand,” he told NDTV Profit on Wednesday.
The Maharashtra government on Tuesday approved an increase in excise duty on Indian Made Foreign Liquor (IMFL). It has been raised to 4.5 times from three times the manufacturing cost. At the same time, the duty on country liquor has been raised to Rs 205 from Rs 180 per proof litre.
One of the immediate effects would be "down-trading”. It refers to customer migration to more affordable alcohol variants, the liquor body chief observed.
“The prices are going to go up…there would be a bit of down trading, a lot of our industry members from our association have brands across categories, so they may be able to catch the customers down trading…at the higher price points, there would be some initial resistance, but after that, I'm sure it'll stabilise,” he said.
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Iyer criticised the unexpected duty hike suddenly, while highlighting the fact that it has not been extended to beer.
“I don't think the sudden and huge price increase is in the right spirit. It shouldn't be done like this…The other aspect is that I'm very surprised that they haven't increased the excise duty on beer. They should have done it all across…beer duty should have also gone up,” he said.
He noted that Maharashtra produces a lot of wine, so it is understandable that the duty hike did not cover wines.
The state government has also approved a new category of Maharashtra-made liquor. According to Iyer, this segment is intended to bridge the gap between country liquor and IMFL and has seen success in states like Rajasthan.
"It is IMFL in all practical purposes," he explained, describing it as containing ENA (Extra Neutral Alcohol) and flavouring substances. However, he remains cautious about its potential success in Maharashtra, noting its lacklustre performance in other states like Uttar Pradesh.
He acknowledged the financial pressures the government is facing. "I know that the government is under severe pressure because of the welfare schemes... and they are in dire straits as far as their financial situation is concerned," Iyer said.
