Liquor sales volumes to decline after steep, abrupt increase in duty: CIABC to Maharashtra government
Expressing concerns over the recent Maharashtra Cabinet decision to hike excise duty on Indian Made Foreign Liquor (IMFL), CIABC said it could severely disrupt the market, erode the competitiveness of national brands, and jeopardise the availability of legitimate alcoholic beverages in the state.
Moreover, the government's decision to not increase the excise duty on Beer would create an "uneven playing field" in the alchoBev market, CIABC said, urging the state government to rethink and reconsider the hike, which may trigger serious consequences.
This will also lead to downtrading in the state, compelling a shift toward lower-category products, CIABC said, adding that "if implemented in toto, will have far-reaching adverse impact".
On Tuesday, the Maharashtra government decided to increase the excise duty on IMFL and country liquor. Now, IMFL will be subject to an excise duty that is 4.5 times the manufacturing cost.
However, the state government has not decided to increase excise duty on beer, a move criticised by several alcohol beverage players.
CIABC further said the IMFL industry contributes approximately 60 per cent of the total Excise Revenue of the state.
Questioning the rationale for not increasing excise duty on beer, CIABC said the excise Duty collected from a single case of IMFL is equivalent to that from four cases of beer, underscoring the critical importance of this category.
"Furthermore, duty increase on IMFL, without corresponding changes for a category, such as beer, will create an uneven playing field and distort category dynamics, leading to possible adverse impact on revenue.
The Confederation of Indian Alcoholic Beverage Companies (CIABC) said a steep and abrupt increase in MRP (maximum retail price) would destabilise consumer accessibility and purchasing power, particularly within the mass-market segment which caters to the common man.
"This will lead to a significant drop in legal sales volumes, overlooking the interest of industry and its substantial investment in the state," CIABC Director General Anant S Iyer said, adding that it will also endanger the employment of people engaged in the entire value chain from farm to consumer.
This will also lead to the proliferation of illicit, spurious liquor and counterfeit brands.
It will also increase dumping from neighbouring states and may erode Maharashtra's tax collection.
"Maharashtra shares borders with states that are porous. These states have similar brands which have lower MRPs for IMFL. Any additional price escalation will trigger large-scale dumping (exfiltration) from these states, resulting in illicit inflows that damage legitimate trade and erode the state's tax base," it said.
CIABC said the retail price structure must align with consumer affordability.
"We request that further deliberations be held with all stakeholders to arrive at a balanced, data-driven, and sustainable course of action that protects both revenue interests and the long-term viability of the IMFL sector in Maharashtra," CIABC noted.
Earlier in the day, the Brewers Association of India (BAI) defended the Maharashtra government's recent decision to increase excise duty on IMFL whisky and not on beer, saying that taxes on beer are already very high in the state compared to other markets.
Tax reforms were undertaken for beer in 2018-19, and it was long overdue for spirits, said BAI, a body of the top three beer companies - UBL, Brewer Anheuser-Busch InBev (AB InBev), which owns brands as Budweiser, Hoegaarden and Corona along with Carlsberg which operates here with Carlsberg and Tuborg brands, together accounting for around 85 per cent of sales in India.>
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