Karnataka: Premium liquor rates drop, but new pricing will take longer to kick in

The hospitality industry had been urging for rationalisation of rates to bring the prices in Karnataka on a par or closer to the rates in neighbouring States

While rates of premium liquor in Karnataka were expected to come down by around 20% from Tuesday, the policy change might take about a week to kick in, with the new rate cards still to be announced. Though the new rationalised slabs for liquor came into force from Tuesday, wine merchants said that new rate card had not been announced and there had been no supply of liquor under the new rate regime yet.

The revision of rate of liquor follows rationalisation of slabs, a long pending demand, by the State government that is expected to not only bring down the cost of some popular brands, but is also expected to increase excise revenue to the government. The government had notified August 27 as the date on which new price would come into force when it notified the changes or Excise Act on August 23. Under the new regime, the rate of liquor in Karnataka would be on a par or very close to the rates in neighbouring States, government sources said.

“The supply of premium liquor in the State has been erratic since the past one-and-a-half months as anticipating the price revision the manufacturers had reduced the supply. On Tuesday, we expected new rates to kick in following the notification. But it is yet to happen,” said P. Govindraj Hegde, general secretary of Federation of Wine Merchants Association, Karnataka. Lokesh K.T., president of Bengaluru Wine Merchants Association, also said that they were awaiting the new rates and were unable to purchase fresh stocks on Tuesday.

In about a week

Meanwhile, Finance Secretary (Expenditure) P.C. Jaffer said: “The new rates involve the process of distilleries deciding on the price and getting it approved. Since rate cards for large number of items have to be approved, it will take about a week to stabilise.”

The rates have been revised following changes to the Karnataka Excise (Excise Duties and Fees) Rules and are applicable to Brandy, Whiskey, Gin, Rum, and such other liquors and not for Beer, Wine, Toddy and Fenny. The rationalisation of liquor had been announced by the government in the 2024-2025 Budget as the hospitality industry had been urging for rationalisation of rates.

Impact on revenue

The government sources said: “We are set to suffer losses due to reduction in the rate revision in the initial months but we are expecting the revenue to pick up after consumption of premium liquor increases. A similar trend had been witnessed in Maharashtra after the rate rationalisation.” Karnataka has set a target of ₹38,525 crore in excise revenue for 2024-2025.

Sources also acknowledged that the premium liquor remained short in supply for the past couple of months as anticipating rate reduction distillers went slow on production and consumers also postponed purchases of expensive liquor.

Slabs proposed

While a committee set up to study had recommended new slabs, bringing down the number of slabs from 18 to 16, the rate revision was hanging in balance due to disagreement of rates between the distillers and government. The government wanted the distilleries to pass on the benefit of the rationalization to the consumers while the distilleries were holding on to downward reduction of the declared price/supply of liquor. Under the rationalisation, the government had asked distillers to keep the declared price less than or equal to declared price offered by the manufacturer to other States. Sources said that the government did not agree to the distillers’ demand for changes in slabs and eventually notified the new slabs.