State excise policies aimed at increasing beer consumption to boost tax revenue appear to be having a positive effect in India.
The beer industry that substantially lost it’s fizz over the past year due to the Covid-19 pandemic has benefitted from several populous states updating their tax regulations.
In West Bengal, home to Kolkata and 91 million inhabitants, the industry has seen 50% upwards growth since a progressive change in the duty structure was introduced earlier this year.
Speaking with the Times Of India, AB InBev president, India & South East Asia, Kartikeya Sharma noted “North and South India are expected to recover to 2019 levels due to low rates of Covid infections and a favourable tax climate for beer”.
In January the state government of Uttar Pradesh announced a cut in excise duty for beer from 280% to approximately 200% of the wholesale price. This was to counteract an estimated drop of 36% in beer sales between April and November 2020 in the state.
This would mean 500ml strong beer cans, a segment that accounts for 70% of the market in the state, will see a reduction from Rs 130 (US$1.75) to Rs 110 (US$1.50) a drop of over 15%.
To promote the ease of doing business, brand registration, label approval, bar, and micro-brewery licenses will all have the option to be renewed up to three years instead of requiring approvals every year.
As the state government has not increased license fees it is expected wholesalers and retailers will see a significant increase in their margins.
The new regulations in Uttar Pradesh came into affect on 1st April this year.
In Rajasthan, one of India’s largest beer markets, to support the local liquor and beer market the state government has increased duty for Indian-Made Foreign Liquor (IMFL) in a bid to boost sales of Rajasthan-Made Liquor (RML).
On March 22 the Delhi government lowered the age limit for the purchase of alcohol in the territory from 25 to 21. The move brings the capital in line with the majority of other states. The state is currently undergoing a restructuring of it’s liquor laws.
As many states rely heavily on liquor tax revenue to fill their coffers it is felt the wholesale reduction in excise and measures to support local producers in large parts of the country will help boost beer consumption.
Over the past year many states have updated their excise regulations, including a proposed national change in beer tax classification a move that was expected but accelerated by the impact of the coronavirus pandemic in India.
It should be noted, however, that in the past week India has seen their rate of Covid-19 infections sour which will undoubtedly have more impact on alcohol sales across the South Asian nation.