Liquor revenues on course but dropping sales worry distillers, retailers in Karnataka

Karnataka seems on course to meet its revenue target from the sale of alcoholic beverages despite a fall in consumption owing to higher levies as distillers and liquor businesses worry over sedate sales. Chief Minister Siddaramaiah set a target of Rs 40,000 for the excise department which regulates liquor industry for the fiscal year 2025-26.

The excise department has mopped up Rs 33,371 crore in taxes from sale of alcoholic beverages, an increase of Rs 3911 crore over the same 10-month period, last fiscal year. This represents 13.72% growth, according to a note from the excise department.

While sales of both Indian made liquor (IML) and beer have been uniformly hit, tax collections have either dropped or remained flat in about half of Karnataka. The collections have been under stress in the districts of Kolar, Chikkaballapur, Tumakuru, Davanagere, Haveri, Ballari, Chitradurga, Bidar, Raichur, Dakshina Kannada, Kodagu, Uttara Kannada, Hassan, Mandya, Mysuru City and Mysuru rural. Other districts, including Bengaluru have made up for the rest, reporting higher tax revenues.


Arun Kumar Parasa, President of Karnataka Brewers & Distillers Association, said the policies must promote growth of the sector with softer taxes. When volumes drop precipitously, it will also cut into jobs in distilleries which mostly employ rural women, he added.

The excise department’s note, however, blamed the lower tax collections in parts of the state on the excise policies of neighbouring states. Maharashtra, Tamil Nadu, Telangana, Andhra Pradesh and Kerala have allowed their own versions of country liquor (toddy, feni etc) which again has influenced the consumption habits in Karnataka’s bordering districts, industry sources said.

The note also blamed part of the slump on the use of contraband substances (cocaine, heroin and opioids) while adding that the excise officials have tightened measures to crack down on their distribution and sale. This fiscal year, the department officials destroyed drugs worth Rs 5.34 crore in four excise districts in Bengaluru North, the note added. “It is a fact many people are looking for alternatives to have a better kick for a lesser price,” a businessman said.

Industry sources say the government increasing excise levies four times in two years has hit the sales hard. Stagnant rural wages and falling prices of agricultural produce are also said to be a factor for people spending less on liquor in several rural districts.

The government increased the excise duty on the lower slabs by Rs 15-Rs 20 for 180-ml bottles of cheaper IML liquor. This meant a monthly increase of Rs 600 for a regular consumer, that most people cannot afford. “In advanced economies, liquor prices remain the same for a few years, boosting sales. But here the industry is driven by revenue considerations, not the growth of the sector,” Arun Parasa said.