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High Taxation Pushing Alcohol Industry On Brink of Crisis, Says ISWAI

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Edited By: Mohammad Haris

Last Updated: December 16, 2022, 19:20 IST

The liquor industry contributes 25-40 per cent of revenues for state governments, says the International Spirits & Wines Association of India. (Credits: Shutterstock)

The liquor industry contributes 25-40 per cent of revenues for state governments, says the International Spirits & Wines Association of India. (Credits: Shutterstock)

ISWAI says taxation accounts for 67-80 per cent of alcobev product prices, leaving little for suppliers and trade to sustain and manage their operations

The International Spirits & Wines Association of India (ISWAI), the apex body of the premium alcobev sector, has said high taxation of the alcobev industry is threatening the future of the Indian alcoholic beverages market. It added that taxation accounts for 67-80 per cent of alcobev product prices, leaving little for suppliers and trade to sustain and manage their operations.

Nita Kapoor, CEO of ISWAI, said, “The Indian alcobev industry is in deep crisis due to the inflation on one hand and high taxation on another. Unless swift action is taken to reverse the situation by decreasing taxes or increasing the product prices, India could soon be facing a situation that will be akin to killing the proverbial golden goose.”

Kapoor added manufacturers from automobile to pharmaceuticals have raised prices but the alcobev industry has been crippled because of the lack of pricing freedom. The liquor industry has historically contributed 25-40 per cent of revenues for state governments, but higher taxes without price hikes is pushing the industry into a crisis. While India has a comparative advantage in production because of the ready availability of raw materials like molasses and grains, the country needs to rehaul its policies that will encourage greater production of volumes for exports.

The Indian alcobev industry employs 1.5 million people and has an estimated market size of $52.5 billion (2020), which is the ninth-largest in the world.

Suresh Menon, secretary-general of ISWAI, said, “Gross margins for makers of Indian Made Foreign Liquor during the quarter ended September were lower compared to the same period a year ago due to higher cost of ingredients. ISWAI estimates that alcoholic ingredients such as Extra Neutral Alcohol (ENA) and Barley are 12 per cent and 46.2 per cent more expensive than last year, while the cost of packaging material such as glass and mono cartons rose by 24.9 per cent and 19 per cent, respectively. The paring of taxes at both central government and state government would also go a long way in helping the beleaguered AlcoBev manufacturers in India.”

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