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Duty hikes leave Indian state of Karnataka in beer drought
Karnataka’s government has triggered a shortage of beer in the Indian state by introducing a steep hike in excise duties.
The government’s hike in beer duties, which came into effect on 20 January, has added another layer of challenges for the already struggling local beer industry.
According to the Times of India, where this story was first reported, excuse duty in Karnataka has now increased from 185% to 195% of the billing price, or INR130 (£1.20) per bulk litre, whichever is higher.
The new system favours beer brands on the higher end of the price spectrum. The price of a bottle of beer which used to cost INR100 is now INR145. However, for a beer which previously cost INR230, the price has only risen by INR10 to INR240.
Government officials have said the hike aims to address revenue shortfalls in the excise department. However, this is despite record liquor sales earlier this financial year.
A senior excise official defended the increase to the Times of India, saying it was part of the 2024 state budget plan to update outdated tax policies.
“We’ve been focused on Indian-Made Liquor (IML), but beer duties have remained unchanged for years. This hike helps close that gap,” the official stated, adding that the policy was reviewed based on feedback from various stakeholders.
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But industry representatives have warned that the decision has left the southwest Indian state, whose capital is Bengaluru (formerly Bangalore), in a beer drought.
Karunakar Hegde, president of the Federation of Wine Merchants’ Associations, said that for the past week there has been “no supply of beer due to the price hike”.
Brewers even began slowing production a week before the increase was introduced as they prepared for the challenges ahead.
“As a result, there’s a shortage, the market is dry, and business is taking a hit. Purchases have already dropped 10% and the lack of stock is impacting sales significantly,” Hegde said.
On-trade businesses have already been dealing with a challenging operating climate due to a noticeable drop in the number of people going out to drink. Pubs in the region are struggling with intense competition and financial constraints.
Businesses cannot afford to pass price hikes on to consumers, who are dealing with their own financial pressures, leading to less beer stock in the market as a result of the hikes.
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