Hangover shrugged

State governments’ decisions to impose Corona cess on liquor has left many feeling dry 

Published 4 years ago on Aug 17, 2020 2 minutes Read
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Indians love their spirits, but not more than their hard-earned money. No matter how bad the craving was, due to the special cess levied by state governments, many Indians refused to line up in front of liquor shops for their favourite bottles of alcohol. According to data collated by the Confederation of Indian Alcoholic Beverage Companies (CIABC), states that imposed over 50% Corona cess on liquor sale saw 59% year-on-year fall in sales in the months of May and June. 

Meanwhile, states that imposed no or moderate COVID-19 taxes (0-15%) saw 16% sales decline and those levying 15-50% cess saw 34% decline. Notably, these ‘special corona' fees were announced by several state governments to fill the coffers that were running dry due to the pandemic-induced lockdown. Turns out, the plan backfired as the industry body reports that total liquor sales dropped by 25%, from 58.7 million cases to 43.7 million cases during the two months. Consequently, illicit liquor trade also gained momentum in several areas, said CIABC. 

While some people are temporarily abstaining, others have changed their buying behaviour due to the surcharge. According to a LocalCircles survey conducted in Telangana, West Bengal and Rajasthan, when residents were asked whether they were considering downgrading to a cheaper alcoholic brand to stay within their budget, 55%, 50% and 49%, respectively answered in affirmative. Consumers were also asked if they would increase the quantity of liquor they purchase when the government removed or significantly reduced prices, and 45% respondents of Telangana, 36% of West Bengal and 67% residents of Rajasthan answered with a 'yes'.

Statistics compiled by Maharashtra’s excise department reportedly show that alcohol consumption between April and June was down by 59% to 98.9 million bulk litres (bl) as against 240.8 million bl consumed in April-June 2019. Other states such as West Bengal, Rajasthan and Karnataka also recorded lower excise revenue due to lower sales. Seeing the counterproductive results, the Delhi government rolled back the 70% COVID cess in early June, a move that was hailed by liquor-makers. Odisha, too, reduced its special fee from 50% to 15%.

Slowly but surely, with home delivery of alcohol, reopening of retailers and states coming to their senses, liquor trade is reviving. It may not be long before the industry regains its high spirits.