High taxation is breaking the backbone of the liquor industry in the country, the International Spirits and Wines Association of India (ISWAI) has said.
Taxation accounts for 67 to 80 percent of liquor prices, leaving little for suppliers and merchants to sustain and manage their operations, the association said in a statement Thursday.
“The Indian liquor industry is going through a deep crisis due to inflation on one hand and high taxation on the other hand. Unless quick steps are taken to reverse the situation by lowering taxes or by raising commodity prices, India may soon be faced with a situation akin to killing the proverbial goose that lays the golden egg,” said Nita Kapoor, Chief Executive Officer of ISWAI.
Unlike most other industries, from automobiles to pharmaceuticals, the alcoholic beverage industry has suffered from a lack of price freedom, she said.
“Although the alcohol industry has historically contributed 25-40% of state government revenue, higher taxes without price increases are pushing the industry into crisis,” she added.
Liquor makers said India has a comparative advantage in production due to the ready availability of raw materials such as molasses and grain. But the country must review its policies to encourage greater production volumes for exports, they said.
India’s alcoholic beverage industry employs 1.5 million people and has an estimated market size of $52.5 billion (2020), the ninth largest in the world.
“Gross margins for overseas liquor makers made in India in the quarter ended September were lower than the same period a year ago due to higher cost of ingredients,” said Suresh Menon, Corporate Secretary. of ISWAI.
According to ISWAI, alcoholic ingredients such as extra neutral alcohol and barley cost 12% and 46.2% more this year than in 2021. Similarly, the cost of packaging materials such as glass and mono cartons increased by 24.9% and 19% respectively.
“Reducing taxes at central and state government level would go a long way to helping the beleaguered liquor manufacturers in India,” Mr Menon said.