The Centre is set to give up its control on the manufacture of whisky and wine, a long-pending move that will finally allow states to hand out brewing licences. Experts say the transfer of this regulating power could give domestic brands a new high apart from reducing prices of potable alcohol and greatly incentivising small breweries.
The Industrial (Development and Regulation) Act of 1951 gives the central government the authority to regulate the manufacture of industrial and potable alcohol, including the power to issue licences for production units. This has meant that the commerce ministry has been issuing licences for setting up alcohol manufacturing units across India while the states have been responsible for the rest. The states have thus been licensing distribution and sale, declaring prohibition, and preventing misuse of potable alcohol for non-potable purposes.
The states have opposed the mechanism, pointing out that they have complete control over the potable liquor business except issuing manufacturing licences. The issue has also been discussed in the Supreme Court which concurred with the states.
Many chief ministers had urged Prime Minister Narendra Modi to change the law in the spirit of “cooperative federalism”, arguing that potable liquor business had always been their exclusive domain.
Sources said the PM was in agreement, and had asked the commerce ministry to examine the issue.
Following an apex court order in the Bihar Distillery case of 1997 that gave states the authority to levy excise as well as all other controls on rectified spirit used for potable purpose, the law commission recommended the following year that states get exclusive rights over the potable liquor business.
It said this would improve state revenues while the loss to the Centre would be marginal.
Seventeen years later, the commerce ministry has accepted the commission’s recommendation and moved a cabinet note seeking amendment to the first schedule of the 1951 law.
The note, vetted by the law ministry, proposes to introduce an exception in item 26 of the first schedule which lists the category of industries regulated by the Centre.
The exception proposed is “fermentation industry except potable liquor”, thereby giving exclusive rights to state to regulate the liquor business.
A two-word change could bring major investment for the states.
“We have a national policy that doesn’t take into account state-specific needs,” a government official explained. “Once the amendment is notified, states can have their own policies as per local needs to promote entrepreneurship and attract investment.”
Sources said the amendment would help states deal with horticulture and farm waste as they would now be able to give licences for small brewing units. Farm cooperatives in Maharashtra had proposed small vineyards but were unable to meet the requirements of the central policy.
Now, with states set to get the power to issue licences, small breweries in Maharashtra and elsewhere could be around the corner.