Maharashtra: Excise duty on liquor goes up by over 50%, retail prices to rise from 14% to 60%

Beer and wine have been exempted from the excise duty hike.

MUMBAI: The cash-strapped Maharashtra government on Tuesday increased the state excise duty on Indian-made foreign liquor (IMFL) by over 50%, which will lead to a significant increase in retail prices by over 60%. It has also increased the duty on country liquor and imported premium liquor, which will hike their retail prices by 14% and over 25% respectively. The excise duty on beer and wine has not been increased.

editorial discreation required Gurugram, India-June 12, 2024: People are buying liquor at a shop at MG road near Bristol chowk; the liquor prices have increased up to 20% after the new liquor shops auction in the Gurugram city, in Gurugram, India, on Wednesday, 12 June 2024. (Photo by Parveen Kumar/Hindustan Times)(Pic to go with Leena Dhankar's story)

The government expects the whopping hike to increase its revenue to ₹57,000 crore, up ₹14,000 crore from the ₹43,620 crore collected in FY 2024-25. It expects 10% of the estimated revenue receipts of ₹5.60 lakh crore for the financial year 2025-26 to come from this.

While tapping sources of revenue that would enable the drained exchequer to bear the burden of populist schemes like Ladki Bahin and sops for farmers and other communities, the Mahayuti government in January constituted a committee headed by then additional chief secretary Valsa Nair to recommend steps to increase revenue from liquor sales. The committee submitted its report in April this year, and the state cabinet gave its assent to this on Tuesday.

Based on the recommendations of the committee, IMFL will now attract four and a half times excise duty on the manufacturing cost instead of the existing three times. “This will vary based on the manufacturing price but could lead to a huge hike of over 60% in retail prices,” said an excise department official. The cost of IMFL currently ranges between ₹120 and ₹150 for 180 ml, which will now go up to a minimum of ₹205. Premium brands will cost a minimum of ₹360 for 180 ml as against their current rate ranging between ₹210 and ₹330. The price of 180-ml bottles of country liquor has gone up to ₹80 from the current price of ₹70.

Beer and wine have been exempted from the excise duty hike. Officials said the retail price of beer, which has a lesser percentage of alcohol compared to hard liquor, is among the highest in the country and was thus exempted. In the case of wine, it is the policy of the state to promote wine since a significant chunk of the country’s wineries are in Maharashtra and a significant number of farmers who supply grapes for these wineries are also based here.

The government has also introduced a new category called Maharashtra-made liquor (MML), which will also be exempted from the hike. MML brands, made from grains, will cost a minimum of ₹148 for 180 ml, a price that has been strategically kept in the existing price range of IMFL to help MML capture the IMFL market.

An official from the excise department said that the new category had been introduced to revive the 70 manufacturing units that manufacture IMFL from molasses and grains. “Currently 22 of the 70 licenced units are entirely defunct while 16 do no manufacturing and renew their licence only for permission to sell liquor through their shops,” he said. “The remaining 32 are actually manufacturing the liquor, and 10 of these produce 70% of the IMFL manufactured in the state.”

The official added that distilleries using molasses would have to shift to making grain-based liquor in order to get the benefit of the exemption. The reason for this, he alleged, was that most of the grain-based manufacturing units are owned by politicians and the decision was taken to benefit them.

The duty hike on IMFL brands has come after 14 years. According to officials, the excise duty levied is still lower than other neighbouring states like Madhya Pradesh and Telangana. “The committee’s recommendations were based on the study of the rates in other states,” said an officer.

Another officer said that the hike in duty on country liquor brands was minimal since a greater increase and higher price would lead to the consumption of illicit liquor. “It is also because the last hike was done in 2022,” he said.

The cabinet has also allowed owners of bars to rent out permit room licences for alcohol by paying 10% of the licence fee.