Bangalore: Karnataka banned arrack four months ago in an effort to prevent poor people, who were the largest consumers of the local liquor, from ruining their finances.
However, since the ban, sales of Indian-made liquor (IML) have doubled—indicating that the poor actually ended up spending more money. And the state lost out Rs2,000 crore which it would have otherwise got from the sale of arrack, although some part of this will be offset by the money it earns from excise duty on liquor sales.
To meet demand, distilleries have stepped up production.
The Karnataka State Beverages Corp. Ltd (KSBCL), the state-run agency that controls the wholesale trade of liquor and beer, says 3.4 million cases (each case is 12 bottles of 750ml or about 9 litres) of IML may be sold in November, nearly thrice October 2006 figure of 950,000 cases.
Beer sales have jumped by 24% to 1.17 million cases (each case holds 12 bottles of 650ml) in October from 942,000 cases in July. Usually, third quarter sales of beer are flat due to the cold weather.
Government officials who do not wish to be identified say that these rising sales, and the consequent rise in excise duty, will help the government make up for its revenue losses from the arrack ban.
Karnataka enforced the arrack ban from 1 July. In the year to March, 15.4 million cases of IML were sold resulting in the collection of local taxes of Rs2,533.9 crore. In the four months to October, the state saw sales of 11.15 million cases, and the collection of Rs1,080 crore. According to the state’s excise department, Karnataka used to see average sales of 15 million litres of arrack a month before the ban.
The rise in sales of IML has exceeded even the most optimistic estimates.
“We expected to sell 2.8 million cases a month, assuming that we would have covered almost all arrack drinkers. We think IML sales should stabilize around 3.4 million cases,” said a KSBCL official who did not wish to be identified as he is not authorized to speak to the media. “In 14 days in November, we have had sales of one lakh cases a day,” he said.
The increase in IML sales means that the government has been successful in getting people to pay more for their drink. At Rs11.50 for a 100ml sachet, arrack was the cheapest drink available. Prices of IML start at Rs27 for a bottle of 180ml. “We find that any low priced brand (of IML) is selling nowadays,” said Shivanand, a sales manager at the Bangalore-based J.P. Distilleries which produces Rs.No.1 Highway’ whiskey priced at Rs27 and Rs.Raja’ whiskey at Rs32 per 180 ml.