Beer prices may rise again, brewers’ body wants Karnataka to rethink draft rules

The Brewers Association of India (BAI) has formally appealed to the Karnataka government to rethink its draft rules that propose a duty hike based on alcohol content classification.

Representing the country’s top beer producers, the BAI warned that the proposed tax increases, new labelling rules, and stricter definitions in the draft notification could harm both the industry and the state’s revenue.

The Karnataka government, in August, sent a draft notification to the industry stakeholders seeking feedback on the proposed changes to beer regulations.

Key proposals in the draft included requiring beer labels to show malt and sugar content, raising taxes on strong beer, and increasing the minimum price of beer statewide. The draft also set stricter rules for beer production, limiting sugar content to 25% and making content labelling mandatory.

“Beer contains no sugar by standard definition,” said BAI director general Vinod Giri, noting that India already had an established classification for beer under the Food Safety and Standards Authority of India (FSSAI).

“Beer labels are already filled with statutory information and warnings. Adding unnecessary details would only clutter the label, making it less appealing to consumers,” Giri added.

The BAI chief also voiced his concerns over the draft proposal. “The draft notification just states proposed changes. It does not give a reasoning behind (these) proposed changes. While the government has heard our arguments patiently, it hasn’t offered a substantive reasoning behind the proposed changes,” he stated.

The proposed amendments also include substantial tax hikes. According to the draft notification, the excise duty on strong beer (beer that has alcohol content between 6.5 per cent and 8 per cent v/v) will be doubled, raising it to Rs 20 per litre, while the minimum case price for beer would reach Rs 300. Additionally, the draft seeks to increase the Additional Excise Duty (AED) to 195 percent of the billing price or Rs 130 per bulk litre, whichever is higher.

According to Giri, strong beer, which accounts for 90% of Karnataka’s beer market, would make it among the costliest in India with the minimum per-bottle price climbing from Rs 95 to Rs 140.

Commenting on the anticipated rise in beer prices, Giri noted: “This would mark the third tax increase on beer within 15 months, which is unprecedented. It appears that the intent is to make beer prices uncompetitive relative to hard liquor, potentially encouraging consumers to shift toward stronger alcoholic beverages, contrary to health guidelines from organisations like the WHO.”

The BAI argues that these proposed tax hikes could have a ripple effect, leading to decreased beer sales, potential cross-border smuggling, and ultimately a dip in the state’s tax revenue.

With over 11 breweries, thousands of crores in investments, and employment for 7,500 people, Karnataka has been an attractive hub for beer production. However, the BAI warns that these new policies could potentially stymie industry growth, reduce the state’s appeal for future investments, and drive companies to explore options in other regions.

The association has urged the Karnataka government to reconsider these amendments in light of the potential economic and social impacts, advocating for policies that align with public health recommendations and encourage sustainable growth within the beer industry.