Ahead of Festivals, Beer Prices in Bengaluru Set to Rise by 10-20%

Beer Association of India (BAI) has urged Karnataka government to withdraw draft tifications, which proposed a hike in duty through alcohol content-based classification in beer, saying that on aver this move would lead to a price increase of 10-20 per cent in mainstream and premium segments.

Upcoming Festival Season

Well this is t first time prices of beer have been increased, this is third time in last 12 months. And w third proposal in such a short time will impact industry ahead of upcoming festival season. Diwali days are just around corner and n Christmas and New Year festivities are also t very far away. And this price surge can be detrimental to industry volume as well as revenues for State from Beer category.

draft tification proposes to double excise duty on strong beer to Rs 20 per bulk litre, increase minimum billing price for beer in state to Rs 300 per case and Additional Excise Duty (AED) to 195 per cent of billing price or Rs 130 per bulk litre whichever is higher.

CM Siddaramaiah’s Call to Withdraw Proposal

industry body, in a letter to Chief Minister Siddaramaiah, has also asked to withdraw proposal asking beer manufacturers to declare sugar content in beer on bottle’s label and capping use of sugar to 25 per cent of weight of malt or grain.

BAI, which represents leading beer makers United Breweries, ABInBev and Carlsberg, said se draft tifications are t in interest of any of stakeholders and may result in high prices for consumers, impact Ease of Doing Business in state and may lead to lower tax revenues as sales would be impacted.

" increase proposed in draft tification would increase prices by 10-20 per cent in mainstream and premium segments. At same time, it would also make beer unaffordable to masses with proposed 35 per cent increase in taxes in this segment," said BAI, whose members account for 85 per cent of beer sold in India.

"Due to impact on MRP, we estimate tax revenues from beer category may actually fall to tune of Rs 400 crore revenue from this proposal," said BAI. Apart from tax revenue loss, it would put over Rs 5,000 crore investment in 10 breweries in state at risk due to low commercial viability and make future investment into capacity expansion doubtful.

Negative Results on Sales 

Moreover, high prices and reduced volumes will hit sales, lower manufacturing activity, and impact trade as well as hospitality industry, said BAI, adding proposed changes via draft tification are t in interest of any of stakeholders.

Over display of percent of Malt and Sugar content on label of beer bottles, BAI said it will mislead and confuse consumers, add undue compliance burden on beer manufacturers, force breweries to reveal confidential information, and reduce ease of doing business in state.

"We refore request you to withdraw draft tifications or amend m," said BAI in a letter written by its Director-General Vid Giri.

draft amendment proposes to reclassify beer into three subclasses and apply differential excise duty for each of m, as against a uniform rate on all beer. government proposed a rate of duty of Rs 10, Rs 16 and Rs 20 per bulk litre based on alcohol - below 5 per cent, 5 to 6.5 per cent and 6.5 to 8 per cent respectively.

"We request to eir withdraw it or revise this amendment to increase minimum declared price levels to Rs 400 per case for bottled beers, and review and rationalise minimum AED of 130/ BL which orwise will lead to big jump in MRP," it said.

Importance of Karnataka’s Market

Karnataka is a very important market for beer industry and it is recognised for its strong beer culture which has been made possible by supportive and progressive policies by Government.

"It is third largest beer market in India, and with supportive policies, could become biggest in coming years. However, we are concerned that some proposed changes could hinder growth of industry, diminish state's investment appeal, or drive future investments elsewhere," it said.