Indian-made foreign liquor sales down by 29% in first half of 2020-21; decline by 9% in Sept quarter

A complete ban on liquor sale during lockdown followed by the imposition of steep corona tax in some states has led to a drop of 29% in sale of liquor across India in the first half of current fiscal, claimed liquor industry.

The situation has been worse in states like Andhra Pradesh, Chhattisgarh, West Bengal and Rajasthan where sales have seen a steep decline due to high 'coronavirus tax' on Indian-made foreign liquor (IMFL).

“All India sales volume growth for IMFL segment for the first half of the year 2020-21 was down by 29%. The first quarter (April-June) of the current fiscal saw sales plummeting by 49%, while in the second quarter sales were down by 9%. Leaving out April when entire liquor trade was shut down under lockdown, the sales for the period May to September in 2020-21 was -16% over same period last year,” says the data compiled by the Confederation of Indian Alcoholic Beverage Companies (CIABC), the apex body of Indian alcoholic beverage industry.

Overall, sales recovery in states that imposed no/marginal tax increases in light of the Covid-19 pandemic was better. Put together, sales were just 1% below same month previous year in September for these states. The comparable number in August also was same at -1%.

However, the drop in sales was much higher in states that imposed high Covid-led taxes. The sales were nearly 30% below the same month last year in September. Also, the quantum of decline in sales was in clear relation to the quantum of tax imposed.

“The notion that alcohol is not price-sensitive is greatly misplaced. We have been highlighting that alcohol is highly price elastic product. The inclination of some state Governments to impose high taxes on alcohol, assuming it will yield greater revenues, is greatly misplaced. There is empirical evidence that price increases above 5-10% tend to start suppressing demand causing fall in sales volume, thus defeating the whole purpose of tax increase," CIABC Director General Vinod Giri said.

The states should roll back corona tax to arrest fall in sales, sustain tax collection, prevent consumer misery, he said.