<p class="bodytext">The Karnataka government’s denial of corruption allegations in the Excise Department is neither convincing nor adequate. When Lokayukta traps reinforce repeated charges from trade bodies and opposition parties, the issue can no longer be dismissed as political noise. At the heart of the malaise is a reported scam that trade associations allege has reached Rs 6,000 crore over the last two years. A primary driver of this crisis is the 33-year freeze on new liquor retail (CL-2) and bar-and-restaurant (CL-9) licences to curb consumption. The moratorium has long outlived its purpose. Karnataka’s population, urban footprint, and hospitality sector have expanded dramatically since then, but the licensing regime remains frozen in a different era. This artificial scarcity has turned licences into tradable assets, spawning a thriving black market, as the state forfeits revenue. This environment has also distorted business behaviour. With no new CL-9 licences available, entrepreneurs are pushed towards CL-7 hotel licences as a workaround, a process allegedly lubricated by massive bribes at every stage – from grant and transfer of licences to renewals.</p>.<p class="bodytext">The recent arrest of senior excise officers while allegedly accepting bribes to clear CL-7 licences lends credibility to claims of systemic rot. Equally troubling is the widely reported transfer racket, where lucrative postings are allegedly bought and sold. Officers who pay for postings are incentivised to recover their investment through predatory enforcement, weaponising provisions of the Excise Act to intimidate traders and extract bribes. Added to this are the repeated and unscientific duty hikes, resulting in adverse fiscal consequences; the department missed its 2024-25 revenue target by over Rs 3,000 crore. Beer sales have dipped by nearly 20%, and border districts are losing business to Andhra Pradesh, where a more transparent policy offers significantly cheaper liquor. Institutional decay compounds the problem. An archaic staffing pattern and large vacancies have left the department ill-equipped to manage a modern, complex market.</p>.<p class="bodytext">At this juncture, corruption charges demand more than denials. A credible investigation by the Lokayukta – under which the Anti-Corruption Bureau functions – is essential to establish facts and restore confidence. But accountability must be paired with structural reform: lifting the licence freeze through transparent, population-linked mechanisms; curbing discretionary powers; rationalising duties in line with neighbouring states; and insulating transfers from political and monetary influence. The Excise Department exists to regulate a sensitive commodity while safeguarding public revenue. Today, it risks becoming a symbol of institutionalised rent-seeking. Ignoring the warning signs will not make the problem disappear; it will only deepen public distrust and losses to the exchequer.</p>
<p class="bodytext">The Karnataka government’s denial of corruption allegations in the Excise Department is neither convincing nor adequate. When Lokayukta traps reinforce repeated charges from trade bodies and opposition parties, the issue can no longer be dismissed as political noise. At the heart of the malaise is a reported scam that trade associations allege has reached Rs 6,000 crore over the last two years. A primary driver of this crisis is the 33-year freeze on new liquor retail (CL-2) and bar-and-restaurant (CL-9) licences to curb consumption. The moratorium has long outlived its purpose. Karnataka’s population, urban footprint, and hospitality sector have expanded dramatically since then, but the licensing regime remains frozen in a different era. This artificial scarcity has turned licences into tradable assets, spawning a thriving black market, as the state forfeits revenue. This environment has also distorted business behaviour. With no new CL-9 licences available, entrepreneurs are pushed towards CL-7 hotel licences as a workaround, a process allegedly lubricated by massive bribes at every stage – from grant and transfer of licences to renewals.</p>.<p class="bodytext">The recent arrest of senior excise officers while allegedly accepting bribes to clear CL-7 licences lends credibility to claims of systemic rot. Equally troubling is the widely reported transfer racket, where lucrative postings are allegedly bought and sold. Officers who pay for postings are incentivised to recover their investment through predatory enforcement, weaponising provisions of the Excise Act to intimidate traders and extract bribes. Added to this are the repeated and unscientific duty hikes, resulting in adverse fiscal consequences; the department missed its 2024-25 revenue target by over Rs 3,000 crore. Beer sales have dipped by nearly 20%, and border districts are losing business to Andhra Pradesh, where a more transparent policy offers significantly cheaper liquor. Institutional decay compounds the problem. An archaic staffing pattern and large vacancies have left the department ill-equipped to manage a modern, complex market.</p>.<p class="bodytext">At this juncture, corruption charges demand more than denials. A credible investigation by the Lokayukta – under which the Anti-Corruption Bureau functions – is essential to establish facts and restore confidence. But accountability must be paired with structural reform: lifting the licence freeze through transparent, population-linked mechanisms; curbing discretionary powers; rationalising duties in line with neighbouring states; and insulating transfers from political and monetary influence. The Excise Department exists to regulate a sensitive commodity while safeguarding public revenue. Today, it risks becoming a symbol of institutionalised rent-seeking. Ignoring the warning signs will not make the problem disappear; it will only deepen public distrust and losses to the exchequer.</p>
