Premium alcobev sector industry body ISWAI (International Spirits & Wines Association of India), which represents Beam Suntory, Brown Forman, Diageo, Moet Hennessy, Pernod Ricard and Bacardi, has written to state governments to reduce taxes in upcoming excise policies citing ‘unsustainable’ inflation and allow companies to re-start home delivery of alcohol and make the delivery models sustainable ‘with immediate effect and proactively.’Citing “extra ordinary inflationary pressures,” ISWAI has flagged that record increase in costs of input materials including extra neutral alcohol (ENA), crown caps, cartons, glass, PET bottles and labels is severely impacting profitability of businesses. “With suppression in volumes and steep increase in input costs which is shrinking margins, we have reached a stage when sustaining operations is becoming an issue,” ISWAI chief executive Nita Kapoor told ET.

The letters, copies of which ET reviewed, have called on state governments to “provide for adjustment for extraordinary inflationary pressures that the industry is being burdened with on all input materials.” Prices of glass and PET bottles, smart caps, mono cartons and labels are up anywhere between 10-30%, as pandemic-hit suppliers grapple with raw materials shortages globally.

“We are making representations and telling all state governments to come up with an excise policy that adjusts for inflation. Otherwise, it may impact direct employment, social impact programmes and operations,” Kapoor said.

In another set of letters to states, the association said allowing home delivery will address low retail density and price arbitrage, which it said was leading to revenue loss and resulting in sales of counterfeit liquor.

India's liquor problems: Alcohol consumption patterns in Indian states

Home delivery is “the only solution” if the Omicron variant spreads and there are shut-downs of retail vends again as was the case in the previous two Covid-19 waves. “In that case, the liquor industry will be set back two quarters; we will not be able to reach pre covid numbers,” she said.

States such as West Bengal, Jharkhand and Chhattisgarh had permitted home delivery of liquor last year, but it didn’t take off owing to lack of clarity on guidelines and steep fees charged by aggregators Swiggy and Zomato. Other states like Maharashtra and Kerala also allowed home delivery but with various localised restrictions.

While last month, ISWAI approached the Maharashtra government to continue the online home delivery to address low retail density and price arbitrage, it is now writing to all states. “We are ready to partner with the states to build comprehensive regulations and safeguards, inculcating a practice of responsible consumption. Home delivery can enable convenience, ensure quality products and offer a safe buying experience for women,” the letter states.

UBS Securities analyst Sunita Sachdev wrote in a report on the alcobev sector earlier this month that progressive improvement in the regulatory environment, such as lowering of excise duties in Delhi, West Bengal and Maharashtra, and improving distribution could aid industry growth.

“We expect a sustained period of growth over the next four to five years for the Indian alcoholic beverages sector, as the regulatory outlook improves across states. Post the initial increase in additional taxes during the pandemic, we think most states have realised that excessive taxation can have a negative impact on overall revenue collection,” Sachdev wrote in the report.


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