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Ensuring the dual objectives of COVID protocols and steady excise revenue

The Delhi government has come up with a fairly robust and market-friendly Excise Policy in November for 2021-22.

By Dr. Arpita Mukherjee, Professor, ICRIER

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The rapid spread of the Covid-19 Omicron variant in states like Delhi has left the State governments with no choice but to implement partial/full lockdown. At the same time, alcoholic beverages is among the top three tax revenue earnings of the states and they cannot compromise on their revenue earnings. The total excise revenue generated nationally by alcoholic beverages was over INR1.4 lakh crores in the financial year 2020-21.

The Delhi Excise Department collected a revenue of over INR 6,500 crores from Excise duty, license and permit fee, label and brand registration fee, import fee, and VAT from the 849 liquor shops in 2020-21. To ensure revenue earnings amidst the pandemic related slowdown, states like Delhi will have to be innovative on how they can earn their revenues and at the same time implement the COVID-19 related protocols to reduce overcrowding at the liquor outlets.

Home Delivery Policy in Delhi

The Delhi government has come up with a fairly robust and market-friendly Excise Policy in November for 2021-22. The objective of the policy is to augment the State Excise Duty revenue, simplify the pricing mechanism, reduce malpractices, and ensure equitable access to liquor supply. The policy supports a competitive business environment and takes out the government-run corporations (who previously had almost 60 percent of the business) from the liquor retail business. The retail business is now entirely privatised, and the policy separated out the producers, wholesalers, and retailers.

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With an aim to give the consumers a wonderful shopping experience, the policy had made provision for 849 retail outlets with five super-premium retail outlets where premium products including 50 percent bottled in country-of-origin brands will be made available to consumers. A core objective of the Policy is to give consumers the experience of browsing through the products, reading the ingredients and then making an informed purchase decision in the retail outlets. Brands will get better visibility.

Unfortunately, as the new outlets were opening up, Delhi saw a sharp rise in Covid-19 cases. To reduce the spread of the virus, Delhi Government implemented an odd-even policy for retail outlets, with weekend closures. However, unlike other states like Orissa or West Bengal, Delhi is yet to come up with a clear liquor home delivery policy. This will not only adversely impact the sales of the new retail outlets but also the tax collection of the government. Further, in the dustry pointed out that out of 849 retail outlets, around 300 are yet to open, thereby creating a gap in the market and leading to possibilities of long queues, violating social distancing norms, at the existing outlets.  This can be avoided through home delivery.

For around ten years, Delhi has a license category, L-13, for home delivery. Last year, the Excise Department made certain amendments to the license which mentions that L-13 license holders can do home delivery by ordering throuthe gh mobile app or online web portal; no delivery shall be made to any hostel, office, and institution; the licensee shall not sell liquor to any person for consumption “on” the premises; and the licensee shall not sell liquor to any other licensee. While these conditions have been formalised in the Excise Policy 2021-22, the Excise Department is yet to come up with the standard operating practice for this license. For example, who can apply for such a license, should be it issued to existing retailers or if aggregators can also apply, how will the licensee source the stocks – whether directly from the manufacturer or the wholesaler or retailers themselves will do the home delivery, etc. The zoning requirements, if any, also need to be specified, given that the retailers have already paid a hefty license fee to get their retail licenses.

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Experiences of Other States

Retail is a state subject and state governments reserve the right to decide their own policies. Experiences during the previous wave of pandemic show that many states have implemented different models of home delivery. For example, the Odisha Excise Department had issued guidelines to allow both on and off-premises shops to do home delivery. However, there were restrictions on the amount to be sold (a maximum of 2.5 litres of alcoholic beverage/5 litre beer at one time per order) and on delivery timings (between 7 am and 6 pm). In Maharashtra, while home delivery was allowed during the lockdown period through apps and portals, only permit holders could place orders for home delivery, which could be procured by consumers online from the State Excise portal. The order had specifically mentioned that products can only be sold at maximum retail price and no additional service charge could be levied by retailers.

The Way Forward 

Given that Delhi is already into partial lockdown, it is important for the State government to come up with standard operating practices to start home delivery on an urgent basis. A study conducted by International Spirits and Wines Association of India (ISWAI) and LocalCircles covering 12,444 consumers of alcoholic beverages from 11 districts of Delhi, found that 71% of the consumers indicated that they would use home delivery if it is made available; 92% opined that home delivery is convenient, ensures social distancing and better availability vis-a-vis store visits; and 81% perceived that sales through online platforms will bring price transparency. Given that Delhi consumers are ready, the State Government needs to support home delivery for the best interest of the consumers, ensure COVID protocols and continual Excise revenue earnings.

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(The author, Dr Arpita Mukherjee, Professor, Indian Council for Research on International Economic Relations (ICRIER). Views expressed are personal and do not reflect the official position or policy of the Financial Express Online.)

The above news was originally posted on www.financialexpress.com

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