Karnataka’s evolving excise policy framework is increasingly facing a balancing challenge between revenue generation and consumption regulation, according to the Confederation of Indian Alcoholic Beverage Companies (CIABC).
In an exclusive interaction, CIABC Director General Anant S Iyer said ongoing discussions around Karnataka’s excise structure are being influenced by assumptions that lower-alcohol beverages such as beer are automatically safer than spirits.
According to Iyer, alcohol-related harm should be assessed through total alcohol consumption rather than beverage category alone. He argued that serving size, drinking frequency and consumption behaviour are more important indicators than just alcohol percentage.
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He explained that a 650 ml bottle of strong beer at 8 per cent alcohol by volume (ABV) contains nearly the same amount of pure alcohol as two standard servings of Indian Made Foreign Liquor (IMFL) at 42.8 per cent ABV.
“Policy should not assume that lower-strength beverages are inherently safer without considering actual consumption volume,” Iyer said.
The CIABC also warned that favouring beer or low-alcohol beverages through lower taxation could create revenue pressures for states. IMFL generates significantly higher excise revenue per case compared to beer, making it one of the largest contributors to state tax collections.
Iyer said if consumers shift from IMFL to lower-taxed categories, states could lose substantial revenue without necessarily achieving proportional public health benefits. He stressed that such trade-offs should be transparently acknowledged in excise policy design.
On the issue of category-neutral taxation, Iyer said policies should evaluate all alcoholic beverages using comparable parameters such as alcohol content, serving size, consumption volume, tax yield and market impact.
He cautioned that repeated duty hikes on lower-priced IMFL products could hurt the legal alcohol market. According to CIABC, nearly 85 per cent of IMFL sales volumes come from lower price slabs, making them highly sensitive to taxation-led price increases.
“Premiumisation should happen naturally through rising incomes and consumer choice, not by making mass-market products unaffordable,” he said.
The industry body also raised concerns that excessive excise escalation could eventually lead to downtrading, illegal alcohol trade and weakening of state revenues over the long term.
CIABC further highlighted the sector’s strong economic linkages with agriculture and rural industries. The spirits industry depends heavily on agricultural raw materials such as sugarcane, molasses, rice and maize for the production of Extra Neutral Alcohol (ENA) and bulk spirits.
According to Iyer, alcohol manufacturing supports farmers, sugar mills, packaging companies, transport operators and rural employment across multiple states.
He said governments should recognise the industry as a regulated economic sector with major upstream linkages instead of treating it purely as a “vice industry”.
The CIABC also stated that excise policy alone cannot address public health concerns. It suggested that governments should focus separately on responsible retailing, drunk-driving enforcement, legal drinking age compliance and awareness programmes.
Iyer warned that if taxes continue rising sharply amid inflationary pressures and global supply-chain disruptions, consumers may shift toward illicit or unregulated alcohol markets.
“The sustainable approach is predictable taxation, sensible regulation and stable market-based pricing,” he said, adding that long-term fiscal stability depends on maintaining a healthy legal alcohol market rather than relying only on repeated tax increases.
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