Premium liquor prices in Karnataka set to surge by 20%, becoming the costliest in India

Karnataka is set to maintain its position as the most expensive state in India for premium liquor brands, as the State government has proposed a 20% increase in additional excise duty (AED) on alcohol.

The announcement came last week when the state cabinet presented the budget on Friday. Once the budget is passed in the legislature, which is expected to happen on July 19, the new prices will take effect.

According to officials from the Excise Department, even though liquor brands with lower price tags are still relatively cheaper in Karnataka compared to other states due to the long-standing ban on the sale of Arrack, a crude country liquor variant, a comparison of liquor prices reveals that even some low-end brands have become more expensive in the state.

In Karnataka, liquor brands are classified into 18 categories based on their declared price, which is the price at which manufacturers sell liquor to the Karnataka State Beverage Corporation Ltd (KSBCL), the government wholesaler. The highest price range consists of brands priced above Rs 15,001 per bulk litre.

The duty structure involves an excise duty of Rs 50 per bulk litre and an AED of Rs 215. The maximum retail price (MRP) includes all these charges, as well as 0.6% of the KSBCL margin and a 10% retail margin. With the 20% increase in AED, the cost of Indian-made liquor (IML) is expected to significantly impact consumers’ wallets.

Excise Department officials argue that over 78% of consumers purchase liquor falling into the lowest and medium price ranges, with only about 5% opting for top brands.

However, with the recent AED hike, beer in Karnataka (priced at Rs 187 for a 650ml bottle) will become the third most expensive, following Tamil Nadu (Rs 210) and Delhi (Rs 190).

An Excise official stated, “The price increase will affect only a fraction of consumers. Nevertheless, a review might be considered later as the chief minister believes that premium liquor is overly expensive in Karnataka, while brands in the lower price ranges are relatively cheaper.”

The chief minister has also proposed increasing the AED on beer from Rs 175 to Rs 185. As a result, the price of a 650ml bottle of beer will rise from Rs 170 to Rs 187. With this latest hike, Karnataka will become one of the most expensive states in terms of beer prices, with only Tamil Nadu (Rs 210) and Delhi (Rs 190) surpassing it.

According to reports, the International Spirits and Wines Association of India (ISWAI) has expressed concerns about the steep hike and has called on the state to rationalize the AED, thereby reducing the MRP of premium brands to be more in line with neighboring states.

Even officials from the excise department acknowledge the disparity and are concerned about the potential diversion of trade to other states due to the higher prices in Karnataka, particularly for premium brands.