Sales of Indian-made foreign liquor (IMFL) recovered in the January-March quarter with a 6 percent growth, but it declined 12 percent in 2020-21 on an overall basis.
While the liquor sales fell by a whopping 42 percent in Q1 of the last fiscal, it declined by 9 percent in Q2 and 1 percent in Q3, before showing a recovery of 6 percent in Q4.
Maharashtra, Uttarakhand, Arunachal Pradesh and Haryana were best performing states in terms of sales. The largest decline in liquor sales were observed in Andhra Pradesh, West Bengal, Rajasthan and Chhattisgarh against previous years.
The total sales of Indian-Made Foreign Liquor (IMFL) products in 2020-21 was 305 million cases (9 litres each) which is nearly 12 percent below the previous year, according to the data compiled by the Confederation of Indian Alcoholic Beverage Companies (CIABC).
However, during the quarter, sales of IMFL in states such as Chhattisgarh reported a 31 percent decline, 28 percent in West Bengal and a 20 percent in Rajasthan.
The highest decline of 52 percent was in Meghalaya and 43 percent in the Union Territory of Daman, Diu and Silvassa, the data said.
Markets such as Delhi and Chandigarh reported 2 percent and 4 percent growth, respectively, in January-March. The sales growth was flat in Assam.
According to CIABC Director General Vinod Giri: “Many states showed positive trend through the quarters, and even though most states were unable to fully recover volume lost in first and second quarters, strong performance in third and fourth quarters reflects fundamental strength in the market. It also confirms that there is no lasting shift against alcoholic beverages in consumption baskets.”
The CIABC DG pointed out that some States remained a matter of concern where sales did not pick up or picked up way below national trend. “Incidentally, the majority of these states are ones that imposed high cess / tax during the first wave of COVID, and unlike other states did not withdraw or reduce it. West Bengal and Chhattisgarh also made changes in the route-to-market which may have suppressed the market's natural uplift”.
The trends confirm yet again that alcohol is a price elastic product. “The inclination of some State Governments to impose high taxes on alcohol, assuming it will yield greater revenues, is greatly misplaced.
“Sales figures clearly show that fall in sales on account of higher taxes negates expected increase in Government’s revenues. Higher prices on account of higher taxes not only lowers sales, they also force consumers to down trade to cheaper options. Thus tax collection per bottle also goes down, leading to disproportionately higher loss in tax revenues,” he said.
CIABC has also said that some states applied changes in the route-to-market without careful consideration of possible adverse consequences. For instance, in Chhattisgarh, introduction of super distributor has led to suppression of sales, and in West Bengal mid-year changes in excise policy have led to further decline in sales. “We are also concerned regarding Meghalaya, where proposed introduction of super distributor where there is no need for it, may lead to collapse of sales,” Giri noted.
According to estimates, the liquor industry contributes almost Rs 2 lakh crore to state exchequer through taxes and levies.