If you have ever stood in a liquor store, eyeing a premium scotch before quietly reaching for something cheaper, Karnataka’s new draft liquor policy might just change your mind. The state government published a revised draft of duty structure on April 18 that could see premium alcohol prices fall. These could potentially include aged scotches, premium whiskies, and imported dark rums, falling by anywhere between 10 and 30%. However, it is a draft policy and yet to be implemented.
In a recent report, brokerage firm Nomura breaks down the expected costs of various types of alcohol. Keep in mind that these prices are based on the firm’s calculations and are subject to change if and when the policy is implemented. See what gets cheaper and what gets more expensive:
Karnataka Liquor Draft Policy: What may change, and why it matters
As per the Nomura report, the draft policy is set to overhaul how liquor is taxed in Karnataka, which is one of the country’s largest alcohol markets. Under the new structure, basic excise duty has been revised from Rs 50 per bulk litre of Indian Made Foreign Liquor (IMFL) to Rs 1,000 per litre of pure alcohol.
More significantly, the number of pricing slabs has been halved from 16 to 8, and brands now get to decide where within those slabs they sit. The government has also removed administered price fixation entirely, meaning brands can set their own maximum retail prices based on market conditions rather than waiting for state approval, the report mentioned.
For consumers, if this policy comes into action, it will make the premium portfolio cheaper, and your budget will get pricier.
Nomura analysts, in a note dated April 20, estimate that brands in the P&A segment are seeing a reduction in total tax incidence, combining basic and additional excise duties, of between 20 and 35%.
Karnataka Liquor Draft Policy: Your shopping guide to what could be cheaper
Based on Nomura’s indicative calculations, assuming declared prices and alcohol content remain unchanged, here is what some well-known premium labels could look like on shelves once the policy takes effect:
McDowell’s Premium Citron Rum (750ml): Expected price drop of 23%, from Rs 1,700 to around Rs 1,310.
McDowell’s Premium Dark Rum (180ml): Expected price drop of 16%, from Rs 340 to around Rs 285.
Black Dog Millard’s Pvt. Reserve Blended Scotch Whisky 14 YO (750ml): Expected price drop of 16%, from Rs 5,270 to around Rs 4,410.
B&W Finest Blended Scotch Whisky Aged 12 Years (750ml): Expected price drop of 15%, from Rs 3,495 to around Rs 2,965.
RC Premium Select Whisky (60ml PET): Expected price drop of 5%, from Rs 100 to around Rs 95.
Vat 69 Blended Scotch Whisky (750ml): Marginal price drop of 1%, from Rs 2,405 to around Rs 2,375.
The report also noted that these are indicative figures, and actual shelf prices will depend on how brands choose to pass on the benefit, and how quickly retailers update pricing once the policy is formally notified.
Karnataka Liquor Draft Policy: What could get more expensive?
The report also noted that, if the policy is implemented, the other side of the ledger is less cheerful for buyers of popular and budget brands:
Director’s Special Whisky (1000ml PET): Expected price hike of 16%, from Rs 830 to around Rs 965.
DSP Black Deluxe Whisky (750ml): Expected price hike of 11%, from Rs 765 to around Rs 850.
DSP Black Deluxe Whisky (90ml PET): No change expected, staying at Rs 105.
Karnataka Liquor Draft Policy: Is the price gap closing
As per the brokerage firm, the proposed reduction of the price of mass-market bottles and premium ones, the state is betting that consumers will trade up. Karnataka has form here, when it revised slabs in FY25 and cut prices on select premium brands from July 2024, premium segment volumes responded with stronger growth.
Nomura’s note described this as an “acceleration in premiumisation,” and expects the new structure to expand the total addressable market for premium spirits while driving better margins for companies with a heavy P&A skew.
The report also suggested that the larger companies with stronger distribution and brand recall are better placed to push through price increases without losing volumes, while smaller regional players may struggle.
What this means for United Spirits
The biggest potential beneficiary of the new policy is Diageo-owned United Spirits (USL), the maker of brands including McDowell’s, Black Dog, Vat 69, and Royal Challenge. Around 90% of USL’s FY25 sales mix sits in the P&A segment, precisely where taxes are being cut. Karnataka accounts for over 12-15% of the company’s sales volumes, making it one of USL’s most important state markets.
Nomura maintains a Buy rating on USL with a target price of Rs 1,650, against a current price of Rs 1,308 as of April 20. The brokerage forecasts earnings per share to grow at a compounded annual rate of 13% between FY26 and FY28.
The draft policy is open for consideration for seven days from the date of gazette publication, meaning it could be formally notified by around April 25.
The fine print
The savings outlined above are indicative, based on Nomura’s modelling using 42.8% alcohol by volume and current declared prices. The new policy also gives companies the option to change the alcohol content of their products, which could affect final pricing further. Actual consumer prices will only become clear once companies respond to the final gazette notification and update their pricing accordingly.