The Karnataka government’s proposed plan to scrap price controls on alcoholic beverages from April 2026 and introduce an alcohol-in-beverage (AIB) based excise duty structure is expected to boost the market for beer and liquor, experts tracking the market said.
Players may also consider reducing prices once the new excise policy is introduced in the state in FY27, liquor industry executives said, as the AIB-led tax system is likely to bring down tax rates significantly, especially on beer. So far, manufacturers declared ex-factory prices, based on which the state would fix the maximum retail price.
Market-Driven Pricing
The proposed plan by the state government also includes reduce pricing slabs to eight from 16, while allowing producers to decide prices. Indian alcoholic beverage stocks advanced as much as 7% on Friday on the bourses following announcement of the policy. The fine print is expected to be released over the next few weeks, industry sources said.
“The initiative taken by the Karnataka government to realign its alcoholic beverages excise policy is a step in the right direction. It will get the beer market in the state back on the growth path,” Vinod Giri, director general, Brewers Association of India, said. Giri also says that introducing an AIB-based tax structure on alcoholic beverages is in line with global norms.
Karnataka is among the top two consumption markets for beer and liquor in India, contributing 11% of beer sales (48 million cases) and around 17% of liquor sales (70 million cases). While the state is the second-largest beer market after Telangana (55 million cases), it is the largest liquor market in the country, followed by Tamil Nadu (63-64 million cases). Both liquor and beer are around 410 million cases and 440 million cases in terms of size nationally.
But persistent price hikes in the last two-three years have dented the Karnataka market, with beer sales likely to close FY26 at about 40-42 million cases, a drop of about 12-16% versus its 48-million-case size. While liquor sales are likely to close the current fiscal down to about 68 million cases, which is a drop of about 2-3% versus its 70-million-case size, sector experts said.
Unlocking Potential
A report by brokerage Nuvama on Friday that the step to deregulate prices was a positive development as it will remove the overhang on the sector in the state. “The state has among the highest alcohol taxes in India, with liquor classified into multiple price sections, each attracting an additional excise duty,” the report said.
In particular, players such as United Spirits and United Breweries as well as Tilaknagar Industries and Allied Blenders & Distillers count Karnataka as one of their top markets.