NEW DELHI: India's per capital alcohol consumption is much lower at 5.5 litres compared with the global average of 6.2 litres and the East Asia and Pacific average of 6.4 litres, according to a UBS report.
However, the brokerage believes this is likely to go up because of certain regulatory changes such as lowering of excise dity in states like Delhi, West Bengal and Maharashtra, as well as improved distribution in Delhi and Uttar Pradesh.
Twenty five states/union territories had increased duties on alcohol to offset some of the revenue loss during the pandemic. However, multiple states that had imposed additional taxes during the pandemic had a negative impact on their overall beverage volumes.
The Confederation of Indian Alcoholic Beverage Companies (CIABC) had then suggested that states imposing a tax of over 25% would have lower tax revenue from liquor sales. Higher prices on account of increased excise duty lead to a double whammy for the states: reduction in volumes as well as downtrading to cheaper options.
Overall, sales in FY21 declined 11.6% YoY for the alcohol industry.
"After the initial hike in taxes, many states have reduced or rolled back the additional duties imposed during the lockdown. Some state governments (eg, Delhi) are also lowering the drinking age, improving distribution and introducing new excise regimes to boost revenue from liquor sales. We believe such steps could be positive at an industry level as other states follow suit, " said Sunita Sachdev, analyst at UBS.
