he Brewers Association of India (BAI) on Sunday requested the Karnataka Government to not go ahead with proposed amendments to reclassification of beer and restructuring of taxes, saying these would work against both the Government and the industry.
BAI's submission is in response to a draft notification issued by the Karnataka government seeking stakeholders opinion on matters related to regulation of beer. In the draft notification the Government has sought to mandate declaration of malt and sugar content on the label of beer products, increase taxes on the strong beer, and raise the minimum price of beer in the state.
The draft notification introduces a new definition of beer which, amongst others, limits the addition of sugar to 25% in beer and makes it mandatory for the beer products to display the content of malt and sugar on the label. Brewers in the state have objected to these proposals.
Commenting on the matter, Vinod Giri, the Director general of the BAI said, "Beer has no sugar in it. There is a definition of beer set by the FSSAI which are followed by all states and we don't see the need to change them by one state. Having said that, our larger concern is regarding putting it up on the label. Beer labels are already cluttered with so much statutory information and warnings. Adding more information, especially when it is not even relevant, will just make them more cluttered and unappealing."
The draft notification also proposes to increase the excise duty on strong beer by 100% to Rs 20 per bulk litre, increases the minimum billing price for beer in the state to Rs 300 per case and increases Additional Excise Duty (AED) to 195% of the billing price or Rs 130 per bulk litre whichever is higher.
On the proposed hike in minimum beer price of beer, Mr Giri said: "If implemented, it would be the third increase in tax on beer in the last 15 months. That's unheard of! It almost seems the direction of the policy is to make beer prices uncompetitive compared to hard liquor so as to shift consumers from a milder form of alcohol like beer to hard spirit like IMFL. That is something that health bodies such as the WHO do not recommend for public policy. Governments should not do that consciously."
BAI has objected to these, saying that these proposals will hit the beer industry in the state very hard. BAI, in its letter to the Government states that the taxes on beer have already been increased twice in the last one year and one more tax increase will push the beer price amongst the highest in the country. BAI has said that such increase may lead to drop in sales of beer in the state and encourage cross border unlawful imports, eventually leading to fall in tax collection of the Government.
Vinod Giri added, "The proposed tax increases are going to hit consumers two ways. One, the price of strong beer, which accounts for 90% of beer sold in the state, will go up by Rs 10-15 per bottle making it amongst the most expensive in the country, and raise the minimum price of the beer from current Rs 95 per bottle to Rs 140 per bottle. Such a rapid and massive increase in tax on beer is surprising as it is third time in less than a year. Further, the Government is at the same time reducing taxes on liquor. Increasing beer prices and holding or reducing liquor prices will only encourage consumers to switch from mild form of alcohol to hard liquor, which is not what the World Health Organization recommends."
The letter states: "Karnataka is recognized for its strong beer culture. It has 11 breweries with thousands of crores of investment, providing employment to 7500 people. It is home to two of India's largest beer makers. All this has been made possible by supportive and progressive policies by the Government. However, we are concerned that some proposed changes could hinder the growth of the industry, diminish the state's investment appeal, or drive future investments elsewhere.
