Beer price hike before Diwali? Karnataka's 'cheers' may come with a heft price tag

Bengaluru, October 28, 2024 - Just ahead of Diwali, beer lovers in Karnataka might be facing a price hike. The Karnataka state government has accepted a proposal from the excise department to increase beer prices. Brewing companies have opposed this increase and the Beer Association of India (BAI) has written to Chief Minister Siddaramaiah to look at the proposal again with an eye on the brewing industry, which might bring a 10 to 20 percent increase in a bottle of beer.

Proposed Hike and Industry Concerns

The state budget 2023 had already proposed a hike in liquor by 20 percent and beer by 10 percent as CM Siddaramaiah had earlier. The recent hikes in the prices of premium and semi-premium spirits may lead to the latest proposal, which is another ₹10-20 increase on every beer bottle basis alcohol content.

The BAI letter to the Chief Minister is most worried that the price rise would affect the consumers as well as the manufacturers of beer. A hike would definitely influence the sales of beer, and therefore, revenues will be affected. According to the officials of BAI, revenue of the government might decrease by about ₹400 crore with the proposal since people will buy less.

Regional Price Comparison and Government Considerations

Beer is already dearer in Karnataka compared to any other southern state, which industry officials drive home in their letter to the chief minister. Any new model by the excise department proposing a 35% tax increase on high alcohol-content beers would continue to drive this gap wider. If the government were to raise the tax, it would scare away consumers so much that sales could decline to an extent to damage manufacturers' profits and defeat government revenue plans, warned BAI.

Potential Impact to Consumers and Government Revenue

The prices of alcohol in Karnataka have increased nearly double in the last two years because the state government has increased the price on two occasions. The government decision is yet to come, but due to Diwali and all the celebrations, consumers as well as the sellers are watching out for each and every update.

Now that the BAI is aware of the economic implications that a sale decline can have on the economy of a state, it has continued to spark the debate on whether the hike proposed would benefit the interests of the state. Up to date, the state is left to wonder if it should lighten the load on consumers' beer by reducing its price or increase its price despite the chances of losing potential revenue and making consumers unsatisfied with its decision?

As the festive season approaches, such a move by Karnataka can have significant repercussions for its market and for consumer spending trends in the region in general.

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