BENGALURU: The Congress government is likely to increase liquor prices to mop up additional resources to fulfill its five poll guarantees in the state.
According to sources, the Finance Department is working out modalities for revision of Additional Excise Duty (AED) on liquor in the budget to be presented by Chief Minister Siddaramaiah on July 7.
It is, however, unclear whether the tax burden will be passed on to all 18 slabs of Indian Made Liquor (IML). The slabs are categorised by Maximum Retail Price (MRP) in ascending order, and range from around Rs 56 to Rs 1,200 per pint (180ml). The last revision of AED on all 18 slabs was done in May 2020 by the BJP government soon after retail liquor stores were allowed to open partially after the Covid-19 lockdown.
Govt needs Rs 40,000 crore more for schemes
The government needs additional resources of around Rs 40,000 crore to implement its guarantees. “Other than liquor, resources are likely to be mobilised through stamps and registration and additional borrowing,” sources said. In 2020, AED was revised twice.
Once during the budget, when there was a uniform increase of 6% on all 18 slabs, and in May, when it was raised from 17 to 25%. The lowest first four slabs contribute 70 to 72% towards excise revenue. The department, considered as the cash cow of the state government, contributes around 21% towards the state exchequer.
The economically weaker sections of society contribute to around 85% of the total consumption of liquor in Karnataka. Critics of upward revision of AED said that it may lead to bootlegging and ugly revival of seconds or non-duty paid liquor.
“Alcohol consumption has gone up by at least 20 to 30% after pandemic curbs were lifted. Any hike in MRP may result in unlawful activities. Regulation and enforcement may become a challenge,” sources said.