E-Malt.com News article: India: Newly-increased excise duty in Delhi expected to lead to increased cross-border smuggling of alcohol from neighbour state

Delhi Lieutenant Governor Najeeb Jung has approved a steep hike of 50-55 per cent in excise duty across all segments of liquor, including beer and Indian-made Foreign Liquor (IMFL). This translates into a hike of about 30 per cent for beer and between 15 and 20 per cent for IMFL varieties, Mail Online India reported on June 17.

Officials say this is one of the highest jumps of recent years in the cost of beer and other liquor. The hike will be effective by next week.

A bottle of Kingfisher beer which used to cost Rs 60 will cost anything between Rs 75 and 80 now; a bottle of Blenders Pride whisky which comes for Rs 610 now is set to cost more than Rs 700 at city vends under the new excise tax regime.

Royal Stag whisky is to go up from Rs 350 to Rs 410 for a bottle, and Foster's Strong beer will cost Rs 90 per can now.

Compared to neighbouring Haryana - which borders the capital on its north, west and south - liquor prices are already high in Delhi. The new tax regime will make the difference even more pronounced, and cross-border smuggling of liquor is expected to grow as a result.

For those who fancy buying their liquor in Haryana and drinking it in Delhi, here's a warning: It is illegal to bring in more than a litre of liquor from another state.

According to top sources at the L-G's office, Jung has signed on the proposal of Delhi Excise Department and a notification in this regard is expected anytime now.

Excise Department sources said that with the approval by the LG's office, excise duty on light and strong beer will go up from 120 per cent to 170 per cent.

In case of Indian-made Foreign Liquor, the duty has gone up from 170 per cent to 225 per cent. This would be an increase of 55 per cent and is expected to play out in terms of increase in market price in the range of 15 to 20 per cent.

Excise duty for foreign liquor varieties remains unchanged, however, as most imported brands are already steeply priced.

"We can't increase the price of foreign liquor as it already costs more in Delhi. A bottle of Johnny Walker Black Label costs about Rs 3,600 here, while it is available for Rs 2,500 in Haryana," said an official.

Officials said that the excise department hopes to earn additional revenue of over Rs 300 crore through this revised excise duty regime.

In this financial year, the Delhi government has a revenue target of Rs 3,600 crore from excise collections. In 2013-14, the department had collected about Rs 3,151 crore by means of excise, about Rs 50 crore short of the amount targeted.

A senior official of the excise department said that a tax revision has not been done for the past few years, and that this has hurt revenue collection.

"This time the government has fixed the target of `3,600 crore and we hope that with the hike in the taxes the department will be able to meet the target," said a senior official.

The excise regime is reviewed annually and changes are notified at the beginning of the new financial year. The exercise got delayed due to the Lok Sabha polls this time because the model code of conduct was in force.

Explaining the remarkable and revenue collection of Rs 3,151 crore in 2013-14 despite no change in prices, officials claimed that it was realised only because of strict action against duty evasion. That the Delhi budget for 2013-14 pegged fiscal deficit at Rs 1,268 crore puts that figure into perspective.

"The department could have easily crossed the target of Rs 3,200 crore in last financial year (2013-14). But elections, multiple dry days and strict action led to drop in sales," the official added.

Over the past three years, there has been an almost 300 per cent hike in the amount of Indian-made Foreign Liquor smuggled into Delhi from Haryana, the hub of cheap alcohol.

With this latest rise in prices of alcohol in Delhi, there is likely to be a further spurt in cross-border smuggling.

An intense and persistent crackdown by the excise intelligence bureau on illegal transfer and stocking of IMFL led to the confiscation of over nearly 1.03 lakh bottles of IMFL, most of them smuggled from Haryana, in 2013-14. The department seized 36,000 bottles in 2011-12.

A senior excise department official said that of all varieties of liquor, IMFL is smuggled the most.

Besides the fact that there is little or no difference in beer prices in the two states, a government official said the difference in excise duties Delhi and Haryana levy on IMFL was the main reason it was the most smuggled variety.

For example, a bottle of Black Label costs about Rs 3,600 in the national Capital, while in Haryana, one need only pay Rs 2400 for the same quantity.

Similarly, in the case of Royal Stag, the most consumed brand in the city, the difference is at least Rs 150 for a bottle. The official said the large-scale smuggling of liquor cost the Delhi government about Rs 200-250 crore in losses annually.

Explaining further, he pointed out that the difference in excise policies works to the liquor mafia's benefit.

"In Delhi, the liquor business is under the government's control, while in Haryana, it is virtually run by private operators. In Haryana, vend licences are auctioned and dealers make a onetime payment for licences. Thereafter, they sell the liquor according to their own preferences," the official said.

To learn more about the smuggling, Mail Today talked to some police officials, one of whom said the illegal operation does not require much infrastructure.

"A smuggler only needs vehicles to transport liquor. They purchase boxes at wholesale prices from Haryana and transport them to the Delhi border. Even if you account for transportation and other expenses, such as payment made to police at border points, they make a hefty profit," the official said.


18 June, 2014