Liquor Prices in Andhra Pradesh Likely to Rise Following Policy Changes

Liquor prices in Andhra Pradesh are poised for an imminent hike as the state government moves to address declining revenues from private liquor shops. The excise department is preparing to revise pricing, citing financial losses faced by liquor shop licensees.

In the 2023-24 fiscal year, Andhra Pradesh generated approximately Rs 36,000 crore from liquor sales. After accounting for payments to distilleries and employee salaries, the government retained Rs 28,000-30,000 crore. However, the introduction of private liquor shops in October 2024 significantly reduced state revenue, a concern raised by the Finance Department when the coalition government assumed power last year.

Despite warnings that privatization could impact state earnings, the government proceeded with the policy, establishing over 3,000 private liquor outlets. Licensees were initially promised a 20 per cent commission on liquor sales, leading to increased participation. However, traders soon voiced concerns over inadequate profit margins and alleged political influence in the industry.

With mounting financial strain, liquor shop owners issued an ultimatum in December 2024, threatening to halt sales unless their commission was increased. In response, the excise department proposed a margin hike, which was reportedly approved in Thursday’s cabinet meeting. However, an official announcement is yet to be made due to the prevailing election code.

Contrary to reports suggesting a reduction in liquor prices, only two brands—one brandy and one whiskey—have witnessed a price drop of Rs 30. The excise department had earlier indicated a potential price cut for ten brands, but this has not materialized, leading to speculation about internal management issues.

Under the previous YSRCP government, the cost of lower-quality liquor surged by 80-100% compared to May 2019 prices. Initially, a 200 per cent price hike was implemented in the name of prohibition, which was later reduced to 100%. The revenue generated was channeled into welfare schemes such as Amma Vodi, triggering criticism that the government was exploiting liquor sales for populist programs. This policy backlash played a role in the previous administration’s electoral defeat.

With the proposed increase in commission to 14.5 per cent, liquor prices are expected to rise proportionally. The excise department, facing revenue losses from declining sales and licensing fees, has drafted several pricing models to compensate for the shortfall.

One proposal suggests a Rs 10 price increase for liquor brands retailing above Rs 150, estimating a revenue loss of Rs 135 crore if the 14 per cent, margin is uniformly applied. Another model projects an additional revenue of Rs 320 crore by implementing a Rs 10 price hike while maintaining the 14 per cent margin for all brands except the Rs 99 quarter segment. A third alternative considers a two-tier margin structure of 10.5 per cent and 14 per cent, with potential revenue gains of Rs 220 crore.

While the government deliberates these proposals, the opposition is likely to seize the opportunity to challenge the administration, particularly given the excise department’s recent stance on reducing liquor prices. The impending hike is set to impact both traders and consumers.