Good News for all Beer lovers: Hike in prices is being cushioned by Government

There may be good news for beer lovers in Maharashtra before New Year as the hike in prices is being cushioned and supplies being restored.

The state government’s decision to allow beer manufacturers to hike MRP on strong beer to 4.6 times the production cost (up from 4.25 times) and 3.75 times for mild beer (as against 3.5 times), may end its impasse with beer manufacturers.

In October, the state excise department had hiked excise duty on mild beer to 175 percent of manufacturing cost or Rs 42 per bulk liter, whichever is higher, as against 150 per cent or Rs 33. For the strong beer, it was 235 percent or Rs 80 per bulk liter, versus 200 per cent or Rs 60.

This led to breweries scaling down or even stopping production, affecting the supply of beer before Christmas and New Year, when the demand for the drink rises. Industry sources claimed the duty rise would have squeezed margins and operating costs and increased beer prices, thus diverting people to hard liquor.

“Earlier, the MRP hike would have been extraordinary. It will be reasonable now… For instance, prices of a 650ml bottle from a popular brand may have gone up to Rs 180 from Rs 145. It may now be around Rs 157 after the change in the MRP formula,” an industry source explained. Production was likely to restart immediately after necessary approvals from the department. However, considering the present levels of de-stocking at the retailer and distributor levels, the full supply of beer may be restored in January, he added.

“The MRP is based on the manufacturing cost and is derived from backward calculations,” explained an excise official, adding the formula would also cushion the MRP hike. Another official said the new MRP formula would also lower the rate hike for beer in the premium and normal segments which would have come about in the old formula.

In 2016-17, beer sales fell by 0.95% to end at 3,285.78 lakh bulk liters (LBL) against 3,317.32 LBL in the previous fiscal. In contrast, sales of Indian Made Foreign Liquor (IMFL), wine and country liquor (CL) had shown a rise.Excise duty on mild beer was last hiked in 2011.