Lockdown, tax hikes cause IMFL sales to fall 12% in FY21

A total 305 million cases (nine litres each) of IMFL products were sold in 2020-21, data compiled by the CIABC said. (Representative image)

Sales of Indian Made Foreign Liquor (IMFL) declined 12% year-on-year in FY21 due to the pandemic-induced lockdown and increase in taxes, according to the Confederation of Indian Alcoholic Beverage Companies (CIABC), the representative body of leading Indian alcohol beverage companies.

Though sales picked up in the second half of 2020-21 in most parts of the country, states which imposed a high Covid-19 cess and other taxes after the first wave showed poor recovery, CIABC director general Vinod Giri said.

A total 305 million cases (nine litres each) of IMFL products were sold in 2020-21, data compiled by the CIABC said.

After an extremely poor first quarter (April-June 2020) due to lockdowns, sales showed a positive trend on an all-India basis, improving through each quarter and ending the year with a robust performance in the fourth quarter (January to March) it said. While liquor sales fell a whopping 42% in Q1, they declined 9% in Q2 and 1% in Q3, before showing a recovery of 6% in Q4.

The top five states in terms of recovery in sales were Maharashtra, Goa, Haryana, Himachal Pradesh and Uttarakhand, while West Bengal, Rajasthan and Chhattisgarh were among the big states which witnessed the largest declines over the previous fiscal.

“Many states showed a positive trend through the quarters, and even though most were unable to fully recover the volume lost in the first and second quarters, the strong performance in the third and fourth quarters reflects fundamental strength in the market. It also confirms that there is no lasting shift against alcoholic beverages in consumption baskets,” Giri said.

He said that some states, where sales did not pick up or picked up way below the national trend, remain a concern.

Giri said the trends confirm yet again that alcohol is a price elastic product. “The inclination of some state governments to impose high taxes on alcohol, assuming it will yield greater revenues, is greatly misplaced. Higher prices on account of higher taxes not only lower case sales, they also force consumers down-trade to cheaper options. Thus, tax collection per bottle also goes down, leading to disproportionately higher loss in tax revenues.”

Some states applied changes in the route-to-market without careful consideration of possible adverse consequences. For instance, in Chhattisgarh introduction of super distributor has led to suppression of sales, and in West Bengal mid-year changes in excise policy have led to further decline in sales, the CIABC said.