How Andhra Pradesh's prohibition is impacting alcohol consumption in the state

The new liquor policy will come in effect from January 2020 as the government plans to make Andhra Pradesh alcohol-free by 2024.

Andhra Pradesh is not the first to attempt total prohibition as Gujarat, Mizoram, Bihar, and Nagaland have already prohibited alcohol.

The government has cancelled the licenses of all the 798 bars in the state and passed the orders to cut the number of bars by 40 percent when a new bar license will be issued with effect from January 2020. The license fee will also be hiked from Rs 10 lakh to Rs 1.45 crore, and from thereon a 10 percent increase will be in effect every year for three star establishments and above.

For the other bars, the fee has been hiked from Rs 5 lakh to Rs 10 lakh. The government has also closed more than 40,000 illegal liquor outlets. Beginning October 1, the government has cancelled licenses of 880 shops of the 4,380 licensed ones and now the remaining 3,500 outlets are under the management of the Andhra Pradesh State Beverages Corporation. The timings have also been restricted between 11 am to 8 pm. Further, the state is levying additional retail excise tax from Rs 10 to Rs 250 per bottle, making it expensive for retail buyers.

In April 2019, the overall liquor sales inched higher by 29.57 percent, while the growth was flat in May 2019. Thereafter, the volume and sales started declining until October 2019 before an uptick was seen on a month-on-month basis in November. The increase could be attributed to the festive season.

Source: Government of Andhra Pradesh Prohibition and Excise Department.

Source: Government of Andhra Pradesh Prohibition and Excise Department.

The AP Wine and Liquor Dealers Association has said that they will challenge the government’s decision in the high court as hundreds of workers lost jobs due to revocation of bar licenses.

Shekhar Ramamurthy, managing director of United Breweries, earlier told CNBC-TV18 that Andhra Pradesh is a very important market for the company and comments from the state government were worrying for the industry. UB expects a 5-6 percent impact on its business.

United Spirits in its earning call had said, “Andhra Pradesh contributes somewhere between 3 percent and 4 percent of our topline and bottomline. So, if it did go for full prohibition, then that would be the order of impact.”

South India corners over 45 percent of the alcohol market in the country, divided equally among Andhra Pradesh, Telangana, Kerala, and Karnataka.

In the last calendar year, 16 percent growth was seen in overall alcohol sales value in Andhra Pradesh, with 384 lakh cases of Indian-made liquor (IML) and 277 lakh cases of beer sold in CY2018. In 2019, 205 lakh cases of IML and 174 lakh cases of beer have been sold in the country so far, indicating a flat growth.