Telangana eyes increase in revenue via liquor sale

After refusing to slash the Value Added Tax (VAT) on petrol and diesel, the Telangana government has decided to generate additional revenue through liquor sales, to fight its precarious financial condition this year.

In a notification issued on Tuesday, the state government called for tenders for granting fresh licences to wine shops for a period of two years, beginning December 1, 2023. The applications for obtaining licences would be received till November 16 and the allotment of wine shops would be done through a draw of lots by district collectors on November 18.

The provisional licences to run liquor shops would be issued on November 20 and the same would come into operation from December 1, the notification said.

“The lockdown imposed across the state during the coronavirus pandemic period in 2020 and this year affected the liquor trade to a considerable extent. However, the revenue flow was not much affected as prices of Indian Made Foreign Liquor (IMFL) were increased last year by 16 per cent, besides a flat increase of ₹30 on beer of all brands,” an excise department official familiar with the development said, seeking anonymity.

Besides, the consumption of liquor also goes up steeply during the festive seasons, the official added.

“As a result, the revenue from liquor sales continues to go up every year. In the first year of Telangana formation, the revenue from liquor was ₹10,833 crore and during 2020-21, it went up to ₹27,888 crore,” the official said.

Liquor sales and VAT on petrol and diesel are the main source of revenue for the Telangana government. After the Centre reduced excise duty on fuel on November 3, chief minister K Chandrasekhar Rao on Sunday said the ruling TRS government had not increased VAT on petroleum products and therefore, the question of reduction did not arise.

During 2020-21, the state government had earned ₹27,888 crore from liquor in the form of state excise and licence fee, and ₹10,000 crore through VAT on petrol and diesel.

While refusing to reduce the VAT on petrol and diesel, the Telangana government said it will increase the number of retail wine shops in the state. With 2,216 retail wine shops already running, the government plans to add 404 more, taking the total to 2,620.

According to the notification, the applicants for licences for wine shops would have to pay a non-refundable fee of ₹2 lakh, besides an annual retail excise tax of ₹5 lakh on allotment of the licence. This tax can be paid in six instalments every year. Unlike in the past, applicants can apply for more than one shop on payment of a separate application fee for each shop, it added.

“If a retail wine shop dealer wants to convert the shop into walk-in stores (permit room to consume liquor), he will have to pay another ₹5 lakh per annum,” a government order issued by the excise department in this regard on Saturday said.

The order also announced shop allocation reservation of 10 per cent for Scheduled Castes (SC), five per cent for Scheduled Tribes (ST) and 15 per cent for Goud community (an OBC category involved in liquor trade).

The state government had issued permits to 159 bars across the state in January this year, in addition to the existing 800 bars and 27 clubs and pubs that serve liquor, to mop up additional revenues.

According to state finance minister T Harish Rao, Telangana suffered a revenue loss of ₹4,100 crore due to the second wave of Covid-19 pandemic this year, prompting the government to request the Centre to relax rules for external borrowings.

In the Telangana budget for 2021-22, the total outstanding public debt of the state was projected at ₹286,804.64 crore.