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The state government has taken over the liquor retail business. Andhra Pradesh accounts for nearly 8-10% of the overall spirits and beer consumption in India. The suppliers are seeking immediate release of Rs 765 crore by the state.
The Association of Liquor and Beer Suppliers — which represents companies such as United Spirits, Pernod Ricard, United Breweries and AB InBev — said the state excise department’s sales receipts were Rs 7,081 crore over the past four months and it was holding back 15% of the total proceeds from suppliers. The trade body called it “appalling and unjust”. ET has a copy of the letter.
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The Andhra Pradesh finance ministry and excise department did not respond to ET’s queries.
The liquor industry in the state works on a revenue model, purely on credit terms, towards stocks and duties and the excise department makes payments on the stock’s value and advance duties only after the entire stock is sold.
“Holding the payments for September-December is cascading to a huge deficit in availability of working capital to re-invest in further supplies,” says the letter sent to the principal secretary of the state’s finance ministry and to the Andhra Pradesh State Beverage Corporation.
“Keeping in view the above delays, we humbly request you to release immediately 50% of the amount of Rs 1,533 crore (Rs 765 crore), which can at least meet the demand after the Sankranthi festival,” it said.
Late last year, the state introduced a new bar policy which includes cancellation of existing bar licences, issuance of new permits from January 2020 and reduction in the number of bars by 40%.
This has already resulted in a sharp decline in alcoholic beverage volumes in the state — for the October-December quarter, spirits volumes were down 32% year-on-year, while beer volumes were down 63%. January numbers are similar too — spirits volumes are down 40%, while beer volumes have declined 56% over the past three weeks, according to state excise department data.
This comes at a time when companies have been witnessing slower growth sequentially every quarter because of increased taxes and curbs on liquor in a few states.
United Breweries, which controls nearly half the beer market with brands such as Kingfisher, had said that unless there was a dramatic turnaround in the economy overall, 2020 would continue to be challenging for the industry.
“There will be a base effect. We will hopefully see growth in Q1 (January-March) this year since the base effect of Q1 of 2019 was depressed due to elections. But that gets negated by the fact that Andhra Pradesh, which was a large market, will be significantly reduced because of government policies,” UB’s managing director Shekhar Ramamurthy told ET earlier this month.
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