No takers for single liquor duty

States with high excise revenue not keen on the Centre's proposal.

No state has shown interest in implementing the central government's proposal for a uniform tax regime for liquors.

In India, excise duty on alcohol is levied at the state level and so the states control the excise duty structure and the distribution system of potable liquor.

"A uniform excise structure will check inter-state smuggling of liquor and evasion of excise duty," said an official source. But the states seem to be reluctant.

According to analysts, in states like Andhra Pradesh, Maharashtra and Uttar Pradesh, excise duty on liquor is the second highest earner for the exchequer. Maharashtra earns Rs 4,000 crore from excise on liquor each year and Uttar Pradesh over Rs 3,500 crore.

Besides, these states also produce molasses (a byproduct of sugar is used to make potable alcohol) in large quantity.

As a result, the states producing molasses do not want to see a part of their revenue go to states like Goa, Bihar and north-eastern states where the excise duty on liquor is much lower. "If a uniform duty is levied throughout the country, the biggest gainers will be smaller states as their revenue will go up substantially," said VN Raina, secretary general, All India Distillers' Association.

"So if the government decides to go ahead with its decision, it will have to consider the differences in the duty across states," an official source said.

The distilleries, however, have argued that the mandatory blending of 5 per cent ethanol (ethyl alcohol, which is derived from molasses) in petrol has led to a decline in the supply of potable ethanol "" used to manufacture liquor.

At present, around 85 per cent of the molasses produced in the country is used to brew alcohol for industrial and potable purposes.

However, the excise duty structure favours use of molasses for producing ethanol, instead of Indian made foreign liquor.

Last year, the Uttar Pradesh government had also announced a molasses policy for cane-crushing. The policy allowed distilleries in the state to buy molasses from other states and countries.