 "Punjab limits retailers to 1,000 cases of IMFL monthly, manufacturers panic")
A recent circular in Punjab has limited retailers to purchasing only 1,000 cases of Indian Made Foreign Liquor (IMFL) per month, according to a report by Mint. The move, which applies to the entire state, has sparked concerns among spirit manufacturers, particularly those whose businesses are driven by whisky sales.
Details of the IMFL quota
The circular, issued in Ludhiana district, reportedly mandates that retailers or retail groups can buy no more than 1,000 cases of IMFL spirits per month. For additional stock, retailers must apply for a permit and submit utilisation report for the initial 1,000 cases.
Industry estimates suggest that Punjab’s IMFL market, which typically moves around one million cases (each containing 9 litres) per month, could shrink to just a quarter of its size under the new rule. This is a significant shift from the previous financial year when Punjab’s excise policy allowed for unlimited stock purchases by distributors and retailers.
Punjab has approximately 230 retail groups operating around 6,500 stores. The state recently set ambitious targets for FY25, aiming to generate Rs 10,000 crore in excise revenue from liquor sales — a 13 per cent increase from the previous year’s Rs 8,850 crore.
Vendors urge state to put a cap on IMFL
In December 2023, The Times of India reported that many Punjab liquor traders were urging the state government to make changes to the excise policy due to heavy losses caused by the open quota on IMFL. Traders had argued that the open quota had led to an oversupply in the market, leading to price wars. The report noted that traders had urged the state to fix a quota and provide additional quota at a ‘reasonable excise duty’.
The Aam Aadmi Party (AAP)-led government in the state had set a target to generate excise revenue of Rs 9,754 crore in the financial year 2023-24.
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Challenges with IMFL quota
The spirit industry is now concerned that this strict quota may lead to a rise in black marketing of alcohol. Additionally, as per protocol, new labels must be approved each year for brands. This means that brands now need to go through the process of procuring new licences for liquor that may be difficult to sell.
According to Mint, retail groups are now focusing on bulk purchasing popular brands from bigger companies, unable to afford the risk of stocking less frequently sold products. Even larger players, who might have benefited from the quota, are struggling to move their less popular brands.
As the industry grapples with these new regulations, the long-term impacts of this policy change remain to be seen.