Bengaluru: The Siddaramaiah-led Karnataka government may have good news for those who enjoy a drink or two. They may soon have more options to choose from with the Congress government considering issuing fresh licenses to open more liquor stores across the state, ThePrint has learnt.
Karnataka’s excise sector is heavily regulated, is a reliable revenue stream and any changes in prices or policy has helped the state reap rich dividends.
The new proposal, if implemented, will bring in an additional Rs 2,000 crore to the already ambitious Rs 38,525 crore expected from excise this year.
“One recommendation is that you have to give out more licences and two is that you have to revise the licence fees,” a senior government official told ThePrint, requesting anonymity.
According to officials, a committee set up to identify avenues for resource mobilisation has made the recommendation to restart the practice of issuing fresh CL-2 (retail liquor shops) and CL-9 (Bars & restaurants) licences, which have been frozen since 1992.
The move will help the state shore up more revenues to revive income avenues.
With nearly Rs 60,000 crore tied up in bankrolling the five guarantees, Karnataka is exploring every possible lead to bring in some much-needed cash inflows and give the 76-year-old chief minister some wiggle room when he presents his record 16th state budget, scheduled in the first week of March.
Changes in liquor policy or pricing are among the easiest to implement, yielding immediate revenue gains. This makes them an attractive option, especially in the post-GST era, where Karnataka—like several other states—has seen its share of central taxes and grants shrink under Prime Minister Narendra Modi. The state government has repeatedly accused the Centre of ‘step-motherly’ treatment.
Siddaramaiah Saturday said that the Union Budget continued its ‘discriminatory’ practice. “Modi Govt collects from Karnataka but never gives back what is rightfully ours!” he said.
“Instead of treating states merely as revenue-generating units, the Centre must respond to their financial challenges with fairness and empathy. When it comes to resource allocation, including tax devolution, the Centre must follow scientific and equitable standards. In particular, states like Karnataka, which are at the forefront of development, must receive adequate support. The Centre must recognise their contributions and positively respond to their needs, ensuring that resource distribution is just and proportional,” he said in a statement Friday.
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‘No point in giving new licences’
As of today, Karnataka has approximately 12,666 active liquor licenses, a sharp rise from around 8,379 in 2010-11. Revenue from liquor sales has also surged, growing from around Rs 7,500 crore in 2010-11 to Rs 38,525 crore in 2024-25, according to budget documents accessed by ThePrint.
But the numbers of CL-2 & CL-9 licences have remained largely unchanged during this time.
In 2010-11, Karnataka had 3,795 CL-2 licenses and 3,447 CL-9 licenses. By 2023-24, these numbers saw a slight increase to 3,979 and 3,628, respectively, according to official data.
With reduced revenue inflows from the Centre in the post-GST era, Karnataka, like other states, has limited state-generated taxes to rely on.
The cash-strapped Karnataka government has roped in Boston Consulting Group (BCG) and one committee headed by retired IAS officer, K.P. Krishnan, to identify resource mobilisation avenues.
In recent months, the government has explored the idea of setting up an investment trust (InvIT), issuing bonds to raise funds to raise capital, and trying to reduce the burden of borrowing from institutional investors at high interest rates, ThePrint reported earlier.
However, existing retailers have opposed the proposal to issue fresh licenses, arguing that an increase in outlets does not necessarily lead to higher sales.
“The existing licence holders are unable to make a living…so what’s the point of issuing new ones? I cannot sell water, juice or any other commodity. It has to be only liquor. Also, the number of new licences does not mean higher sales,” Govindraj Hegde from the Karnataka State Wine Merchant’s association, told ThePrint.
According to data shared by the association, sales of Indian Made Liquor (IML) increased by just 32 percent between 2013-14 and 2022-23, rising from 5,26,24,715 boxes to 6,98,46,152 boxes.
Beer sales were up 60.20 percent from 2,43,84,486 boxes to 3,90,66,381 in the same time period.
Hegde argues that in the 10-year period between 2013-14 to 2022-23, there has been a near 200 percent hike in CL-7 (Hotel & Boarding House Licences ) and about 160 percent increase in CL-11(C) Retail shops licences issued to government companies and several other categories.
Speaking to ThePrint on condition of anonymity, a government official said that the existing retailers are opposed to new licences issued as it would dent their business.
“There is no recommendation on the number of licences we should issue and nor do we want to flood the market. As per requirement, we shall take up the matter,” the official cited above said.
(Edited by Zinnia Ray Chaudhuri)
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