<div>In the late 1990s, the per capita consumption of beer in both India and China was exactly the same at half a litre per year. Today, Karan Bilimoria, founder and chairman of Cobra beer, says China’s per capita consumption of beer is 32 litres while India’s is just 1.6 litres.</div><div> </div><div>That’s because China has made beer affordable and available to its masses, he says, while India has slapped irrational taxes and made the drink — globally regarded as a socially acceptable one a luxury and a vice. </div><div> </div><div>Bilimoria argues that it’s better to encourage beer drinking which has less alcohol content (about 8-14 per cent) and curb the consumption of harder spirits and country liquor (40 per cent alcohol content).</div><div> </div><div>The All India Brewers Association (AIBA), an independent body representing the brewing industry, also feels it’s high time a sensible tax structure was introduced on alcohol. Tax reforms, it says are a better way of curbing alcoholism than prohibition. </div><div> </div><div>According to AIBA, globally liquor is taxed based on alcohol content which is why in France hard liquor is taxed five times higher than beer while in Germany it’s six times higher. In India, it is the reverse. The result is for consumers the price of 3 pegs of Indian-made foreign liquor is lower than a bottle of beer, leading to more consumption of harder liquor, which is more damaging to health. </div><div> </div><div>With hard liquor showing a higher growth than beer thanks to these price anomalies, the tendency among beer manufacturers has been to try and cater to consumer taste and produce stronger beer adding to the public health problem. India is perhaps the only country where beer with alcohol content of up to 8 per cent abv (alcohol by volume) is allowed. Almost every beer manufacturer has launched a strong variant.</div><div> </div><div>AIBA also claims that it costs more to produce beer or wine than hard liquor. </div><div> </div><div>Also, globally, beer can be picked up from retail stores and is widely available as it’s not put in the same category as hard liquor. In India, it can be sold only through licenced outlets and there is just one licenced outlet per 18,000 Indians compared to one per 300 in China. </div><div> </div><div>“There is a case for issuing a separate licence for beer and wine for restaurants and retail outlets and another for hard liquor,” argues Bilimoria.</div><div> </div><div>AIBA’s suggestions: deregulate the availability of beer, bring beer into GST, set up a beer board. </div><div> </div><div>These are eminently sensible suggestions supported by economic theory which says taxes should be consistent with social policies. Given the spirited condemnation that Kerala government’s moves towards prohibition are eliciting, tax reforms might be a better alternative. Till then ale makers will have to live with ‘in-tax-ication’! </div><div> </div><div>(This story was published in BW | Businessworld Issue Dated 03-11-2014)</div>
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