CIABC urges Telangana to approve supply price hike amid rising alcohol production costs

Hyderabad: The Confederation of Indian Alcoholic Beverage Companies (CIABC), the apex body representing major players in the sector, has urged the Telangana government to permit a supply price revision for alcoholic beverages. The appeal comes amid steep production cost hikes and the absence of a structured annual review mechanism.

Cost Escalations Pressure Profitability

Speaking on behalf of the industry, CIABC Director General Anant S. Iyer noted that production and operational expenses have risen sharply since the last supply price adjustment in May 2023. Key cost drivers include Extra Neutral Alcohol (ENA), malt spirits, packaging materials, labour, and logistics.

“There is no provision for systematic price correction, and the burden of rising input costs is being absorbed entirely by manufacturers,” Mr. Iyer said. “This is not viable in the long run and threatens the financial health of the industry.”

Disproportionate Revenue Share

The industry body also flagged concerns over the current revenue-sharing structure. According to CIABC, the state government retains over 70% of the Maximum Retail Price (MRP) of alcoholic beverages. Manufacturers receive only 12–15%, while retailers earn 15–18%.

“This revenue share model significantly limits manufacturers’ ability to offset cost increases,” Mr. Iyer said. “Government revenues continue to grow through periodic tax increases, while supplier margins are shrinking.”

GST Exclusion Increases Operating Burden

CIABC further pointed out that the alcoholic beverage sector remains outside the purview of the Goods and Services Tax (GST), resulting in manufacturers being unable to claim Input Tax Credit (ITC) on GST paid for raw materials and services. This adds 3–5% to production costs, the association said.

“The lack of ITC is a unique burden on this sector,” Mr. Iyer stated. “It effectively increases our cost base with no relief mechanism.”

Specific Price Revision Request

The CIABC is seeking a WPI-linked escalation model and has requested a supply price increase of ₹100–₹200 per case for Indian Made Foreign Liquor (IMFL), and a 5% price hike for wine products. This translates to a consumer-end increase of ₹2.50 to ₹5 per 180 ml bottle.

While the beer segment has already received approval for a price hike, spirit and wine manufacturers have not, despite experiencing identical inflationary pressures, the CIABC noted.

Payment Delays and Working Capital Stress

In addition to price pressures, CIABC raised the issue of delayed payments, stating that overdue dues have crossed 45 days and currently amount to ₹2,800 crore. The cumulative interest burden on this outstanding amount is estimated at ₹400 crore.

“These delays are impacting liquidity and working capital cycles across the industry,” Mr. Iyer said. “Unless resolved, they may affect supply consistency and investment planning.”

Industry Seeks Regulatory Support

CIABC emphasized that the industry remains committed to responsible operations and consumer service but called for immediate intervention to ensure financial sustainability.

“The industry is not seeking excessive increases — only inflation-linked, data-backed revisions that allow us to operate sustainably,” Mr. Iyer concluded.