Delhi discounts derail liquor sales in Noida, Ghaziabad and Faridabad

Delhi's neighbouring markets - Gurugram, Noida, Ghaziabad, and Faridabad - saw a 20-25% fall in liquor sales in May after the national capital allowed private shops to offer steep discounts on the maximum retail price (MRP) of liquor, according to excise and industry data.
Companies and experts said consumers from Delhi, which earlier bought from these markets, especially Gurugram, shifted purchases to their city due to price-parity. Late last year, Delhi opened the market by allowing private retailers to sell liquor compared besides government-owned shops.

"Delhi was always a big consumer but they bought from nearby markets due to price differential of at least 15-20%. The price arbitrage between Delhi and Haryana is no longer there now, which reflects in significantly higher sales in the capital," said Vinod Giri, director general at Confederation of Indian Alcoholic Beverage Companies (CIABC), adding that a uniform tax structure across states would discourage sales shifting to markets where taxes are lower.

In November, the Delhi government decided to exit the liquor vending business and handed it over to private companies which led to steep price-offs and large gatherings outside shops. While this forced the government to ban discounting in March, private liquor shops were re-allowed to offer up to 25% discount on the MRP a month later.

“There is an impact on liquor sales in Gurgaon due to the discounting in Delhi and we are in touch with the state government to ensure it doesn’t become a reason for smuggling,” said VK Beniwal, Deputy commissioner of excise and taxation, Gurgaon
However, nearly a dozen new retailers in Delhi have surrendered their licenses blaming unfair competition from large wholesalers offering higher discounts. Companies, however, remained unperturbed.

"The pilot months of the new policy which was focused on price parity did put the industry on the growth trajectory in the state. It created space for new entrants in the wholesale as well as in the retail market for testing the waters. The subsequent exit by some players and concerns pertaining to a few amendments in the policy tamed the pace, but the consumer demand remained intact," said Amar Sinha, chief operating officer, Radico Khaitan, adding that the turbulence will settle and the distribution and supplies will be streamlined in the coming months.

Industry officials also said there has been an increase in black marketing and interstate movement of liquor. For instance, about 100 people have been arrested so far for bringing liquor to Noida from Delhi and over 10,000 bottles have been seized.

“We had sold 10 lakh bottles in May 2021, but the number dropped to 8 lakh in May 2022. In June last year, 9 lakh liquor bottles were sold in Noida, but till June 15 this year, only 3 lakh bottles were sold. We will fall short of our revenue target because of the discount offered by the Delhi government,” said Gautam Buddh Nagar’s Excise Officer Rakesh Bahadur Singh, adding that at the government level, the discussion is on to bring parity in rates so that people don’t buy from outside. The excise department is also conducting random checks at the Delhi border to stop smuggling.

Another bordering town, Ghaziabad is facing a similar issue.

“Our revenue fell from Rs 125 crore in May last year to Rs 112 crore in May this year and though June data is yet to come, there is a substantial dip. Last year, the sale was anyway less because of the second wave of covid cases but despite that, we are not able to achieve the revenue numbers of last years,” said RK Singh, Ghaziabad excise officer.