New Delhi, 8 March

Karnataka's new alcohol policy marks a significant shift in the state's regulatory landscape. With price deregulation and a transition to a new taxation system, major industry players are expected to benefit while local companies lose ground, according to a report by Nuvama.

The Karnataka government decided to end its role in liquor pricing. The shift toward a price-deregulated market allows larger companies to capture market share through their superior innovation, distribution heft, and advertising capabilities.

The report highlighted that Karnataka's alcohol reform is seen as a "big positive" as the state will transition to an Alcohol in Beverage (AIB) taxation system starting in April 2026. This framework, which taxes products based on their alcohol content rather than selling price, is regarded globally as the gold standard.

Nuvama noted that the transition will occur gradually over the next three to four years to provide "sufficient time for a smooth rollout without disrupting the market." The report suggested that the tax shift looks more positive for beer due to its lower alcohol salience compared to spirits; hence, beer volumes could see a "sharp uptick in FY27 in Karnataka," especially since the category currently faces a low base following a double-digit volume decrease in the 2026 fiscal year.

Furthermore, the government now permits distilleries and breweries to operate 24 hours a day.

Nuvama indicated that the government's tax revenue target of Rs 450 billion for the 2027 fiscal year implies an industry growth of approximately 13 per cent year-on-year (YoY).