Liquor worth ₹1,669 crore sold in the last week of December

The news about ₹1,669 crore worth of liquor sales in the last week of December, despite a slump in Indian Made Liquor (IML) sales but an overall increase in excise revenue, and the ambitious ₹40,000 crore target for FY2025-26, offers a crucial window into the intricacies of state finances and economic policy in India. This isn't just about alcohol; it's a deep dive into fiscal federalism, revenue generation, and the socio-economic dilemmas faced by state governments.

**Background Context and What Happened:**

Historically, excise duty has been a cornerstone of government revenue in India. Before the implementation of the Goods and Services Tax (GST) in 2017, both central and state governments levied various excise duties on goods manufactured within the country. Post-GST, most indirect taxes were subsumed, but certain items were deliberately kept out. Alcohol for human consumption and petroleum products are two such significant exceptions. This means states retain the power to levy excise duty on liquor, making it one of their most vital 'own tax revenue' sources. The reported sales figure of ₹1,669 crore in just one week highlights the immense revenue-generating potential of this sector, particularly during festive seasons like the end-of-year holidays. Despite a specific segment (IML) experiencing a slump, the overall excise revenue collection increasing indicates resilience in demand and potentially effective pricing or policy adjustments by the state excise department. The government's setting of a ₹40,000 crore excise revenue target for FY2025-26 underscores its reliance on this stream for funding public services and development projects.

**Key Stakeholders Involved:**

1. **State Government:** The primary beneficiary and regulator. State governments depend heavily on excise duty on alcohol to fund their budgets, including welfare schemes, infrastructure development, and administrative expenses. They are responsible for formulating excise policy, setting tax rates, granting licenses, and ensuring collection.

2. **Consumers:** The demand side of the equation. Their consumption patterns, influenced by cultural factors, disposable income, and availability, directly impact revenue figures.

3. **Liquor Industry:** This includes manufacturers, distributors, and retailers. They operate under strict government regulations, and their business profitability is directly linked to excise policies, licensing, and market demand. They are significant employers and contribute to the economy through production and sales.

4. **Excise Department:** This is the administrative body within the state government responsible for the enforcement of excise laws, collection of duties, prevention of illicit liquor trade, and overall regulation of the liquor industry.

**Significance for India:**

This issue holds profound significance for India, particularly concerning state finances and fiscal federalism. Excise duty on alcohol is one of the few substantial 'own tax revenues' that states fully control after GST. This autonomy is critical for states to manage their budgets and fund state-specific initiatives without excessive dependence on central transfers. The revenue generated is often channeled into critical sectors like education, healthcare, and infrastructure. However, this reliance also presents a dilemma: states must balance the need for revenue with public health concerns and the social costs associated with alcohol consumption. Debates around prohibition often highlight this tension, where some states opt for prohibition (e.g., Gujarat, Bihar) sacrificing revenue for perceived social benefits, while others maximize revenue generation.

**Historical Context and Constitutional Provisions:**

The power to legislate on alcohol has always rested with the states. The **Seventh Schedule of the Indian Constitution** delineates the legislative powers between the Union and the States. Specifically, **Entry 51 of the State List (List II)** grants states the exclusive power to levy duties on