Why Kerala’s low-alcohol liquor policy has sparked a political storm | Explained

The story so far

The Kerala government’s move to allow the sale and production of low-alcohol beverages across the State by fixing a sales tax for low-alcohol liquor under two different tax categories has now snowballed into a major controversy with Opposition Left Democratic Front (LDF), a section within the United Democratic Front (UDF), including alliance partners, and influential church bodies criticising the move. The decision has also been alleged to be tainted by corruption, considering the swift movement of files and proceedings within days of the announcement of the tax structure for low-alcohol liquor.

What has led to the current controversy?

The Revised Budget for 2026–27 presented by the UDF government has reduced the sales tax on Indian-made foreign liquor (IMFL) with low alcohol content to the range of 120–175%, from the current 251% charged on liquor with 42% alcohol content. As per the Budget proposal, alcoholic beverages with alcohol content ranging from 0.5% to 10% v/v (volume by volume) would attract a sales tax of 120%, while beverages with alcohol content ranging from above 10% up to 20% v/v would be taxed at 175%.

What is the Opposition’s charge against the new move?

The Opposition, including former Excise Minister M.B. Rajesh and former Finance Minister K.N. Balagopal, has alleged that the move is aimed at protecting ‘certain interests’ and clearly smacks of corruption, as the project was shelved by the previous LDF government after it had initially explored its feasibility and potential. Mr. Rajesh also alleged that the tax cut would result in an annual loss of around ₹600 crore to the exchequer. Further, he asked how much the present government had been paid by the company interested in the project, as the tax cut primarily benefits the company that had approached the previous government with a similar demand, he alleged.

Does the Budget proposal have full support within the government?

Veteran Congress leader V.M. Sudheeran, who opposed the proposal for a lower tax on low-alcohol beverages, shot off a letter to Chief Minister V.D. Satheesan asking him to reverse the decision, arguing that it was against the tenets of the UDF election manifesto, which promised to save Kerala from the perils of alcohol, drugs and other addictive substances. This, Mr. Sudheeran said, amounted to a breach of the promise made to the people and should therefore be reversed. AICC general secretary K.C. Venugopal also signalled that the party High Command was unhappy with the controversy.

What is the State government’s response to the controversy?

The new tax structure for low-alcohol beverages was fixed after the previous government had legalised the production of low-alcohol liquor from selected agricultural produce under the provisions of the Kerala Small Scale Winery Rules, 2022 (for the production of horti-wine from tropical fruits and agricultural products of Kerala), which lay down the conditions for granting licences to run small-scale wineries, the licence fees, and related regulations. The rules also regulate the production of low-alcohol horti-wine (alcohol up to 15.5%) using local tropical fruits and agricultural produce, excluding cereals.

Can the previous government completely distance itself from the project?

The previous government had a declared policy of promoting beverages with low alcohol content as part of its efforts to support farmers. It had even approved the production of wine and low-alcohol beverages from selected fruits after considering a report submitted by the Kerala Agricultural University. The legislation that followed the government’s approval proposed the production of low-alcohol beverages from fruits such as jackfruit, mango, banana and cashew, though not from cereals.

However, the State government did not fix a tax structure for this category of liquor, and the company that approached the previous government had sought a reduction in the 251% tax rate charged on liquor with 42% alcohol content, arguing that it would not be profitable to operate under such a high tax burden. LDF leaders contend that the government subsequently shelved the project, taking into account the larger interests of the State, including the well-being of its people.

Although the previous government allowed the sale of low-alcohol-content horti-wine made from local fruits at the same tax rate as wine (86%) as part of its efforts to support farmers, the present government has reduced the tax on low-alcohol beverages made from spirit, a move that could have far-reaching consequences for the State, according to the Opposition.