Uttar Pradesh Sets Ambitious Excise Revenue Target

The Uttar Pradesh government has established an excise revenue target of ₹60,000 crore for the financial year 2025-26. This decision was announced by Finance Minister Suresh Khanna. The government’s previous target for the current financial year was ₹58,000 crore. However, only ₹31,000 crore was collected in the first three quarters. This marks gap in expected revenue.

Excise Revenue Trends

The revenue from excise duties has seen fluctuations in recent years. In FY23, the revenue was ₹41,250 crore, which increased to ₹47,600 crore in FY24. The current financial year has not met expectations, prompting the government to set a higher target for FY26.

New Excise Policy

The new excise policy introduces an e-lottery system for the allocation of liquor, beer, and wine shops. This system aims to create a transparent and fair process for license distribution. Existing license holders will have the option to renew their licenses through this e-lottery in FY27.

Support for Farmers

The policy also focuses on enhancing farm incomes by promoting the use of horticultural products in wine production. This initiative is expected to increase fruit sales, benefiting rural farmers and stimulating the local economy.

Industry Response

Local liquor manufacturers have responded positively to the new policy. They have requested local authorities to allocate larger spaces for composite shops that sell beer and wine. However, the policy restricts premium liquor outlets from being located in malls and multiplexes, allowing them only in airports, metro stations, and railway stations with appropriate approvals.

Strategies for Revenue Generation

To achieve the ambitious revenue target, the government plans to address tax leakages and combat the illicit liquor trade. These measures are crucial for protecting both legitimate businesses and the state’s revenue.

Ethanol Production

In addition to excise revenue, Uttar Pradesh is a leading producer of ethanol. The byproduct of sugarcane is used in various sectors, including medicine and fuel blending. Increased ethanol production supports timely payments to sugarcane farmers and contributes to reducing the country’s oil import bill.

Future Outlook

The new excise policy and revenue targets represent a strategic shift towards enhancing state income while supporting local agriculture. The government’s focus on transparency and farmer support is expected to have impact on rural economies.

Questions for UPSC:

1. Critically analyse the impact of the new excise policy on rural economies in Uttar Pradesh.
2. What are the implications of the e-lottery system for liquor license allocation? Discuss its advantages and disadvantages.
3. Estimate the potential effects of increased ethanol production on the sugarcane farming sector in Uttar Pradesh.
4. Point out the challenges faced by the Uttar Pradesh government in achieving its excise revenue target for FY26.

Answer Hints:

1. Critically analyse the impact of the new excise policy on rural economies in Uttar Pradesh.

1. The policy promotes the use of horticultural products in wine production, potentially increasing demand for local fruits.
2. Higher fruit sales can lead to increased incomes for rural farmers, stimulating economic growth in these areas.
3. The introduction of an e-lottery system for licenses may enhance transparency, encouraging local entrepreneurship.
4. The focus on local production can reduce dependency on external suppliers, benefiting the local economy.
5. However, the restrictions on premium liquor outlets may limit market expansion opportunities for local businesses.

2. What are the implications of the e-lottery system for liquor license allocation? Discuss its advantages and disadvantages.

1. The e-lottery system aims to ensure a fair and transparent process for liquor license distribution.
2. It reduces corruption and favoritism in the allocation of licenses, promoting equity among applicants.
3. Existing license holders can renew their licenses through the system, which may encourage stability in the market.
4. However, the system may create uncertainty for new entrants due to the competitive nature of the lottery.
5. There may be technical challenges or accessibility issues for some applicants, potentially limiting participation.

3. Estimate the potential effects of increased ethanol production on the sugarcane farming sector in Uttar Pradesh.

1. Increased ethanol production can lead to higher demand for sugarcane, boosting farmers’ incomes.
2. Timely payments to farmers for sugarcane can improve their financial stability and investment in farming.
3. It can diversify income sources for farmers, reducing reliance solely on sugar sales.
4. The ethanol sector can create job opportunities in rural areas, further stimulating the local economy.
5. However, over-reliance on ethanol production may lead to fluctuations in sugarcane prices, impacting farmers negatively during downturns.

4. Point out the challenges faced by the Uttar Pradesh government in achieving its excise revenue target for FY26.

1. Current shortfall in revenue collection (only ₹31,000 crore collected in the first three quarters) poses challenge.
2. Combating illicit liquor trade and smuggling is crucial, as these activities undermine legitimate businesses and tax revenues.
3. Ensuring compliance with the new excise policy among license holders may require additional regulatory efforts.
4. Market restrictions on premium liquor outlets could limit potential revenue from high-margin products.
5. Economic fluctuations and changing consumer preferences can affect overall liquor sales, impacting revenue targets.