Dailymiorror.News,Hyderabad, November 20, 2024: The Brewers Association of India (BAI), representing leading beer manufacturers such as United Breweries, AB InBev, and Carlsberg, has appealed to the Telangana Government to approve immediate price increases for beer companies to account for inflation.

In a letter to Telangana’s Chief Minister, Mr. Anumula Revanth Reddy, BAI Director General, Mr. Vinod Giri, expressed concerns over the 35-40% rise in production costs since 2019, which have not been reflected in the current beer prices set by the government. He highlighted that the basic price allowed to beer suppliers in Telangana is still based on 2019 cost submissions, and no price revision has been permitted to compensate for the increase in production costs. This, according to BAI, has made business operations in the state unsustainable and discouraged further investments.

The Telangana Government had formed a Price Fixation Committee (PFC) in July 2024 to assess and revise beer prices. The committee asked beer companies to submit proposals for revised prices at which they supply beer to the state government. Additionally, BAI was tasked with presenting an industry-wide perspective on production costs and factors influencing beer prices. Although submissions, presentations, and consultations were concluded by early August 2024, BAI asserts that no progress has been made since then.

BAI’s letter to PFC members outlines that while price hikes for suppliers have historically occurred only after several years, the cost of production continues to rise regularly. The association pointed out that prices had only been adjusted twice in the last seven years—by 9%-11% in 2018 and by 5.5%-7.5% in 2022. When adjusted for inflation, this represents a net increase of 16%-18% over the seven years, while the cost of production has surged by 45%-50%, according to the Wholesale Price Index (WPI) data from the Government of India.

Since the last price increase in 2022, the cost of production has risen by 35%-40%. In light of this, Mr. Vinod Giri emphasized that a price increase of at least 35%-40% on average is necessary to offset these rising production costs.

Currently, beer prices in Telangana are 30%-50% lower than in neighboring states, making the supply of beer in the state commercially unsustainable. In addition to this, the government’s significant delays in payments for supplied beer have further exacerbated the problem. BAI expressed concern that while setting up the PFC was a positive step, the lack of follow-up actions has placed the industry in a challenging position. The association urged the government to act swiftly and approve the proposed price hikes.

Furthermore, BAI recommended that Telangana, known for being progressive and business-friendly, should allow companies to set prices for their products based on costs and market demand, similar to practices in states like Karnataka and Maharashtra. Such measures have resulted in significant investment inflows into the alcohol and beverage sectors in those states.

As a more immediate solution, BAI suggested that the government link beer prices to inflation, using the Wholesale Price Index (WPI) as a credible benchmark. This would allow beer suppliers to raise their prices annually in line with changes in WPI, ensuring fairness for suppliers and inflation-adjusted government tax revenues.