A Parallel Alcohol Economy Worth ₹60000 Crore

For many urban Indians, premium whisky and “imported” labels signal trust, status and safety - yet behind the glossy bottles thrives a deeply rooted grey market. Refilled and counterfeit brands at weddings and bars have turned premium drinking into a risky gamble, where labels may be genuine but the liquid often isn’t. To understand how this parallel economy operates, and how India can fix it, NEEARJ Mahajan spoke to consumer-rights veteran, Prof. BIJON Misra.

How big is the problem of refilled or diluted premium liquor, and what does it reveal about our excise and consumer protection systems?

The problem is much bigger than the occasional raid you see in the news. We now have regular cases where licensed vends are caught refilling premium bottles with cheap or watered-down alcohol. In Noida, for instance, excise officials recently seized adulterated whisky in bottles of Ballantine’s, Black Label, Red Label and Jameson, all with fake QR codes. In Nagpur, under “Operation Thunder”, the police found 1,200 litres of watered-down premium alcohol, 4,500 empty branded bottles, fake caps and sealing machines – essentially a full-scale dilution factory.

If you step back and add FICCI’s estimate that illicit alcoholic beverages now account for over 30 percent of the Indian market, worth more than ₹60,000 crore, you realise we are not dealing with a few small-time cheats. It reveals two uncomfortable truths: excise departments are still designed primarily to chase revenue, not protect consumers, and our consumer-protection system has not fully entered the liquor space, which continues to be treated as a “sin tax” commodity rather than a product with serious health and safety risks.

What practical, low-cost anticounterfeiting and supply-chain measures should liquor companies adopt in India?

The good news is you don’t need science fiction to fix a large part of the problem. There are several low-cost measures already working in some states that can be scaled up and replicated easily.

First, unique, non-reusable closures – caps that clearly break or deform if opened – make refilling much harder to hide. Second, every bottle should carry a serialised QR code linked to a central database, which consumers can verify on a simple app. Rajasthan’s excise department has already launched a citizen app where buyers scan the hologram or QR code to see brand, batch, MRP and manufacturer details on their phone. Third, states like Kerala are moving to high-security excise labels using currency-grade features to make copying far more difficult.

For companies, that means working with states to standardise these systems, integrating them into their own ERP, and backing them with random mystery audits at vends and bars. These are not expensive technologies anymore, they just require the will to treat counterfeiting as a core business risk, not a minor nuisance.

Why is it still so easy for vends and gangs to refill branded bottles and sell them at full MRP?

Because the entire ecosystem makes it easy. Empty bottles of top brands are freely available from bars, hotels and scrap dealers. There is a thriving secondary market for empties. Grey-market vendors supply counterfeit caps, excise labels and even fake QR codes, as we saw in the Noida and Lucknow rackets.

On top of that, the enforcement focus is still on paperwork, not product. Inspectors check registers, quotas and licences; they don’t always open random bottles, test contents or verify QR codes on the spot. Supply-chain controls are also porous - Nagpur’s adulteration racket was diverting bottles in transit, diluting them by up to 40 percent with water, then pushing them back into the system.

In my view, brand owners should be mandated by law to take back the empty bottles, and consumers will never mind paying a few rupees extra for assured quality and safety.

 Three Most Common Adulteration Methods

Broadly, I would put adulteration into three buckets. First, simple dilution — adding water to genuine liquor. This is economic cheating and rarely lethal unless the water itself is contaminated. Second, the use of industrial or denatured alcohol, especially methanol, to fortify or replace drinkable alcohol in illicit liquor. Methanol is highly toxic, it converts to formic acid, causing acidosis, optic nerve damage, blindness and death, often in small doses. This drives the mass casualties seen in hooch tragedies.

Third, non-food-grade colours and flavours -from industrial dyes to contaminated agents — used to mimic branded spirits. Health risks range from stomach upset to irreversible blindness, brain damage and multi-organ failure. This is not just a revenue crime; it’s a major public-health threat.

How widespread is counterfeit imported and IMFL liquor, and why are fake caps, labels and holograms so hard to catch?

If you use FICCI CASCADE’s numbers as a rough guide, illicit alcoholic beverages, which include smuggled, tax-evaded and counterfeit products, have more than doubled in value in five years, to about ₹66,000 crore. A good slice of that is counterfeit “imported” and IMFL riding on the aspirational demand for premium brands.

Recent raids keep uncovering the same pattern. In Noida, fake premium whisky in bottles of Ballantine’s, Black Label, Red Label and Jameson; in Ghaziabad, a gang operating from a licensed shop with hundreds of empty bottles of Royal Stag, McDowell’s and Blender’s Pride and fake packaging; in Telangana, an entire printing unit making counterfeit excise holograms and brand labels for multiple states.

Fake caps and labels are hard to catch because printing technology is now cheap and sophisticated, and many states still rely on visual inspection by overstretched staff.

Do we need much tougher laws and penalties for alcohol adulteration, or mainly better enforcement of existing rules?

We need both, but I would start by admitting that even our existing powers are not being fully used. Under food safety and excise laws, authorities can already suspend licences, seize stock, and in serious cases prosecute offenders. After the 2020 Punjab tragedy, for example, there were calls for the death penalty for those guilty of spurious liquor deaths.

The deeper problem is that enforcement is often sporadic and reactive – after a tragedy or a media expose. There is also a conflict of interest: excise departments are judged on revenue targets, not on lives saved. So, they naturally prioritise collection over disruption.

That said, I do think penalties must be sharpened to reflect the reality that adulteration can kill. That means turnoverlinked fines for companies, mandatory jail terms for repeat offenders, and personal liability for those who run refilling and hooch networks. But any new law must be backed by independent investigation, fast-track courts, whistleblower protection and transparent reporting, or it will remain a paper tiger.

How can consumers protect themselves, and what simple, pro-consumer steps should regulators mandate?

Consumers cannot become forensic labs, but there are a few practical safeguards. Buy only from licensed shops and reputable hotels, insist on sealed bottles, and be wary of unbelievable “discounts” on very premium brands. In bars, it is safer when you see the bottle opened in front of you; if something tastes or smells clearly off, stop drinking and complain. Most importantly, never touch country liquor or “special” bottles sold in unmarked containers, especially in prohibition or border areas – that is where methanol tragedies usually originate.

On the regulatory side, there are some simple pro-consumer steps. Every state should offer a citizen verification app – like Rajasthan’s – so people can scan QR codes and verify bottles in seconds. There should be a single, well-publicised toll-free number and WhatsApp line for reporting suspicious liquor or overcharging, with an obligation on authorities to respond. States must mandate tamper-evident closures and secure, non-copyable excise labels, and publish the names of vends and hotels caught with duplicate or adulterated stock.

Most of all, we need a mindset shift: treat the liquor consumer as a citizen with rights, not just a taxpayer with a bottle. Once you accept that, pro-consumer measures become common sense, not charity.