The Karnataka Government's decision to reduce duty on beer from Rs 5 to Rs 4 per bulk litre has triggered this bout with retailers refusing to reduce beer prices, while brewers and the Excise Department insist that the benefit of the duty cut be passed on in full to beer drinkers.

Finance Minister Siddaramaiah went a step further and cut sales tax too - from 55 per cent to 45 per cent. He even cut the last point tax from 10 per cent to five per cent. In fact, what Siddaramaiah did was to take a leaf out of former chief minister Devaraj Urs's book.

More than 20 years ago, Urs announced in the Assembly that he would like to see people drink beer rather than hard liquor and hence would like to sell beer at Rs 2 a bottle rather than see thousands of families get ruined by drinking illicit arrack.

The bone of contention in this current battle is not justthe price cut, but the extent of it. Retailers claim that due to the increase in licence fees their costs have shot up by over 20 per cent. Also, Excise duty on hard liquor or IMFL (Indian Made Foreign Liquor) and the increase in operating costs have made it impossible for them to reduce beer prices by Rs 4 per bottle of lager and Rs 6 per bottle of strong beer.

But the Excise Commissioner is adamant, insisting that the benefits of the duty cut must reach the consumer. At a meeting of brewers, he is reported to have said that since retailers will be paying the increased licence fee only from July 1, there is no reason for them to freeze beer prices at the old level. If necessary, retailers can recover costs by hiking prices of hard liquor, he added.

But retailers are also playing hard ball. A United Breweries official said their newspaper announcement recommending the price cuts was met with strong resistance by retailers. The official said the problem lies with the Excise Act and the Weights and MeasuresAct, both of which do not stipulate that beer bottles carry the price or MRP (Minimum Release Price) on the label of the bottle.

That the retailers are willing to go to any length was evident recently when they virtually gheraoed top office-bearers of the Karnataka Brewers and Distillers Association and some UB officials asking them to sign a letter declaring that the cut in beer prices has been kept in abeyance. The officials however refused.

An Excise official said the department was aware of the "gherao" and is coming out with an announcement saying that the benefits of the price cut be passed on to consumers.

According to President of the Karnataka Brewers and Distillers Association K R Balasubramaniam, the controversy is likely to be resolved in the next 10 to 15 days.