Law Note: Kerala Micro Distillery Rules, 2025

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Table of Contents

Overview

The Kerala Micro Distillery Rules, 2025, notified under G.O. (P) No. 87/2025/Taxes and S.R.O. No. 574/2025, were enacted by the Government of Kerala on April 29, 2025, under the authority of Section 29 of the Abkari Act, I of 1077. These rules regulate the establishment, operation, and supervision of micro distilleries in Kerala for the production of Low Strength Horti Liquor (liquor with an alcohol strength of 20% to 30% v/v) derived from fruits or agricultural products other than grains. The rules aim to formalize the manufacture, compounding, blending, bottling, and distribution of such liquor, ensuring compliance with safety, quality, and excise regulations.

Key Provisions

1. Preliminary (Rules 1, 45, 46)

Title and Commencement: The rules, officially titled the Kerala Micro Distillery Rules, 2025, came into effect immediately upon notification (April 29, 2025).
Definitions: Key terms include:
- Low Strength Horti Liquor: Liquor with 20%–30% v/v alcohol content, produced from fruit juice or non-grain agricultural products.
- Micro Distillery: Facilities using pot or batch distillation methods for producing such liquor.
- Blending, Compounding, Wash, Spent Wash, and Proof Spirit are defined to ensure clarity in operational processes.

2. Licensing and Eligibility (Rules 3–5)

Eligible Entities: Licenses are issued only to government-owned corporations, companies, apex cooperative societies, or registered cooperative societies under the Kerala Co-operative Societies Act, 1969, meeting specific criteria:
- Minimum three years of operational experience in agriculture.
- At least 50 members in the society.
- Ownership or a 10-year lease of land and buildings for the distillery.
- Financial soundness and dedicated premises with separate rooms for raw material storage, distillation, spirit storage, compounding/blending, bottling, and office records.
Application Process: Applicants must submit a detailed application to the Commissioner of Excise through the Deputy Commissioner, including:
- Scaled plans of the distillery and equipment.
- A project report detailing the manufacturing process and raw material availability.
- Financial status declaration and fitness certificates from relevant departments (Agriculture, Food Safety, Factories and Boilers, and Co-operative Societies).
License Fees:
- ₹2,00,000 for annual production up to 20,000 bulk liters.
- ₹50,000 for every additional 10,000 bulk liters or part thereof.
Grant and Renewal: Licenses are granted by the Commissioner with government approval and are valid until March 31 of the financial year. Renewals are processed by the Deputy Commissioner upon application, provided no changes occur in premises or license scope.

3. Infrastructure and Equipment (Rules 6–15)

Buildings and Alterations: No structural or equipment changes are allowed without prior approval from the Deputy Commissioner, though minor alterations may be permitted by the Proper Officer with subsequent approval.
Stills and Receivers: Stills must discharge into locked receivers to prevent unauthorized spirit removal. Receivers and vats must be metal, gauged, and fitted with discharge cocks and dipping rods for accurate measurement.
Fermentation Rooms: Must remain locked when not in use, with at least eight hours’ notice to the Proper Officer for wash preparation.
Wash-Backs and Spirit Vessels: Must be gauged and recorded in Form MD II. Provisions must be made to prevent loss of wash or weak spirit due to leaks.
Compounding, Blending, and Finished Product Rooms: Separate spaces are required for these operations, with immediate transfer of finished products to a designated store after bottling.

4. Operations (Rules 16–25)

Wash Preparation and Fermentation: Conducted in designated rooms using approved yeast quantities. Wash cannot be removed from the distillery.
Distillation and Re-distillation: Requires prior notice to the Proper Officer (10 days for distillation, immediate for re-distillation). Only approved flavoring/coloring materials from the Food Safety Department may be used.
Bottling and Labeling: Performed in a dedicated bottling room. Bottles must be sealed with pilfer-proof caps and labeled per the Kerala Foreign Liquor (Approval of Label) Rules, 2018. A track-and-trace system linked with the Kerala State Beverages Corporation is mandatory.
Wastage Limits: Maximum allowable wastage is 0.5% for compounding, blending, and bottling operations. No wastage is permitted for bottled liquor.
Distribution: Liquor must be sold to the Kerala State Beverages Corporation or exported, with duty paid before removal.

5. Supervision and Compliance (Rules 26, 36, 40–43)

Supervisory Staff: A Preventive Officer/Civil Excise Officer oversees operations, with costs borne by the licensee. Excise Inspectors and above may inspect premises and materials.
Restricted Access: Only authorized personnel (Excise officers, employees with passes) may enter the distillery. A register of employees must be maintained (Form MD XI).
Security Deposit: Licensees must provide a security deposit (cash, stock notes, or government promissory notes) within 10 days of license issuance, failing which the license may be canceled.
Penalties for Breach: Violations by the licensee or employees may result in:
- A fine of up to ₹30,000 per person.
- License cancellation.
- Potential criminal prosecution under the Abkari Act.
Ejection of Violators: The Proper Officer may remove intoxicated or disorderly persons and record such actions.

6. Accounts and Registers (Rules 27–32)

Mandatory Records: Licensees must maintain detailed accounts in prescribed forms (MD II–MD XI) for wash, spirit production, compounding, blending, bottling, and stock transactions. These are subject to inspection by Excise officers.
Stock Verification: Conducted every three months, with a 1% wastage allowance. Excess deficiencies incur excise duty and may lead to criminal proceedings unless proven unavoidable.
Vessel Gauging: All vessels must be gauged by the Legal Metrology Department, with gauge tables maintained for accurate measurement.

7. Additional Obligations (Rules 34–39, 41)

Material Quality: Only high-quality, non-noxious materials may be used. Extraneous substances that obscure spirit strength are prohibited.
Reporting Violations: Licensees must report employee breaches to the Commissioner.
Inventory: An inventory of all apparatus must be submitted to the Excise officer.
Compliance with Additional Rules: Licensees are bound by any new rules or orders issued by the Government or Commissioner.

8. Post-License Obligations (Rule 39)

Upon license expiry, cancellation, or business cessation, the licensee must dispose of all spirits within three months of notice, or they may be confiscated.

9. Appeals (Rule 44)

Orders or proceedings by Excise officers may be appealed to their immediate superiors within two months.

10. Forms (MD I–XI)

Form MD I: License for manufacturing, compounding, blending, and bottling low strength horti liquor.
Forms MD II–XI: Registers for wash, compounding, blending, bottling, stock, employee records, and officer duties, ensuring transparency and accountability.

Significance

The rules promote the regulated production of low-strength horti liquor, leveraging Kerala’s agricultural resources while ensuring compliance with safety and excise standards. By restricting licenses to cooperative societies and government entities, the rules prioritize organized, community-driven enterprises. The stringent supervision, record-keeping, and quality control measures aim to prevent misuse and ensure consumer safety.

Legal Context

These rules align with the Abkari Act, I of 1077, and the Kerala Foreign Liquor (Approval of Label) Rules, 2018, reflecting the state’s broader abkari policy for 2022–23 to encourage value-added agricultural products while maintaining strict regulatory oversight.

Conclusion

The Kerala Micro Distillery Rules, 2025, provide a comprehensive framework for establishing and operating micro distilleries, balancing economic opportunities with regulatory control. Licensees must adhere to strict operational, safety, and documentation standards to ensure compliance and maintain the integrity of the liquor production process.