47-year liquor ban officially ends in Lakshadweep; President signs new excise law

President Droupadi Murmu has cleared the way for the controlled sale and consumption of liquor in Lakshadweep by promulgating the Lakshadweep Excise Regulation, 2026, a sweeping new law that replaces the Union Territory’s four-decade-old prohibition regime.

Issued under Article 240 of the Constitution, the regulation dismantles the Lakshadweep Prohibition Regulation, 1979, and introduces a tightly supervised excise framework covering manufacture, possession, transport, sale and consumption of alcohol across the islands.

End of total prohibition

Under the new law, the Administrator is required to appoint an Excise Commissioner, who will function as the chief controlling authority for excise administration in the Union Territory. The Deputy Commissioner will act as the primary licensing authority, responsible for issuing permits for import and retail vending of liquor. This marks the first time Lakshadweep moves from blanket prohibition to a licensed model anchored in a full-fledged excise machinery.

Two broad categories of entities will be allowed to sell liquor. First, the Administrator can grant licenses or permits to government corporations, government companies, government agencies or autonomous bodies owned or controlled by the government for import and retail vending. Second, the Excise Commissioner may license private individuals or entities for the manufacture, wholesale supply or retail sale of liquor within specified local areas, subject to strict eligibility norms.

Who can get a licence?

Private applicants will have to meet a series of conditions to qualify for a licence. They must be Indian citizens above 18 years of age, with a clean criminal record and no past convictions under excise laws. They cannot be defaulters, blacklisted or debarred from holding an excise licence, and must demonstrate sound financial standing and solvency to run the business.

Premises norms are equally stringent. Any shop or establishment seeking to sell liquor must be located more than 50 metres away from educational institutions, religious places, hospitals and orphanages. Licensees are barred from selling to anyone under 21 years, and are prohibited from employing persons below 18 years of age in liquor-related operations, reflecting an explicit focus on youth protection.

Harsh penalties and victim compensation

The Regulation lays down tough penalties to deter illicit trade and adulteration. Mixing noxious or harmful substances with liquor in a manner that causes death can attract imprisonment for life along with a fine of up to ₹10 lakh. Even where no injury occurs, the use of dangerous ingredients can lead to imprisonment of up to six months, signalling zero tolerance for tampering with alcoholic products.

A notable feature is a statutory compensation mechanism for victims. Courts have been empowered to order manufacturers or sellers to pay at least ₹3 lakh to the legal heirs of any person who dies, and a minimum of ₹2 lakh to any person who suffers grievous injury, as a result of consuming liquor sold from their premises. Drinking in public places or creating nuisance under the influence is also punishable with fines and possible imprisonment, reinforcing public-order safeguards.

All offences under the regulation are classified as cognizable, allowing police to register cases and make arrests without a warrant. Offences carrying a minimum of two years’ imprisonment or more are additionally non‑bailable, further tightening enforcement levers against serious violations.

High excise duties, toddy exemption

On the revenue front, the Union Territory administration will collect money through excise duties, licence fees and label registration charges. The regulation prescribes steep duty rates across categories: Indian Made Foreign Liquor (IMFL) and foreign liquor will attract an excise duty of 400 per cent of the last selling price, beer 200 per cent and wine 80 per cent, making alcohol heavily taxed commodities in the islands.

Toddy, however, has been kept outside the excise duty net when consumed in its natural form or used for producing jaggery, vinegar or yeast. This carve‑out appears designed to protect traditional practices and local livelihoods linked to toddy tapping while still keeping commercial liquor under a tight fiscal and regulatory leash.

E‑governance and regulatory controls

To improve transparency and monitoring, the Excise Commissioner has been empowered to roll out e‑governance tools for tracking the manufacture, movement and sale of liquor through a national‑level digital network. This is expected to create real‑time visibility over stocks, licences and transactions, and to reduce leakages or diversion.

The Administrator retains wide powers to regulate or restrict drinking in specific areas in the interest of public peace. These include the authority to temporarily prohibit consumption in certain localities and to order the closure of liquor outlets for up to seven days in a year, or for shorter stretches, for law‑and‑order or community‑sensitivity reasons. The regulation will come into force on a date to be notified by the Administrator in the official gazette.

From blanket ban to “controlled opening”

Lakshadweep, a predominantly Muslim archipelago where liquor has been largely banned since 1979 except in a few tourist resorts, has seen repeated debates over proposals to relax prohibition as part of tourism‑driven development plans. With the new Excise Regulation, 2026, the administration has now moved decisively towards a tightly regulated opening, combining high taxation, strict licensing filters, tough criminal penalties and strong administrative controls.

Officials say the new regime is intended to balance economic objectives—such as boosting tourism and formalising revenue—with public health and social concerns. Critics, however, are likely to scrutinise how the law is implemented on the ground, especially in a fragile island ecosystem where cultural sensitivities around alcohol remain strong.