Foreign Liquor Ban in CSD Canteens: Exploring the Motives and Impacts
The Canteen Stores Department (CSD) in India is an essential retail network for the armed forces, offering subsidized products to both active and retired military members and their families. In October 2020, the Indian government enacted a policy banning the sale of directly imported goods, including foreign liquor, in these stores. This decision has notable implications for supply chains, domestic production, and consumer access within the defense sector. This article delves into the background, rationale, implementation, and effects of the ban.
The CSD manages around 4,000 outlets across India, operating as a centralized procurement and distribution mechanism under the Ministry of Defence. These canteens provide a wide array of products, such as groceries, electronics, footwear, and liquor, at reduced prices, benefiting from certain tax and duty exemptions. With annual sales surpassing $2 billion, the network caters exclusively to authorized individuals, such as soldiers, ex-servicemen, and their families. Before the ban, imported items made up about 6-7% of the total sales value, with foreign liquor being particularly popular. Items like Scotch whisky from brands such as Johnnie Walker, Chivas Regal, and Glenfiddich were favorites due to their affordability through concessional rates, making them accessible to consumers who might find them otherwise expensive on the open market.
The CSD's purchasing model historically included both domestic and imported products, with imports often sourced from countries like the UK for liquor and China for electronics and consumer goods. This model not only offered variety but also facilitated high-margin sales for international suppliers, including major spirits companies like Diageo and Pernod Ricard.
The policy shift started taking shape in mid-2020 amid broader economic and geopolitical changes. By June 2020, orders for imported liquor from major suppliers such as Pernod Ricard and Diageo reportedly stopped, indicating an early move towards restricting foreign products. This became official on October 19, 2020, through an internal order from the Defence Ministry's Quartermaster General's Branch, instructing CSD outlets to stop procuring "direct imported" items. "Direct imported" refers to finished goods brought in from abroad without any local value addition, such as foreign spirits bottled at the origin.
The ban specifically targeted categories like liquor, electronics, and other consumer items, with foreign liquor being heavily impacted. However, products with foreign ingredients that are bottled or assembled in India, like certain blended whiskies, are still allowed. The order was communicated to the armed forces, including the Army, Navy, and Air Force, following discussions in May and July 2020. By late 2020, most high-end foreign brands were no longer available in unit-run canteens, marking a complete shift in procurement practices.
The primary motivation for the ban was Prime Minister Narendra Modi's Atmanirbhar Bharat Abhiyan, an initiative aimed at fostering self-reliance and boosting domestic manufacturing during the COVID-19 pandemic. This campaign emphasized "Vocal for Local," promoting indigenous products to reduce dependency on imports and spur economic growth. The policy also aligned with efforts to reduce imports from adversarial nations, particularly China, following escalating border tensions in Ladakh in June 2020. Although the ban applies universally to imports, it was portrayed as a measure to replace foreign goods with Indian alternatives, thereby supporting local industries.
Defense sources indicated that the intention was to prioritize swadeshi (locally made) items across all categories, not just liquor. For instance, imported electronics like laptops and rice cookers, many from China, were also phased out. Advocates argued that this would create opportunities for Indian manufacturers, potentially benefiting companies like Radico Khaitan in the liquor industry. The government saw the CSD's significant purchasing power as a tool to promote national self-sufficiency.
The ban has altered the landscape for various stakeholders. Foreign liquor companies, such as Diageo and Pernod Ricard, faced immediate challenges, including drying up orders and potential revenue losses from a lucrative market segment. These companies, which provided premium brands at high margins, expressed concerns that the policy represented protectionism without equivalent domestic alternatives in quality or variety.
For Indian manufacturers, the decision created shelf space in CSD outlets, leading a consortium of local spirits producers to promote their products as replacements. This has heightened competition, with domestic brands vying to fill the void left by imports. However, consumers within the defense community may face limited choices, especially for premium foreign liquors that were previously affordable through subsidies. Some have raised concerns about equity, pointing out that while imported aircraft like Rafale jets are procured for national security, everyday imports for personnel are restricted.
Broader economic consequences may include a potential shift toward black-market sales or increased open-market purchases, as liquor at CSD is sold at nearly half the market price due to excise duty waivers. Critics, including industry executives, have described the ban as excessively protectionist, potentially discouraging foreign investment.
While the policy has been commended for aligning with national self-reliance objectives, it has faced criticism for its selective implementation. Opponents argue that banning imports in canteens places an undue burden on defense personnel, especially when similar restrictions are not applied nationwide. There are also doubts about its significant impact on overall import figures, given the relatively small share of CSD sales in national totals. As of 2026, the ban remains in place, with no signs of reversal, though periodic reviews of procurement criteria continue.
Overall, the ban on foreign liquor in CSD canteens is a strategic move to advance India's self-reliance agenda, influenced by economic nationalism and geopolitical factors. While it promotes domestic industries and decreases reliance on imports, it also highlights the tension between global trade obligations and national priorities. For the defense community, this change underscores the broader push toward indigenization, even in everyday procurement.
