The state currently has 798 bars, which will be closed by January and new licences would be issued on lottery basis after cutting down their numbers.
The YSR Congress Party (YSRCP) government also proposes to increase liquor price in bars to further discourage its consumption.
Minister for Excise Narayana Swamy said that it was also decided to impose time restrictions on bars. They will be open from 11 a.m. to 10 p.m. but food would be allowed to be served till 11 p.m. Bars in star hotels would be allowed to remain open from 11 a.m. to 11 p.m.
The minister warned that heavy penalty would be imposed against bootleggers and non-bailable cases would be registered against them.
Reducing the number of bars is another major step taken by Jagan Mohan Reddy since coming to power in May. He had promised total prohibition in phases. In the final phase, he wants to confine the sale of liquor to five star hotels only.
He earlier ordered a crack down on belt shops or illegal outlets of licenced liquor shops. Narayan Swamy claimed that 43,000 belt shops were closed in the crackdown.
The government took over the retail liquor business from October and increased liquor price. It cut down the number of liquor shops from 4,380 to 3,500. All the shops are currently run by the state-owned Andhra Pradesh Beverages Corporation Limited (APBCL). The business hours of the wine shops were also curtailed.