Hic-nomics: States turn to the liquor consumer for more revenue

When the first lockdown from March 25 was announced, Punjab and Kerala– two states that took the lead in implementing the lockdown successfully by maintaining a fine balance between lives and livelihood– had toyed with the idea of listing alcohol as an essential commodity. In a press conference on 23 March Kerala Chief Minister Pinarayi Vijayan claimed that the “peculiar” situation arising out of Covid-19 made him think in this direction. He also quoted a tweet from his Punjab counterpart, Captain Amarinder Singh, listing alcohol in the list of essentials. The tweet was denied by the Punjab CM and whatever their private beliefs when the lockdown was initially imposed, Central guidelines which were issued to the states left no room for it. Since then, the Captain has been arguing for the reopening of liquor shops pointing to the fact that with the Centre slow in handing out the state’s share of GST earnings, liquor was a major revenue earner.

For good measure, he had added that sealed liquor bottles were less likely to spread Covid-19 than the vegetables sold loose and subject to greater contact. Now, Punjab is one of the last few states to open its liquor shops while Kerala has decided to wait till the lockdown is over. When the shops had downed their shutters, bootleggers were making hay with the moonshine by selling brands for thrice their MRP. For instance in Delhi, a bottle of Absolut Vodka was going in the black market for Rs 2,000 (it’s MRP was Rs 1,400 before the lockdown), while Johnnie Walker Red Label could be got for Rs 2,500 (the MRP being Rs 1,870), a Black Label for Rs 4,000 (MRP Rs 2,800) and a bottle of Kingfisher for Rs 300 and above (MRP Rs 180). Vodka brand Smirnoff, which cost Rs 750 MRP, was going for about Rs 1,000. So, it made sense for the states to reopen liquor vends and earn their rightful share of revenue.

Here is a quick checklist of the spirits in various states: Punjab It is CM Captain Amarinder Singh who has been pushing for liquor vendors to open. The state’s annual revenue from alcohol comes to approximately Rs 6,500 crore. The shops will open from 7th May for half a day, and then there will be home delivery after that. A decision is yet to be taken if the state should charge an extra Covid tax or not, like other states. The CM has called a cabinet meeting to figure this out.  Haryana The state has opened liquor vends from 7 am to 7 pm except in the containment zones. A Corona cess has been imposed making IMFL costlier by as much as Rs 50 while on cheaper brands, the cess will vary from Rs 2 to Rs 50 per bottle.  West Bengal Shops opened on 3rd May for a few hours from 12 noon to 7 pm with police presence and home delivery after hours. No shops to open in containment zones. Prices were hiked by as much as 30 percent.  Within 2 days of operating for four hours each, the state earned approximately Rs 40 crore. Maharashtra Opened the shops, but after a day had to shut them in Mumbai because of overcrowding. As per the notification issued by the Brihanmumbai Municipal Corporation, it was impossible to maintain social distancing because of the large crowds outside the shops.

Maharashtra earns Rs 25,500 crore from sale and excise duty on various types of liquor, beer and wine annually, and during its first day itself sold around four lakh litres of various IMFL brands. “We seemed to have received Rs 11 crore from sale and excise duty of various types of liquor,” said Kantilal Umap, the state excise commissioner. Delhi Out of the 850 liquor shops in Delhi, the capital has only allowed 150 state-run shops to be opened. After a disastrous first day when the crowds couldn’t be managed, Chief Minister Arvind Kejriwal decided to levy a 70 percent Covid cess on MRP for all brands. Further, there is a cap on the quantity per customer: 9 litres and a case of beer. The hike in prices has not gone down well with tipplers though it hasn’t lessened the crowds. Though if the CM really wanted to control the crowds, why hasn’t he allowed the private shops to open as well?  Uttar Pradesh Sold Rs 100 crore of alcohol on Day 1 of reopening postlockdown. The average daily sale before the lockdown was between Rs 70 to Rs 80 crore. However, after the first day, prices have also been hiked in UP with imported brands costing anything from Rs 200 to Rs 500 for 500ml whereas the cheapest brands will cost Rs 30 more for 500ml. The state hopes to mop and additional revenue of Rs 2350 crore after this decision.  Karnataka A whopping 17 to 25 percent hike in liquor prices across all slabs was announced on Wednesday making it the biggest ever single hike ever in the state’s history. This was in tune with country-wide trend of different state’s increasing excise. Karnataka Chief Minister B.S. Yediyurappa stated that the prevailing situation had forced the state government to take this step. 

The state has a target of Rs 18,000 crore per annum to be raised through liquor sales and as of March, it had fallen short of Rs 2000 crore. The dip in collection was furthered by lockdown. Liquor sales in Karnataka contribute to nearly 20 percent of the total revenue of the state making it one of the robust money-spinners. In the last three years, liquor rates have been hiked four times making it one of the expensive states as far as booze is concerned.    On 4 May, the Karnataka government allowed liquor sales through MSIL, a state-run depot, and CL2 wine stores as bars, restaurants and pubs continue to be closed. While the state collected Rs 45 crore on the first day, the numbers went up three times on Day 2, as it mopped up Rs 197 crore.  The record sale was also prompted by rumours and fear in the market that the Ministry of Home Affairs might impose a complete ban on sale of liquor across the country till the Covid battle was won. While addressing a press conference on Wednesday, Yediyurappa was quizzed whether there was any move to prohibit liquor after Maharashtra. His reply was candid–there has been some thinking but we will let you know when the decision is made! Albeit with a smile. Later in the day, the state came up with excise duty hikes ranging between 17% to 25% based on slabs. The 1-4 slab (ranging from a price of 0-Rs 559) will be charged 17% per bulk litre, the 5-10 slab (Rs 600-Rs 1,199) will be taxed 21% and slabs 11-18 (Rs 1,200-Rs 15,000 and above) will be charged at 25%. The buzz is BSY is in no mood to stop liquor sales as the state is already reeling under severe cash crunch. A call from Delhi might however change his stand!     

Tamil Nadu The Tamil Nadu government is set to open liquor shops from 7 May with a hike in prices. Barring Chennai, the governmentrun Tasmac shops will be opened in all districts. Sensing an opportunity to increase revenue, the E. Palaniswami government has now decided to increase the excise duty on IMFL by 15%. With this, the price of an average brand will go up by Rs 10 per 180 ml and by up to Rs 20 for premium brands. Sources in the finance department said the hike was thought up because the Central government has not released 10% of funds sought by the state government. Following the announcement, Opposition parties have condemned it and are now stressing that the state government utilise this opportunity and implement total prohibition in the state. Following the uproar, the state has rolled back its decision in Chennai alone, citing the spurt in the number of positive cases. The DMK and its allies have called for a protest on 7 May against the opening of liquor shops. They have asked people to wear black badges on Thursday and stand outside their residence for 15 minutes from 10 am to register their protest against the government.  Apart from the political tussle, 2 PILs have been filed against the government decision to open liquor shops in the Madras High Court and its Madurai Bench. The HC, which heard the petition on Wednesday, asked the state government to explore other possibilities for the sale of liquor and also questioned whether it can sell liquor online and adjourned the case. Despite all these hurdles, the government is set to go ahead with its plans to reopen liquor stores but with restrictions such as social distancing and allowing only 5 people in a shop at a time. One innovative measure is to allot different time-slots for customers according to their age.

Those above 50 can buy liquor only between 10am to 1pm, those between 40 and 50, can buy between 1pm to 3pm and those below 40, can buy only between 3pm and 5pm. The DGP ordered the deployment of 2 constables, 2 home guards/volunteers per TASMAC shop for security purposes. Andhra Pradesh Initially, the state government increased liquor prices by 25 percent just a day before resuming the sale of liquor. Hours after the shops opened on Monday, thousands turned up without following social distancing guidelines. As a disincentive and to reduce the crowds, the state government increased the price by another 50 percent taking the total to 75 percent. The enhanced rates came into force from Tuesday. The state decided to keep liquor outlets open from 11 am to 8 pm. As per an earlier government initiative to work towards the abolition of liquor in a phased manner, Chief Minister YS Jagan Mohan Reddy directed that 15 percent of the total retail liquor shops be closed down by the end of May. So far, 20 percent of the wine shops have already been closed and by the month-end, another 15 per cent of the shops will be closed. 

The CM instructed the police to ensure there is no smuggling of liquor from other states. Telangana After remaining shut for over a month, liquor shops in Telangana reopened with impatient tipplers forming long queues even before the shutters went up. The price was hiked by 16% on premium brands and 11% on the cheaper ones. This is lower than the neighbouring Telugu state of Andhra Pradesh. Chief Minister K Chandrasekhar Rao had announced that barring 15 liquor outlets located in containment zones, the remaining over 2,200 would be open for business from 10 am to 6 pm beginning Wednesday. Bars, pubs and other outlets that serve liquor will continue to remain shut. Police were deployed at most of the outlets to avoid untoward incidents and ensure law and order. Most of the liquor vends had drawn circles in chalk outside the shops to ensure social distancing rules were followed. The state government has warned that licenses of shops would be cancelled if physical distancing norms were violated.

Kerala Cheers, no hike, no booze here toll May 17! Though Kerala was the last state to shut government-run BEVCO shops and private shops, it has now decided to consider opening up shops only after the completion of the third lockdown. However, some cheer for tipplers here as the government is not increasing rates like its neighbours. Following the closure of liquor shops, Kerala reported one of the highest numbers of deaths due to alcohol withdrawal symptoms. To prevent alcohol-related deaths, Kerala government tried to sell liquor on medical prescriptions for the patients who come with withdrawal symptoms alone, but the move was widely criticised by the doctors associations and it was stayed by the court. The government then put the idea of opening liquor shops into the cold storage. Today, the Minister for Excise confirmed that even though Kerala has a minimum number of active Covid cases, the state has decided not to open up shops and will consider opening  only after the third lockdown period.

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