Explained: Centre-states legal row over control of industrial alcohol

The Union and state governments have been sparring over control of industrial alcohol. The matter is now with the Supreme Court, which has been holding hearings over the past few weeks.

On Thursday (April 18), the Supreme Court reserved its verdict on the issue of overlapping powers of the Centre and states with regard to the production, manufacturing, supply and regulation of industrial alcohol.

A nine-judge Constitution bench headed by Chief Justice DY Chandrachud heard arguments from Attorney General R Venkataramani, Solicitor General Tushar Mehta, senior advocates Dinesh Dwivedi and Arvind P Datar, who appeared in the court on behalf of the Uttar Pradesh government, and other lawyers representing different states.

What is industrial alcohol?

Industrial ethanol is high-purity alcohol made from raw materials such as sugarcane, grain, and wheat. Rectified spirit, which is a highly concentrated spirit that's typically toxic in nature, is used to produce both types of alcohol.

However, industrial alcohol is denatured, meaning it is made unfit for human consumption on purpose, by adding in chemicals such as isopropyl alcohol. This makes the alcohol unpalatable and nauseating.

Such denatured alcohol is used in a wide range of industries, such as construction, fuel, and pharmaceuticals. 

Who controls industrial alcohol?

Potable alcohol is a subject under the State List under the Seventh Schedule of the Constitution of India. However, industrial alcohol falls entirely under the Union List. This means, only the Union government has control over the production of industrial alcohol.

For years now, the Centre and various states have been tussling over who should has the legislative competence over each type of alcohol.

Denatured alcohol is often altered and made fit to some extent for human consumption, which leads to its misuse. State governments argue that since such misuse could harm citizens, they ought to be allowed to control the manufacture and use of industrial alcohol. The Union government has not agreed to this.

Attorney General R Venkataramani had once submitted in court that a “conscious decision” was taken to treat alcoholic liquors fit for human consumption and alcoholic liquors not fit for human consumption separately, with the former falling within the domain of provincial legislatures and the latter within the ambit of the federal legislature.

What does the law say?

Entry 52 of the Union List allows the Centre to regulate industries that Parliament finds to be of “public interest”. Through Section 18-G of the Industries (Development and Regulation) Act, 1951, Parliament holds the power to "regulate specific products related to scheduled industries to the Union government". The aim behind this legislation is to ensure the products are distributed fairly and sold at reasonable prices across the country.

Meanwhile, Entry 8 in the State List under the 7th Schedule of the Constitution gives the states the power to legislate on the "manufacture, possession, transport, purchase and sale of intoxicating liquors, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors.”

Entry 33 of the Concurrent List allows both the state and Union governments to make laws on the products of any industry, even if Parliament has granted control to the Union in public interest. This has triggered confusion on who has the power to regulate industrial alcohol — whether it is the state governments or the Union government.

While both Parliament and state legislatures can enact laws on the subjects mentioned in the Concurrent List, a central law will have primacy over the state law.

What is the current case about?

In October 2007, a Division Bench of the Supreme Court, in the State of Uttar Pradesh v Lalta Prasad Vaish case, held that following the decision in an earlier case (on Synthetics & Chemicals), Section 18-G removed the jurisdiction of the state legislature from Entry 33 of the Concurrent list. States had the legislative competence to regulate potable liquor and a limited competence over industrial alcohol to make provisions to prevent and check industrial alcohol being used as intoxicating liquor, it said.

In December 2010, a seven-judge bench ruled against the states. Subsequently, the matter was adjudicated by a nine-judge Constitution Bench.

The matter remained pending for 4,872 days. In October 2023, the court listed the case for directions before a Chief Justice Chandrachud-led bench.

What's the latest development?

At a hearing on Tuesday (April 16), the Union government told the Supreme Court that the framers of the Constitution intended to give the Centre complete control over any industry through enactment of Industrial (Development and Regulation) Act, 1951 in “public interest”.

Solicitor General Tushar Mehta, appearing for the Centre, told the bench that as per the Act, the development and regulation of a number of important industries, the activities of which affected the country as a whole, were required to be brought under central control.

Citing the example of COVID, he said the government could utilise its regulatory power in national interest as it did during the outbreak by issuing orders to ensure availability of ethanol at a notified price for manufacturing sanitisers. “Suppose the Centre then required that entire quantity of industrial alcohol for use in making sanitisers, the government can utilise its regulatory power,” Mehta said.

What did the Supreme Court say on Tuesday? 

The Supreme Court on Tuesday sought to know from the Centre why the states, as the custodians of the health of citizens, cannot impose regulations on industrial alcohol and levy fees to ensure that its abuse does not take place.

The nine-judge constitution bench asked Mehta why the states cannot have a regulatory mechanism for industrial alcohol.

“We all know about hooch tragedies and the states are widely concerned about health of its citizens. Why should the states not have the power to regulate? If they can regulate to ensure that there is no misuse, then it can impose any fees,” it asked. 

“There is one area. Denatured spirit can be converted into intoxicating liquor by a process. There is a possibility of abuse there. Can we deny to the state the regulatory power to ensure that the abuse does not take place,” the bench asked.

"The Centre is a national entity from the state, you are not going to control what is happening in a district or collectorate. Suppose, there is a strong possibility of denatured spirit of being misused for consumption. The state is rightly concerned as a custodian of health and it can impose regulations for ensuring that abuse does not take place. Why should we deny them the power to impose fees for that purpose?" the bench said.

Referring to hooch tragedies in the country, it said, “Can the state not say that this is happening within my territory and is likely to cause law and order problems?”

What argument did UP and West Bengal give?

The Uttar Pradesh and West Bengal governments have been on the same page on the issue, asserting the legislative power vested in states to regulate industrial alcohol is untrammelled and complete and beyond the Centre's jurisdiction.

Senior advocate Dinesh Dwivedi, appearing for the Uttar Pradesh government, had told the court that liquor has always been within the legislative sphere of states and the Centre does not have any jurisdiction with regard to industrial alcohol.

Excise, liquor and spirit have always been part of the state's jurisdiction, including industrial alcohol, he had said.

What happens next?

The Supreme Court today reserved verdict on the case. Depending on its verdict at a later date, states may or may not acquire control over the manufacture, use and regulation of industrial alcohol.