Prohibition in revenue-hit Andhra could mean windfall for Telangana

Liquor, alcohol, ban prohibition, Andhra Pradesh, Telangana, Jagan Mohan Reddy
After the new liquor policy comes into force, all liquor shops will be maintained by the AP Beverages Corporation Limited. Photo: PTI

As Andhra Pradesh is heading for a phased prohibition, liquor shops and bars are expected to mushroom in neighbouring Telangana, which will witness a boom in the liquor business, as an unintended consequence of the dry law in AP.

Liquor dealers in Andhra, particularly those operating in districts bordering Telangana, are likely to shut down their businesses and compete for retail licences in the neighbouring state. Moreover, with the increase in the number of municipalities and municipal corporations in Telangana, the number of liquor shops is expected to go up significantly.

Under the current biennial excise policy, the licences granted for liquor shops and bars will end on September 30. The government is expected to announce a new excise policy soon for the next two years (2019-21), starting October 1. Fresh licences will have to be issued to run liquor shops and bars for the next two years.

The government fixes the number of liquor shops and bars in municipalities and municipal corporations based on their population. Accordingly, as many as 2,144 wine shops, 840 bars and 27 clubs were granted licences under the current excise policy.

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During the 2017-19 excise period, the state had 68 municipalities and six municipal corporations in which retail liquor outlets and bars were permitted. However, the TRS government recently increased the number of municipalities to 142 and the municipal corporations to 13. As a result, the number of licenced liquor outlets will go up.

There is a huge demand for liquor licences across Telangana as the state has been witnessing steep rise in liquor sales year after year.

The state government had earned ₹400 crore last year from just non-refundable application fee for liquor shops. It is reportedly planning to double to licence fee to mop up revenues.

Sharp jump in sales

The Indian Made Foreign Liquor (IMFL) sales in Telangana rose by 30 per cent this year, compared to last year. The sales figure up to July 16 this year stood at ₹907 crore as against ₹744 crore in the corresponding period last year. Over 2.66 crore cases of liquor and 3.70 crore cartons of beer were sold during the year.

The demand for semi-premium brands of Whiskey, Vodka, Rum and Brandy is more in smaller towns while people in Hyderabad prefer premium brands, according to excise officials.

Overall, the state Excise and Prohibition department earned a revenue of over ₹9,400 crore in 2017-18, with the Greater Hyderabad Municipal Corporation (GHMC) alone accounting for 30 per cent of the total revenues.

Liquor consumption in urban areas has gone up significantly as the government allowed sales by retail outlets till 11 pm.

Contrast in Andhra

While Telangana has been witnessing a consistent growth in liquor business, neighbouring AP presents a contrasting picture.

With Chief Minister YS Jagan Mohan Reddy vowing to implement prohibition in a phased manner, there are fears of job losses in the sector.

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As a first step towards imposing dry law, the state government had recently announced that it would take over the retail liquor trade, on the lines of Tamil Nadu model. The state government has reduced the number of retail outlets from 4,377 to 3,500.

After the new liquor policy comes into force, all liquor shops will be maintained by the AP Beverages Corporation Limited. The government is planning to recruit 16,000 people on contract basis to work at these state-run outlets. A majority of those presently working in liquor shops will become ineligible to apply for the jobs because the government has prescribed graduation as the minimum qualification for supervisors and 12th standard for sales persons.

Total ban by 2024

On several occasions after securing a landslide mandate in the Lok Sabha and Assembly elections, Jagan had said that he would not seek votes in the next elections if his government failed to impose total prohibition by 2024.

To begin with, the government ordered an immediate ban on ‘belt shops’, unauthorised bars being run by licensed retail liquor outlets in the state. Belt shops have become a big menace, particularly in rural areas, and are seen as a major cause for growing addiction to alcohol.

Last year, excise officials had registered cases against 12,700 ‘belt shops’ and arrested more than 12,850 people. There are over 4,380 wine shops and about 800 bars in the state. The excise revenue, which stood at Rs 3,839 crore in 2014-15, rose to Rs 5,789.67 crore in 2017-18.

In the next phase, restrictions would be imposed on the sale of alcohol. It will be confined to five-star hotels and other premium restaurants. These phases will also be supported by de-addiction and awareness programmes.

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Another idea is to restrict the hours of sale. At present, the retail outlets are allowed to sell liquor from 10 am to 10 pm. It is likely to be brought down to eight business hours and all the shops will be asked to close by 6 pm.

“The objective of the new policy is to help the poor come out of the clutches of addiction. It would help if the sales are restricted,” an official said.

At a time when Andhra Pradesh is facing bifurcation blues and moaning under huge revenue deficit burden, imposing prohibition would further squeeze revenues, besides throwing up other challenges such as flow of spurious liquor and smuggling.

After the bifurcation to carve out separate Telangana state in 2014, the residuary AP started its journey with a revenue deficit of ₹16,000 crore. It now earns around Rs 6,000 crore from excise revenue. There are serious doubts over the financial viability of the prohibition policy.

Failed experiment

The experience of several states shows that the dry law can never be successful. Haryana had banned liquor in 1996, but had to revoke it in 1998. Similarly, the combined Andhra Pradesh’s tryst with total prohibition in 1994 barely lasted three years. Kerala banned alcohol in 2014, but a change of government in 2017 saw the policy being reversed.

Andhra Pradesh’s tryst with dry law was a spectacular failure in the past. An anti-arrack agitation started by a group of women at Dubbaka village in the coastal district of Nellore in 1990 soon snowballed into a state-wide social movement.

It became a dominant issue in the run-up to the 1994 elections. TDP founder NT Rama Rao, who was then in the opposition, was moved by the plight of women spearheading the agitation and promised prohibition if his party was voted to power.

And, with a dramatic flourish, he had announced that the first file he would sign as Chief Minister would be on banning liquor. He kept the promise. Within minutes of taking oath as CM for a second time on January 16, 1995, he announced total prohibition in the state.

As a result, four breweries and 24 distilleries producing potable liquor were closed down and the state lost a revenue of ₹800 crore in the first year. Later, some exemptions were made. Tipplers had to produce a “doctor’s certificate” to buy alcohol from special outlets run by the state breweries corporation.

A ‘permit’ would cost ₹5,000 for individuals and ₹50,000 for owners of bars or ‘permit rooms’ as they were called. Soon, the state government had to grapple with rampant smuggling and free flow of illicit liquor, besides massive loss to the exchequer.

“The prohibition policy was a total failure. It only led to an increase in bootlegging,” said Jannat Hussain who was the prohibition commissioner at that time.

Driven against the wall by administrative problems, financial worries and increased smuggling, the Chandrababu Naidu government finally decided to do away with the prohibition. The AP Prohibition (Amendment) Bill was passed, ending the dry law from April 1, 1997. However, the ban on arrack still continues.