Pricey products, quality concerns: The economics of TN's TASMAC outlets

The Tamil Nadu government’s recent decision to hike liquor prices sold in state-owned TASMAC shops by ₹10-60 has caused ripples statewide. This jump in the cost of Indian-Made Foreign Liquor (IMFL) and beer brands comes after two years — the previous price hike was made in May 2020.

The liquor price hike comes in the backdrop of reports that Tamil Nadu State Marketing Corporation Limited (TASMAC), which runs more than 5,000 outlets across the state, lost revenues to the tune of ₹90 crore during the pandemic. On March 25, 2020, TASMAC shops were shut down and the closure was extended till May 15, 2020.

As the Tamil Nadu government presents the Budget for 2022-23 on Friday, March 18, the price hike assumes significance, as TASMAC sales account for a lion’s share of the state’s revenues.

‘Lack of transparency on revenues’

RTI activists, however, are sceptical about losses made by TASMAC, considered the state’s cash-cow, due to the complete lack of transparency on the actual revenues generated by the corporation. TASMAC officially sells liquor worth ₹110-120 crore a day. Replying to an RTI query filed by activist M Kasimayan, the TASMAC authorities had said the corporation incurred a loss of ₹244.82 crore between FY11 and FY20. 

To another RTI query, filed by activist S Sivagnanam, TASMAC said it had suffered a loss of ₹300 crore in just six years, between FY10 and FY21. Kasimayan told The Federal that there are discrepancies in the figures TASMAC shares, and it becomes difficult to assess its actual revenues.

“The taxes paid by the breweries go directly to the government. However, the profit earned through retail sales is not properly reaching the exchequer. In most of the outlets, the employees are selling the liquor at a cost higher than the MRP (maximum retail price). There is no transparency in the accounts,” said Kasimayan.

When liquor funds livelihood schemes

Few may believe that TASMAC is making losses, but tax experts said the government had no option but to raise liquor prices. The state’s total revenue is estimated at ₹2,02,496 crore, per Budget 2021-22. Of the total, its own tax revenue (outside of GST) is estimated at ₹1,26,644 crore. Of this, TASMAC alone accounts for a large chunk — ₹62,568 crore in the form of excise duty and value added tax (VAT). 

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Explaining the rationale behind the spike in prices, G Saimukundhan, visiting faculty, National Academy of Direct Taxes, Nagpur, told The Federal: “Today, we have VAT only on petrol and alcohol and state excise duty is imposed only on liquor. A significant amount of state revenue comes from state excise duty and VAT. So, currently, to boost revenue, the government turns to TASMAC, which it has complete control over.”

It is true that a welfare government should not indulge in this kind of a business, he observed, adding: “However, the revenue created by TASMAC is the one that helps the state to implement various welfare schemes and subsidies. Also, in order to keep the state’s debt in control, it is absolutely necessary that this government run this corporation at any cost.”

Moreover, if liquor is not legally available, people tend to procure them from neighbouring states, and bootlegging can also go up. There is also the threat of spurious liquor that can turn fatal. To avoid all of this, it makes sense for the state to take control of liquor sales, he added.

No clarity on composition of TASMAC liquor

But P Chellapandian, founder, Liquor Consumers Awareness Movement, does not trust the quality of the liquor varieties sold in the TASMAC outlets and is unhappy with the price hike.

“Until the launch of TASMAC in 2003, liquor consumers had only two options, such as toddy or local spirits (known as arrack). When TASMAC launched, it introduced 47 varieties of liquor, which has now risen to 250 varieties. We don’t know the composition of these. The government has a misconception that by raising the price, it can bring down the number of liquor consumers. But that is not the case. It has legally made 4 crore people addicted to liquor,” he said.

According to Chellapandian, in 2006, the then UPA government at the Centre introduced the Food Safety and Standards Act, and alcoholic beverages should logically have been brought under its ambit. 

For example, it should have followed the rules and regulations of the Act like statutory warnings, listing out the contents in the beverages, not selling the product above its MRP etc. “But none of these rules are followed by TASMAC,” he rued.

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Selling liquor above MRP

One of the major allegations made about TASMAC outlets is that the employees sell the liquor above MRP rates. R Rangarajan, professor, department of commerce, University of Madras, who had done a study on the work-life balance of TASMAC employees in 2018, said the employees are stressed due to the long hours. They are also often temporary employees. 

“Unfortunately, except for the TASMAC leadership, many work as contract employees in the corporation. This is the main reason why the employees hawk the products above MRP rate,” he pointed out.

A TASMAC official, however, claimed that the corporation fines and transfers employees who indulge in this fraudulent activity. “Every outlet has the flying squad numbers displayed prominently. If the consumers come across employees selling the products above the MRP rates, they can complain through that number,” he said.

TASMAC is facing another challenge of late. In February 2022, the Madras High Court ordered the closure of bars attached to TASMAC outlets within six months. The order was passed by Justice C Saravanan while dismissing a batch of petitions filed by the Tamil Nadu TASMAC Bar Owners Association, which wanted an extension of the tender period following COVID-triggered losses.

“The court has needlessly intervened in the functioning of the government. This is a dispute between two groups running a bar. While hearing that case, the judge has ordered that TASMAC has no powers to run bars,” said a functionary of the TASMAC employees’ welfare association.

The judge had stated that Sub-clause (1-A) and Section 17 C (1-B) of Tamil Nadu Prohibition Act, 1937, “merely allows TASMAC to do wholesale and retail business of liquor” and TASMAC has no authority to encourage the consumption of alcohol and intoxicating liquor in public place or so-called bars. 

TASMAC, however, appealed against the order, contending that it is governed by the Tamil Nadu Liquor Retail Vending (Shops and Bars), 2003 rules, and can run bars near the liquor outlets.