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Kerala: Block the bar and boost the bottle

How Kerala government’s attempt at bringing down liquor consumption appears to have ended up increasing it

Written by Shaju Philip | Thiruvananthapuram | Updated: June 17, 2014 11:32 am
Queue outside a government-owned liquor outlet. Source: Express Queue outside a government-owned liquor outlet. Source: Express

A move aimed at bringing down liquor consumption has backfired on the Kerala government. Consumption is seen as having increased, in fact, ever since the government held up renewal of the liquor licences of 418 bars identified as “substandard”.

Far from depriving tipplers, the move has sent them flocking to outlets of the Kerala State Beverages Development Corporation (Bevco), the state’s sole wholesale and retail distributor for Indian-made Foreign Liquor. In the two months since April 1, Bevco’s earnings have been Rs 200 crore higher than in the corresponding period last year, Excise Minister K Babu told the assembly last week.

“Those who would drink one or two pegs at hotel bars are now buying at least half a litre from Bevco outlets. And an addict exhausts the bottle in a day,” says an excise official.

The government has kept pending a decision on renewing the licences of these 418 bars — the state has 753 — in the wake of state Congress president V M Sudheeran’s campaign for total prohibition in a phased manner. The Congress-led government would have preferred to let hotel bars function with a rider that they improve standards within a time frame, but Sudheeran gained the support of Christian and Muslim groups and got a further boost following a Supreme Court ruling in March.

Under a liquor policy of 2011, the government had decided to restrict new liquor licences only to five-star hotels from 2013-14 onwards. Owners of four- and three-star hotels appealed, and the Supreme Court ruled in March that the government cannot deny liquor licenses to hotels ranked four stars and above until it takes a final decision on the 418 “substandard” hotels.

With those bars closed since then, a government source admits that it “does not make any sense”. “A practical approach would have factored in the fact that there is a section of people who are addicts. After the bars were closed, more people have started drinking in public places or vehicles as many are reluctant to take liquor home.”

Last week, the Kerala High Court asked the government to decide on the fate of the 418 bars within a month.

The business

The Supreme Court had observed, “If the government is really serious about reducing the consumption of liquor, it should also take steps to reduce its own shops and depots. If it is not possible for the government to reduce the existing retail shops, it is of no use to direct the bar hotels alone to function in a particular manner.”

Kerala cannot, however, do without the income from its liquor business. Earnings from liquor, including various taxes, contribute 22 per cent to the state revenue. Bevco, which accounts for about 75 per cent of the liquor business, had a turnover last year of Rs 9,350 crore, after Rs 8,819 crore in 2012-13. Hotel bars account for the rest of the business. According to industry sources, the 418 bars shut had together an average daily business of Rs 4.5 crore.

The sources say 80 per cent of the retail price of liquor is tax in various forms. But the government has been reluctant to raise the price it pays manufacturers, which has resulted in distilleries watering down the bottled liquor they supply to Kerala.

“More than the drinking habit of people, what is worrying is the government approach of making liquor a source of revenue. Religious heads who demand prohibition have to explain why their people have turned liquor addicts,” says writer Paul Zacharia.

The liquor bar business has evolved over the years. The norms have been revisited a number of times since Kerala became a state in 1956. Then, bar licences were given to quality restaurants that served a non-Kerala menu and had at least three rooms. In 1980, the Left government changed the criteria to hotels with 10 rooms and a restaurant.

It is since 1995 that the IMFL business has grown, with the then Congress government led by A K Antony banning arrack, which was cheap and readily available. Over the next 10 years, a number of new bar hotels came up, mostly three-star. A thrust on tourism in the same period contributed to the growth of the liquor business.

The standards

Simultaneously, the state has set higher and higher standards for its bars. In 1985-86, the then UDF government had decided to give hotels with bars a two-star grade. But in 2007, when the Left government was in power, the then excise commissioner suggested that licences of poor-quality hotels need not be renewed. Then excise minister P K Gurudasan, however, chose to regularise all existing bar licences since they had been given NOCs at various periods based on then prevailing norms. These included the 418 bar licences now pending renewal; a CAG report in 2011 would find these substandard.

The same year, the present Congress government brought out a policy seeking to bring down alcoholism in a phased manner — new licences only to hotels with four or more stars from April 2012, and only to five-star hotels from 2013-14. This is what led to the hotel/bar owners’ appeal and the Supreme Court order. The government has given 60 new licences, 39 of them at the intervention of the court.

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