India. Tamil Nadu set to have complete prohibition; experts question implementation

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Just a month ahead of elections in Tamil Nadu, the two Dravidian parties — which have been ruling the state for nearly half a century — have now promised that they would work towards total prohibition. So, whichever party comes to the power after May 16, it is clear that the state is set to become a no-liquor state, but the question is how revenue of around Rs 27,000 crore, which is coming out of liquor sales, will be compensated.

Tamil Nadu Chief Minister and AIADMK Supremo J Jayalalithaa said that if her party is voted back to power, step by step prohibition will be implemented.

“Full prohibition is not possible in one signature or overnight. It will be implemented in stages,” she said. The strategy would be first reducing the timing of the shops and reducing number of shops and bars, said Jayalalithaa.

AIADMK’s main rival DMK also promised full prohibition immediately and said employees of TASMAC, which is in charge of wholesale liquor sales in the state, will be given alternate jobs.

Without giving details on how the party is planning to compensate the revenue loss, DMK’s Supermo Karunanidhi said his party will take appropriate measures to compensate the revenue loss.

TASMAC turnover grew from Rs 139.41 crore in 1983-84 to over Rs 27,000 crore now. There are about 6800 TASMAC outlets across the state.

In 1983, Tamil Nadu State Marketing Corporation (Tasmac) was instituted to monopolise wholesale trade of Indian Made Foreign Liquor and that facilitated cost-effective excise duty collection.

In 1937, prohibition was introduced by C Rajagopalachari (Rajaji) in Salem and in phases it was implemented in other parts of the state. But in 1971, DMK Government headed by Karunanidhi withdrew the total prohibition. Karunanidhi said it was due bleak economic situation and the shops were closed in 1974, after which, he alleged, that the alchoholic beverages shops were opened by AIADMK government in 1981.

Jayalalithaa said in the last five years sales has been coming down which is a sign of state started going towards full prohibition. She noted, sales of IMFL (Indian Made Foreign Liquor) during DMK’s period increased by 109 per cent to 4.78 crore boxes and beer sales which was around 1.32 crore boxes in 2005-06 has increased to 2.86 crore 2010-11, during DMK regime.

In the last five years the sales dropped to around 2.31 crore

Is complete prohibition possible?

Political and economists, who tracks the state, said it is impossible, considering revenue from liquor amounting to over 20-25% of the State’s Own Tax Revenue every year. How they will adjust the revenue gap and how they will be funding Government’s welfare and freebies schemes, they questioned. It may noted, DMK’s manifesto did not had much of electronics freebies.

The party which was the first one to introduce the freebies concept by offering free television sets to voters, this time said it will give free mobile sets, for the poor. It also said free 3G/4G will be given to students.”Both the parties do not have real intention to bring in prohibition. If they are going to stop liquor sales, they may have to borrow an additional Rs 25,000 crore to execute all those freebies,” said M R Venkatesh, a Chartered Accountant and an expert in economic policy related matters.

Both the parties have not really put their thoughts into the idea and meagerly proclaims prohibition out of competitive spirit, he added.

The ruling AIADMK has been distributing free mixies, grinders, fans, cows, goats and others for the last five years. Over the past decade, successive governments in the state have spent nearly $2 billion (Rs 11,561 crore) on just three freebie schemes – colour television sets, laptops and household appliances. Tamil Nadu’s outstanding debt in 2014-15 was Rs 1,81,036 crore and this is expected to increase to Rs 2,11,483 crore.

When the AIADMK took charge State debt was Rs 1,01,349 crore. One of the reasons is various freebies and subsidy programme, alleges some political parties.”Closure of TASMAC shops will result in loss of income to the level of thousands of crore of rupees to state, which would force the government to suspend several of its welfare measures,” said an official. He added the fact that there is not much scope left for further imposing of taxes.

Venkatesh said that it does not mean that prohibition cannot be implemented, and he believes that it has to be brought in and reminded that the State of Gujarat is revenue surplus even after prohibition, regardless whether their policies are good or not.

However, it means cutting down expenditure in all means and stopping various freebies. Tamil Nadu has projected a revenue surplus of Rs 664.06 crore for 2014-15, but reported a revenue deficit of Rs 6,407.56 crore.

While the projection for 2015-16 was a revenue surplus of Rs 783.43 crore, the revised estimates shows a revenue deficit of Rs 9,481.14 crore. For 2016-17, the projection is revenue surplus of Rs 311.45 crore, while the budget estimates is a revenue deficit of Rs 9,154.78 crore. The other problem, according to experts, in implementing total prohibition could lead to illicit liquor. Duplicate liquor will be sold in black, which may even cause health hazards to the public and it will damage the ruling party.

Political critics also alleges that many of the distilleries are owned by politicians and over Rs 3,500 crore worth of liquor, are supplied by these distilleries. He questioned if suspension of freebies, expenditure optimisation, industrialisation gets further boost and other measures can be carried out, then there is a feasibility. But at the current environment none of this is possible.