Money spinner

Published : Apr 15, 2015 12:30 IST

March 1997: Women of Andhra Pradesh protesting against the government's move to relax the prohibition policy. Total prohibition was imposed by Chief Minister N.T. Rama Rao in January 1995.

March 1997: Women of Andhra Pradesh protesting against the government's move to relax the prohibition policy. Total prohibition was imposed by Chief Minister N.T. Rama Rao in January 1995.

ANDHRA PRADESH: Mixed results

By Kunal Shankar

“THE Directive Principles of State Policy under our Constitution’s Fourth Schedule lists prohibiting alcohol as a duty of the state. Andhra Pradesh’s Prohibition Act only enables this constitutionally mandated policy to be implemented,” argued the State’s Advocate General S. Ramachandra Rao in February 1995 before a full Bench of the Andhra Pradesh High Court headed by the late Chief Justice Prabha Shanker Mishra.

Ramachandra Rao did not even have to make written submissions against the 252 liquor manufacturers and retailers who had challenged undivided Andhra Pradesh’s prohibition law, enacted just a month earlier on the initiative of the actor-turned-politician, Chief Minister Nandamuri Taraka Rama Rao (NTR) of the Telugu Desam Party. So powerful was the State’s pro-prohibition movement that even the “Bench was greatly affected by the philosophy”. The case went in favour of the State in April that year. The liquor lobby decided not to appeal against the order.

Andhra Pradesh’s anti-liquor movement was part happenstance. It was the consequence of an adult literacy drive that emboldened women of a nondescript village in Nellore district to emulate one of the stories, Sitamma Katha or Sita’s story, they read in their textbooks. Sitamma is educated and chooses to end the suffering of women because of their husbands’ alcoholism. She organises the women of the village to fight the liquor lobby and to persuade their husbands to give up drinking. The story was part of government-designed textbooks meant for night classes for women. It sparked a Statewide movement beginning with Dubagunta in Nellore, where Rosamma, a night-class student, decided to organise women of her village. The anti-liquor movement dominated the election campaigns in 1994, with NTR promising to implement prohibition as State policy. On January 16, 1995, within days after becoming Chief Minister, the Andhra Pradesh Prohibition Act was passed. It was NTR’s first legislative business in his third and final term as Chief Minister.

Lakshmana Reddy of the Jana Chaitanya Vedika, a non-profit organisation which helped draft the government textbooks, recollects how Eenadu , the newspaper owned by media baron Ramoji Rao, actively promoted the anti-liquor campaign. “Sridhar, the paper’s cartoonist, ran an uninterrupted satirical series against alcohol consumption for 185 days. I would meet [Ramoji] Rao at least once a week. The paper commanded 70 per cent of the readership market then. The campaign was a huge success.”

What followed was a massive underground market that corrupted the state regulatory apparatus. A “surreptitious” drinking culture flourished. But Ramachandra Rao says the Prohibition Act was “stillborn”. “NTR was ideologically motivated and refreshingly different. To his credit he had no minor bad habits like drinking or smoking. But the law was vagrant and difficult to implement. It encouraged corruption, made liquor more expensive. Adulteration became commonplace. Nobody checked the quality of liquor because its sale itself was outlawed.”

A large number of cases of blindness and death because of adulterated liquor followed. Meagre incomes began to be spent almost entirely on illegally brewed country liquor. The State’s coffers ran dry, or so it was claimed by the TDP government. On April 1, 1997, after firmly establishing himself as Chief Minister less than a year after his father-in-law NTR’s death, N. Chandrababu Naidu lifted the liquor ban, ending the State’s short-lived experiment with prohibition. Eenadu welcomed the decision.

Chandrababu Naidu’s successor, the late Yeduguri Sandinti Rajasekhara Reddy of the Congress, however, outlawed toddy in the twin cities of Hyderabad and Secunderabad in 2004. Rajasekhara Reddy claimed that the lack of palm vegetation in the cities, the unhygienic conditions of toddy extraction and transportation, and the high incidence of contamination were the reasons for his decision. The claim had some truth to it. The many liquor-related deaths were caused by the polluted water used to dilute toddy in order to meet the increased demand and the chemicals and sedative and hypnotic drugs used to adulterate toddy.

There were political reasons as well. Rajasekhara Reddy saw the Goud community as “betraying” him after they invited him on a solidarity platform just ahead of the 2004 elections with the threat of a ban on toddy sale by Chief Minister Chandrababu Naidu looming and then abandoning the meeting after the latter promised not to impose restrictions. For that influential backward caste group, toddy is a source of livelihood.

Venkatamma is in her sixties. She lives in Lal Bahabur Shastri Nagar, one of Hyderabad’s working-class neighbourhoods where members of most of its 300-odd families work as sweepers in the municipal corporation or as auto drivers, maids and cooks. After much prodding, Venkatamma sheepishly admits to drinking saendi (fermented toddy) at nights to beat the summer heat.

Venkatamma’s elder sister Muthamma also likes her toddy. Now retired, she worked the paddy fields in Hyderabad’s Bajpally area. Muthamma’s husband was a painter. She says alcohol killed him, but she is clear it was not just toddy.

Both women say toddy is something “their grandparents drank and was considered healthy then as it is now”. When “gutka [chewing tobacco], paan [betel leaves] and khaini [raw tobacco mixed with limestone] don’t kill people, how can toddy?” asks Venkatamma.

They now face a reignited anti-liquor movement, not as virulent as in the 1990s but persuasive nevertheless. The Association for Promoting Social Action (APSA), a non-profit organisation working towards prohibition, has been attempting to get rid of a toddy shop that has come up in Lal Bahabur Shastri Nagar but it has not made much headway.

The reopening of toddy shops in the twin cities was part of an election promise by Telangana Chief Minister Kalvakuntla Chandrashekar Rao. At the dawn of statehood last year, it sounded sweet to the Goud community. It fetched the Telangana Rashtra Samithi the loyalty of the community as well. The State’s Excise and Prohibition Minister, T. Padma Rao Goud, is from this community. Rajeshwar Rao, Special Officer on Duty to Minister Goud, estimates that about 50,000 families have benefited from the new policy, but he admits it has not been without friction.

Rules prohibit toddy shops from being opened within 100 metres of academic institutions or places of worship. There are instances of compounds of these shops sharing a wall with temples. Rajeshwar Rao says that could be because these temples would not have come under the Endowments Department’s list of designated temples in the State.

Increase in revenue A 650 ml bottle of toddy almost uniformly costs Rs.30 and all transactions are in cash. The State is not looking to make much out of the excise income from toddy sale, nor has trade been as brisk as it was 10 years ago. After Telangana achieved statehood, excise income has been estimated to be over Rs.10,000 crore, 60 per cent of the total revenue. This almost entirely comes from excise on Indian-made foreign liquor, or IMFL, and an extra value-added tax on excise. Rajeshwar Rao estimates a 20 per cent revenue increase in 2015-16.

The compound at New Bhoiguda in Secunderabad is busy at noon. It is one of the bigger ones of the 70-odd shops opened following the grant of licences since June last year. Most such compounds are toddy tappers’ co-operatives. New Bhoiguda Toddy Co-operative Society (TCS) secretary Ramulu Goud says justice has been finally done to the community. He offers open access to his store to check for adulteration and storage facility and even for laboratory tests if required. Fear of adulteration exists, but so is a sense of vigilance and renewed efforts to prevent it. Ramulu Goud says sales have been dull unlike in years past—only 70 to 80 cases of 24 bottles a day. He hopes sales will pick up as the summer peaks.

APSA does not buy Ramulu Goud’s story. Its activists say he was accused of contaminating toddy before the ban. But APSA’s Ramesh and Shivarani, who work with communities around New Bhoiguda, have reconciled to fighting adulteration rather than consumption, much like the rest of the once fierce anti-liquor movement.

As for Andhra Pradesh, the loss from Hyderabad’s excise revenue has been hard to stomach. Excise revenue has not been insignificant: Rs.11,568 crore up to March this year from the 13 districts, but the undivided State fetched more than double that, making Andhra Pradesh one of the excise-rich States of the country. So the State wants to attempt the “best” model to optimise excise revenue. Excise Commissioner Srinivas Naresh is expected to tour other States beginning July this year to study the various statutes across the country. Tamil Nadu is being seen as one of the models where even the retail trade in alcohol is in the State’s hands, fetching it nearly 80 per cent of the revenue.

In Andhra Pradesh’s chequered prohibition history, a forgotten period is between 1947 and 1956 when prohibition was law under Madras Chief Minister C. Rajagopalachari, or Rajaji, as he was popularly known. No liquor was served in the coastal Andhra and Rayalaseema regions even after the State’s formation on October 1, 1953, with Kurnool as the tentative capital. Ramachandra Rao recalls how well-to-do families would visit Hyderabad just to drink.

“It was a law well meant, but with disastrous consequences,” he says of the prohibition years, “so much so that the votaries of prohibition have become non-existent now.”

KARNATAKA: Heady mix

By Ravi Sharma

SARAVANAKUMAR, 28, supports his family of three by caddying at the Karnataka Golf Association course in Bangalore, earning on an average Rs.400 a day. At sundown he heads for Green Bar, a watering hole nearby where he says he spends a minimum of Rs.100—Rs.80 for the Indian-made (foreign) liquor (IML), Rs.2 for the glass and Rs.20 for the bottled water. It is below his dignity, he says, to drink anything but bottled water.

Sonali Chandra, 37, is vice-president at an information technology giant, and to get her share of the increasingly popular—“with the ladies and the younger crowd” —white spirit (vodka), she goes up literally, 16 floors above the city, to the swanky, open-air Skyye Lounge at UB City, where a meal for two can push you back by Rs.4,000 in a couple of hours.

At The Biere Club, one of the dozen or more microbreweries in Bangalore, where small and independent brewers turn out carefully selected, full-bodied, freshly brewed lagers, draughts, stouts, ales and fruit- and spice-flavoured beers, Preity Kapoor and Sabena Purshotam, young urban professionals, settle down after a lengthy wait for a table to spend a Friday night out. It could well be a scene from a metropolis anywhere in the Western world. But two women out on their own in a crowded, noisy, beer-guzzling pub at night in Bangalore? It is a world away from the late 1980s and early 1990s when pubs where mushrooming all over downtown Bangalore but with all-male patrons, prompting a friend from Hong Kong to ask with all seriousness whether it was “a gays only pub”.

For countless Bangaloreans like Kumar and Sonali and Preity and Sabena, and visitors to the city, whatever your palate, penchant or preference or means, there has always been some place in the city—and to a lesser extent in other urban centres like Mysore, Mangalore, or Belgaum—where you can quench your thirst. Students hardly out of school produce fake IDs (if needed, but rarely required) to step into the smoky, dimly lit, EDM (electronic dance music)-blaring pubs to imbibe the latest in alcoholic beverages.

Long before the real estate boom and the explosion of capitation fee-based professional colleges and much, much before information technology globalised Bangalore, it was alcohol—be it the rums, gins, whiskies, beers, toddy, or toddy’s industrialised version (toddy that is diluted, flavoured, or swapped with a different alcoholic base, like sugarcane)— that was the city’s defining industry. The intoxicating brew, be it the country variety or beer and IML kind (whisky, rum, gin, vodka, etc ), has had a deep impact, even shaping the destiny and reputation of the city.

In 1889, Bangalore Brewery (later to house the iconic UB Ltd) was one of the few industries located in the very British Bangalore Cantonment. Interestingly, prohibition has never been imposed in Bangalore despite a time when, after the reorganisation of States in 1956, the rest of Mysore State (as Karnataka was then known) was under prohibition. However, even the Karnataka Prohibition Act, 1961, which amalgamated the Mysore Prohibition Act, 1948, the Bombay Prohibition Act, 1949, the Madras Prohibition Act, 1938, and the Coorg Prohibition Act, 1956, lasted but briefly; it was annulled in 1965.

Men like Eshwar Khoday and his four grandsons, including Ramachandra and Sri Hari Khoday; Vittal and Vijay Mallya; K. Netkalappa and his son K.N. Guruswamy; Sowcar V. Thimmiah, his son Sowcar T. Thammana and his grandson Sowcar T. Thimappa; H.R. Basavaraj; Malappa Shinde; Dasappa; the Guttedears and a handful of others ruled the liquor trade in Karnataka. Toddy ruled the roost right from the early 1920s until the late 1940s, before arrack took over and held sway until the late 1970s when arrack producers frequently began to adulterate and dangerously spike the stuff. The 1980s and beyond belonged to the beer and IML trade. Explaining the shift to IML, Vijay K. Rekhi, who spent over 40 years with the UB Group, 15 of them as the president and managing director of United Spirits Ltd, said: “People don’t drink liquid. They drink lifestyle. Foreign spirits started as a trickle through the 1960s, and swelled to a steady flow by the 1980s.”

Though toddy and arrack were seen as something drunk by the desi /rural masses, and beer/ IML as urbane concoctions, an even bigger difference was the different systems of excise that they were subjected to. While beer and IML were taxed per unit produced or sold, the revenue from country liquor came through the older abkari system, where revenues were obtained by auctioning the right to vend toddy/ arrack from arrack shops in each district. Said T. Srinath, whose great grandfather Sowcar V. Thimmiah, grandfather Sowcar T. Thammana and father T. Thimappa were all in the toddy and arrack business: “Auctions were held in the town halls at Mysore and Bangalore amid much fanfare. Stacks of money would be brought for the auctions since hard cash had to be deposited in the treasury within hours of winning the tender. Both my grandfather and great-grandfather had partnerships with other arrack/toddy barons like K. Netkalappa and K.N. Guruswamy. Many of the auctions were symbolic, the rental would be fixed through negotiation between contractors and senior government officials, with many a time the contractors asking the government how much revenue they wanted.”

And while toddy/arrack barons like Guruswamy, who hailed from the Idiga community whose hereditary trade was tapping toddy, made sure that toddy and arrack contracts stayed in the hands of the community’s wealthy and socially mobile gentry, most of whom owned palm plantations, it was the Mallyas and the Khodays who lorded over the IML business. It was the Khodays who in 1983, looking to catch up on rival Mallya’s forays in the IML sector, set up the Ramda Pub in Bangalore, an outlet that sold beer fresh from the keg. Within a decade, Bangalore had become the “pub capital”.

Money spun off from the liquor business was used to launch and print (for long) the city’s leading newspapers, produce movies and construct cinemas and shopping malls, build hospitals, patronise schools, launch political parties, sponsor/own sports teams, and, most important of all, control the men who ruled the State. Liquor money was allegedly used even to buy the support of Members of Parliament during the trust vote that saved P.V. Narasimha Rao’s government in 1993. The only team in the highly popular Indian Premier League cricket carnival to be named after a product is Royal Challengers, named after a blended whiskey from Mallya’s UB Group.

In July 1981, a batch of contaminated liquor killed 336. While the tragedy ensured that arrack would no longer be sold in drums but in bottles (later in sachets), it hardly stemmed the flow of alcohol. Nor did measures like Chief Minister M. Veerappa Moily’s bold decision in 1992 to freeze the issuance of fresh licences (CL-2) to open liquor stores (still in force), or his successor S.M. Krishna’s bid to curb “seconds”, or the ban in 2007 on arrack (shutting down around 5,200 outlets) by the Janata Dal (Secular)-Bharatiya Janata Party coalition government. According to Excise Commissioner C. Somasekhara, 9,687 IML licenses were renewed in 2014-15 (up to the end of December). This was up from 9,621 in 2013-14, and included 3,935 licences to retail shops (CL-2 licence), 212 to clubs (CL-4), 60 to star hotels (6A), 815 to hotels and boarding houses (CL-7), 3,571 to bars (CL-9), 394 to the State-owned MSIL shops (CL-11C), 308 to “Retail Vend of Beer” outlets and 392 to others.

Liquor sales have always shown a rise: IML sales in 2012-13, 2013-14 and 2014-15 (up to December 2014) were 506.86, 526.25, and 406.76 lakh carton boxes respectively; a monthly average of 42.24, 43.85 and 45.20 lakh carton boxes respectively. Beer sales during the same period were 222.40, 243.85, and 187.36 lakh carton boxes respectively, the monthly average being 18.53, 21.44 and 20.82 lakh carton boxes. Karnataka, a power house in the manufacture of spirits and beer, and more lately of wines as well, has 27 primary distilleries (manufacturing spirit), seven composite distilleries (manufacturing both spirit and IML), 27 units manufacturing only IML, five breweries and 11 fortified and fruit wineries.

Excise revenue, the second largest source of revenue in Karnataka after commercial tax, increased from Rs.7.11 crore in 1967-68 to Rs.12,828.32 crore in 2013-14, a Rs.1,758.59 crore (or 15.89 per cent) over the previous year’s Rs.11,069.73 crore. During 2014-15 (up to December 2014), Rs.10,995.96 crore of excise revenue has already been collected, of which IML accounted for Rs.8,511.57 crore, beer Rs.1,033.05 crore and others Rs.551.34 crore.

Given the substantial annual excise collection, and the hold that the liquor lobby has had over successive governments, the political class has been reluctant to even talk of moderation, leave alone prohibition. Said Moily: “Prohibition is not the answer, it brings in spurious liquor. The ban on arrack in Karnataka has not served the purpose. You have to educate the people. Governments should also ensure that expansion of the trade is curtailed and the liquor lobby is reined in, not allowed to play a large role in governance.” Rekhi echoes the view: “Prohibition is a political ploy, gimmickry. It will make consumers pay through their nose and the government will lose revenue.”

Industry experts like Rekhi are critical of the high taxation regimes. “The assumption that the higher the taxes, the lower the consumption, doesn’t work. The consumer will just move from one brand to another. The government should promote moderation, which can only work through education and realisation. The mantra should be ‘Drink. But don’t abuse alcohol.’”

TAMIL NADU: State monopoly

By R.K. Radhakrishnan

In 2013, during a debate in the Tamil Nadu Assembly, a member wondered how the Rs.1 crore allotted to spread awareness about the ill effects of alcohol would have any impact. In the preceding financial year, 2012-13, patrons in Tamil Nadu had consumed alcohol that fetched the government Rs.21,680 crore in revenue, which constituted over 20 per cent of the State’s revenue.

Minister Nathan Viswanathan’s matter-of-fact response to member Jawahirullah’s observation was: “Rs.1 crore is certainly enough to conduct an essay competition and likewise competitions and to give away prizes.”

As an afterthought, the Minister added: “We are implementing the present policy only with bitterness.”

Almost all State governments in India have employed this line of defence for decades. Governments have often highlighted the negative effects of prohibition: large-scale sale of spurious and often dangerous liquor, rise of organised crime networks that thrive on this market, and job loss for people working in breweries and vineyards.

Tamil Nadu started out with the right intentions after Independence, realising that people’s health was at stake (prohibition was also introduced in some parts of Tamil Nadu in the late 1930s). In 1952, the then Chief Minister of Madras province, C. Rajagopalachari, introduced total prohibition. Tamil Nadu remained a dry State for about two decades after this. In 1971, the Dravida Munnetra Kazhagam (DMK) government suspended prohibition, with Chief Minister M. Karunanidhi saying, “Tamil Nadu cannot serve as camphor in the midst of raging fire.’’ He went back on his camphor statement just a year later, and reintroduced prohibition in 1973. The Karunanidhi government was dismissed soon after the imposition of the Emergency in 1975. In 1975 and 1976, two massive hooch tragedies occurred in Tamil Nadu.

After the 1977 Assembly elections, the All India Anna Dravida Munnetra Kazhagam (AIADMK) government adopted a queer stance to make liquor available to “permit holders”. It did not take long after this for the floodgates to be opened. In 1981, the government allowed the sale of arrack and toddy. This went on until 1987. In 1987 came one more ban, this time, only on arrack and toddy. The very next year, in 1988, and in 1990, hooch tragedies rocked Tamil Nadu. The DMK was voted to power in 1990, and it promptly allowed sale of arrack and toddy.

For some strange reason, possibly because of pressure from industries in the State, methanol was removed from the Tamil Nadu Prohibition Act in 1984. This hampered the efforts of the police to check the diversion of methanol from industrial applications to the illicit liquor trade. In 2002, the State government brought methanol within the ambit of the Act. “Suitable amendments were also made in 2002 in Tamil Nadu Denatured Spirit, Methyl Alcohol and Varnish (French Polish) Rules, 1959, to maintain a strict control over procession, use, transportation, import and sales, etc., of methanol,” says the 2014-15 policy note.

When Chief Minister Jayalalithaa assumed office for the first time in 1991, her first act was to shut down arrack and toddy shops, pursuant to an electoral promise. Again, in November 2003, she signed an order giving the government monopoly over the retail liquor-vending business too.

The Tamil Nadu State Marketing Corporation Limited (TASMAC), which took over wholesale trade in 1983, was also given charge of the retail business. The government said that TASMAC began retail business to eliminate the sale of contraband, spurious and non-duty-paid liquor on some licensed premises under the system of retail vending by private persons.

The revenue from the trade justified the steps taken: Before taking over retail vending by TASMAC, the sale volume of IMFL was 148.99 lakh cases. It increased to 229.22 lakh in 2005-06, marking a growth rate of 53.85 per cent. The turnover of TASMAC was Rs.3,499.75 crore before it took over retail vending. It rose to Rs.7,335 crore in 2005-06; the growth rate was 109.59 per cent. The revenue growth, from 2003-04 (Rs.3,639.93 crore) to 2013-14 (Rs.21,641.14 crore), was 600 per cent plus.

Another justification advanced is that there have been no significant hooch tragedies and hence the government monopoly on alcohol sale should be welcomed.

A minor aberration happened last year, if one looks solely at the revenue side of the issue. For the first time ever since the State took over liquor retailing, the revenue came down to Rs.21,641.14 crore in 2013-14 from Rs.21,680.67 crore in 2012-13.

Fewer dry days

According to the 2014-15 policy note of the Prohibition and Excise Department, there are 6,800 retail shops functioning in the State. As many as 4,271 bars attached to these shops are also run. Some 7,039 shop supervisors, 15,431 salesmen and 3,634 assistant salesmen work in the retail vending shops on contract/consolidated pay basis.

In a bid to also cater to the high-end market, TASMAC has opened swank outlets in high-end malls in Chennai and elsewhere. These shops stock expensive imported alcohol and do brisk business.

While some States such as the neighbouring Kerala have many dry days, Tamil Nadu has only eight. The number of dry days was only five until January 2012. The eight dry days are Gandhi Jayanthi Day, Thiruvalluvar Day, Mahavir Jayanthi Day, Birthday eve of the Prophet Muhammad, Vadalur Ramalingar Ninaivu Nall, Independence Day, Republic Day and May Day. But ask any regular TASMAC-goer, and he will tell you where to find a pint on a “dry” day.

Apart from the committed Gandhians, the only serious, prolonged voice of protest against the State’s alcohol policy comes from Pattali Makkal Katchi founder S. Ramadoss. He has favoured total prohibition and has been pursuing a relentless agenda for over two decades. He has met with some success, but he knows that the battle is far from over.

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