Millennium Post

The new India: Have Bottle, Will Drink

Queues outside liquor shops stretch as far as the eye can see, with hundreds lined up exhibiting a shameless disregard for physical distancing. Despite a COVID-led hike in prices, the average Indian seems to be doing everything but ease up on the bottle

The morning of May 4, 2020, was one that dawned with a definite spring in the step for a large cross-section of Indians. After all, come 10 am and the curtains (read 'shutters') would go up on the best show in every Indian town. And for this spectacle, many headed out from their homes in the wee hours itself. Awaiting them behind those silken curtains was the sustenance they had been deprived of for weeks. Sure, Version 3.0 of the Lockdown in the dreaded COVID-19 battle was beginning but the relaxation provided by the Indian Government meant that their sorely missed dose of daily tipple would soon be at hand, to behold, celebrate and then to down with an unabashed flourish. Finally, liquor sales were on again – the manna from the heavens was back.

It is a different story that May 4, 2020, saw most of these Bacchus aficionados go through a day they would rather not relive in a hurry. Outside liquor stores, snaking queues stretched as far as the eye could see, with hundreds in the line jostling and pushing one another with a near-spiteful disregard for physical distancing amid the COVID-19 threat. The law-enforcers tried to rein in this misplaced reverie, but even their wailing sirens and idling motorcycle engines could not wake up this mélange to the reality of a strict police 'bandobast'. The latter's zero-tolerance policy soon saw nerves running frayed as teeming millions refused to follow the set norms and etiquette required in such times. What followed was a foregone conclusion. Nearly all the shops across the country downed their shutters within minutes of opening.

Price hike but revelry continues

Later the same evening, the revelry was further cut short by announcements by various state governments, of a COVID-19 fee that would be imposed on all liquor sales, with the increase in prices ranging from 10 per cent in some states to 70 per cent in the National Capital, New Delhi. A day later, Andhra Pradesh announced a massive 75-per cent price hike on liquor sales, while Karnataka also imposed a 17-per cent pandemic fee on liquor sales. Other states followed suit.

Another day later, most Indian states announced an increase in excise duties on petroleum products, with both petrol and diesel becoming dearer. While some states attributed the price hikes to an attempt to discourage consumption, others admitted candidly that this was a means to make up for the losses incurred by the 40-day shutdown of liquor sales. Whatever the reason, the announcements had no impact on the turnout witnessed at liquor vends the very next day, as millions clambered on to their scooters and motorcycles, and millions more jumped into their cars — all headed for manna.

What makes so many drink?

It is not easy to explain away what takes over so many, causing them to cast care and fears aside to greedily clutch that slim bottleneck or grab the wide brim of the glass, in times as bad as we are facing today. The only simple explanation is that liquor (should we be polite and call it an 'alcoholic beverage'?) is an intrinsic part of Indian life and lifestyles now. Some months back, a report in the 'Lancet' journal revealed that liquor consumption per adult per year in India went up by 38 per cent between 2010 and 2017 — up from 4.3 litres to 5.9 litres — predominantly on the back of freer familial and cultural values, as also the inclusion of a greater number of women in the drinkers' list. Multiply that per-person consumption by India's adult population for the period under review, of over 50 crore and you get a whiff of the sheer scale and numbers involved.

Today, India and Indians are well and truly hooked to alcohol. Here, we are not just talking about our masses and classes; we are also talking about our administrations and state governments. Such has been the advent and the resultant impact of liquor sales and revenues on our country's finances, right down to the grass-root level, that playing footsie with this particular damsel is cause for economic consternation (if fiddled for a short while) and financial doom (if the interference lasts longer). More on this in a while…

People: Culture & lifestyles

A plethora of research papers and analysis have shown that every third Indian adult likes his daily dose of liquid gold. And all of us who have been around for a generation or two have seen this phenomenon manifest itself more and more across India. The economic liberalisation kicked off in the early 1990s and the opening up of the Indian market did not just shore up our then-sagging economy, it also impacted our lifestyles. And not all in a bad way. As millions of Indians travelled the world crooning the paean of business and commerce, they also picked and brought back with them the ethos and habits of those that they visited. Over years and decades, these percolated across the length and breadth of the country.

A recent BBC report explored the drinking habits and trends of people around the world, and how this indulgence metamorphoses during emergencies such as the ongoing COVID-19 scourge and the resultant lockdowns and 'quarantined' life. Let's face it. Being allowed to step out of your home for an hour a day to exercise or pick up essentials and then being self-confined is, for most, tantamount to a full-blown quarantine. Even in normal circumstances, many tend to reach for the glass at the end of the day, to 'welcome' the evening. Some do it because they like it, others because it is a way to cope with things around them, and others still because they want to blend in. Over time, those in Category 3 graduate to Categories 1 or 2. And newer ones join Category 3. The dance goes on; the number of dancers increases.

Govt: Big business is good

Having sifted through the people, let's sort out where the authorities stand as far as the liquor industry and sales are concerned. They, to put it mildly, are in the sweet spot, in the 'zone' if you will, so far as things keep moving along nice and smoothly. Put together, India's state governments net over Rs 150,000 crore annually in excise collections alone from liquor sales. Bung in the overall sales figures, VAT collections in some states, ancillary and support industry sectors for alcohol manufacture, raw material production, sales and distribution activities, retail outlets and real estate, marketing and brand developments… This is one gravy train that India's state governments need to ensure keeps chuffing along.

As stated, the Indian Made Foreign Liquor (IMFL) sector pays over Rs 1.5 lakh crore in excise and other duties annually to state governments. Other than the levies, they also provide direct and indirect employment to over 10 million people countrywide, including over 4 million farmers. Liquor manufacturers alone also support ancillary industries such as bottles, plastic and paper, which pull their own weight with a turnover of over Rs 5,000 crore. And that's the reason that even a 40-day shutdown in liquor sales can be calamitous and play havoc with a state's finances, especially in troubled times such as today when states are having to fork out massive unbudgeted amounts to battle the COVID-19 pandemic.

Dependence on liquor sales

Clearly then, state governments are deeply dependent on the revenues and levies that come in from liquor sales, as these make up nearly 75 per cent of their overall collections annually. Typically, liquor companies pay excise duty on the manufacture and sale of liquor in the states and Union territories. Further, states also receive special levies on imported foreign liquor, transport, and label and brand registration. Admittedly, the Goods and Services Tax (GST) is the biggest revenue-grosser for states, but in the recent times of the pandemic, states' share of GST has not been reaching them in time, especially so as the Center itself is battling with a massive unbudgeted-for expenditure to battle COVID-19.

A few percentage points of state revenue and levy collections come from the sale of petroleum products, predominantly petrol and diesel oil. That's also due to the fact that petroleum by-products such as naphtha and kerosene are heavily subsidized to keep the farm sector and rural areas going. And that's the reason that the tail of the 40-day Lockdown 1.0 and 2.0 has been wagging the dog – the price of liquor, petrol and diesel have been given a jolt to shore up India's weeping coffers.

The larger economic canvas

Let's look at some numbers from the larger economic perspective, from the blinkered vision of Indian states. The impact of Lockdown 1.0 and 2.0 alone on India's GDP has been over $320 billion or around $8 billion in terms of daily flagellation. Against this numbing number, GST collections in March fell by around Rs 1,000 crore per day. The numbers for April will prove to be worse when they come in. The final nail in the coffin is that the cessation of liquor sales in the country for 40 days is resulting in excise losses of nearly Rs 20,000 crore across India's states. And as excise inflows form a major chunk of states' budgetary calculations, a dip in these receivables is a double-whammy, with most state coffers now having run dry, or getting perilously close to doing so.

As reported earlier in the 'Millennium Post', liquor sector revenues form a major part of countrywide collections and enable Indian states to finance public welfare schemes, especially in times of national emergency, such as we are facing now. The absence of these revenues severely impacts the states' ability to run welfare and alleviation programs. And the sobering truth is that alcoholic beverages make up an industry segment that does not see downturns, ever. In fact, crassly enough, the liquor sector prospers in tough times.

What of liquor manufacturers?

Given the backdrop of reopening of vends, most assume that liquor manufacturers and retailers across the country would be delighted, but that is not the case. From their perspective, the mad rush being witnessed right now at liquor vends is the storm after the calm. Says the owner of a major liquor company, "What you are seeing is people who have been bottled up in cages for weeks on end, who are now stepping out in their hordes to reassert their independence, so to speak. This is not going to last. Given the ongoing pandemic and its fallout, the steep rise in liquor prices for the foreseeable future and the sagging Indian jobs and economic scenario, not many will be able to sustain these expenses for long."

According to him, the Government's decision to keep malls and pubs closed for the immediate future will also have a debilitating, cascading impact on the industry. And then, of course, the slowdown in the hospitality and airline sectors will have its natural fallout on the liquor industry as well. So the rush of the last week could turn out to be a euphoric hurrah blip on the liquor sector radar, one to savour for a bit before the hangover sets in again.

Refusing to learn from history

History is witness to the fact that whenever any State resorts to prohibition for political, cultural or other reasons, it always comes out loser. The United States opted for prohibition in 1920, with the intent of weaning out alcohol's evils in society. The result was quite the opposite, with an alternate, illicit industry being born, the Government incurring massive revenue losses and corruption soaring. Some Indian states flirted with the same concept around two decades back and ended with similar results, nearly going bankrupt.

To tell the truth, all through Lockdown 1.0 and 2.0, liquor was available across the country at hugely inflated prices. The lockdown only managed to push prices to astronomical levels, 4-5 times the mentioned MRP, even as the legal excise collections of states went to zero. This six-week period saw black marketers and bootleggers make a killing, especially in a new India where alcohol consumption has been increasing year on year.

The profit-taking that the country's lanes and by-lanes witnessed through illicit, black-market liquor sales through the last few days of March and all of April would have been better utilized by states had it reached their coffers. At least some of it would have percolated down to the people that matter – those who walked our highways for days and weeks to get back home, and those who work for state governments but have not been paid their April salaries as there is no money to pay them with.

Further, the mad rush we are witnessing today at liquor vends across the country would also have been avoided, as continued access to alcohol would have killed this frenzy we are witnessing today when shops are reopening after six dry weeks. Mind you, India is the only country of note, worldwide, that has seen liquor sales being shut down for any period of time.

A new beginning is being made

Having been wrung dry by the ravages of Lockdown 1.0 and 2.0, states like Chhattisgarh, Uttar Pradesh, Punjab and Himachal Pradesh are now quickly embracing the concept of online sales and home delivery of liquor. Hopefully, in the softer Lockdown 3.0, all of India will do so soon. And today's India needs to, to avoid mindless queues and mayhem outside liquor vends and ensure that physical distancing norms are not made a mockery of in these terrible times. Home delivery of online orders will not only ensure easier access to liquor for the masses that are spending real money on their indulgence but it will also generate desperately-needed cash-flows for state governments.

The National Capital has made a beginning of sorts too by issuing e-tokens last week for queue-less liquor sales in Delhi, even though the first day of its implementation saw some teething problems. Keeping these in mind, the Hon'ble Supreme Court asked the Delhi Government to consider online bookings and home delivery of liquor products. If this happens, Delhi may soon be on its way to overcoming the problems being faced at vends.

Inevitably, these new sale options will become the way of life in the new India, one in which alcohol and related products will soon make it to the list of essential commodities. Such a move will provide succour to those who like their daily liquid fix. But more important, it will fill up the coffers of the authorities and keep the administrative machinery moving – moving to fight this battle that is sure to confront us for a long time.

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