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How Kerala’s Left govt is using lockdown to wriggle out of UDF’s curbs on liquor

The Left Front govt opened up liquor sales on 28 May, after nearly two months of lockdown, but only after it took a number of decisions to push sale and, by extension, revenue. 

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Kochi: As it comes out of the national lockdown-induced freeze on liquor sale, the LDF government in Kerala has found the perfect reason to broad base its liquor sale and completely demolish the no-alcohol policy of the previous Congress-led UDF government.

The government opened up liquor sales on 28 May, after over two months of lockdown, but only after it took a number of decisions to augment sale and, by extension, revenue. 

For one, the state has allowed the retail sale of liquor through private bar counters. As a result, the LDF government has commandeered the support of another 867 sales points, comprising 576 bar-attached hotels and 291 beer parlours.   

Before the lockdown, the state’s liquor retail outreach was limited to 265 outlets of Kerala State Beverages Corporation (Bevco), supplemented by 36 Consumer Federation sales points. 

With the new policy, the state now has 1,168 retail sales points. 

The state government has also enforced a new astronomical tax structure under which tax is levied at 247 per cent of the basic cost of liquor, up from 212 per cent before the lockdown.

This is among the highest in the country. For instance, in Maharashtra, which has allowed home delivery of liquor, 72 per cent goes as excise and VAT to the government on every bottle sold. 

Delhi, another state that has taken advantage of the lockdown, has imposed a 70 per cent Corona cess on the retail price of liquor. 

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Policy too sweet to spit out, too bitter to swallow 

The new policy, however, isn’t without its critics. 

Experts say allowing retail liquor sale at bar counters will cost the exchequer massively.  

The bar owners are also not too enthused. 

According to a bar owner who does not wish to be named, the state government has offered a pill flavoured in the too sweet to spit out, too bitter to swallow category. 

“What is on offer is a decent 20 per cent margin, where the bars will be charged only 80 per cent of the MRP. Then comes the rider. The state is imposing a 10 per cent turnover tax on the billable amount,” the bar owner said. “This essentially puts our margin at 10 per cent. For many bar hotels, with the kind of overheads it will require to keep these retail sales counters open, the profit will be negligible.”

Perhaps this is the reason why 100-odd bar hotels, including some establishments that put a price on their customer profile, have decided to give this opportunity to turn sub-agent to Bevco, a wide miss.

There are also many sceptics who question the rationale behind awarding Faircode, the makers of the basic BevQ app, 50 paise per e-token issued. Under the new policy, those looking to buy liquor will have secure e-tokens on the newly-launched BevQ app before they head to the beverage outlets. 

For the government, however, nothing can take away the sheen of what the latest reach-out has achieved. 

According to Sparjan Kumar, managing director, Bevco, the e-tokens alone netted the state-owned distributor Rs 1.25 lakh on the very first day. 

He said glitches in the app that provides the token for physical sale can be attributed to the heavy rush of customers. To put things in perspective, as many as 3.5 lakh downloads have happened and 2.5 lakh e-token have been issued for day one sales — five people at a time at each outlet, in line with social distancing norms.

Although a good two months have been wiped out of its sales calendar, the Kerala government seems to be betting on its augmented reach into the market working in tandem with the jacked up tax rate bringing home the gravy. And the government knows only too well this is one gravy train it cannot afford to miss as its other major revenue streams, offshore remittances and tourism industry are doing the vanishing act.

While the Bevco sales figures for 2019-20 are still not available, liquor has continued to be a rich revenue stream fetching Rs 14,505 crore by way of tax in 2018-19, which was a 12 per cent growth over the previous year. 

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The LDF strides at leaving behind the UDF policy 

The LDF government in Kerala began walking the talk on its policy on liquor as soon as it came to power four years ago by reopening all the bars shut by the UDF government. 

The Congress-led UDF government in Kerala envisaged total prohibition in Kerala by 2025, and in 2014 closed down 418 bars with 3-star rating and the remaining 312 bars in the 4-star category by 31 March 2015. 

Soon after the LDF came to power in 2016, it began eating away at the UDF’s liquor policy. 

In June 2017, it allowed hotels with three and four star ratings to sell Indian-made foreign liquor (IMFL). Two-star hotels were allowed to run beer/wine parlours, provided they did not violate the Supreme Court order banning sale of alcohol within 500 m of highways.

Always one to pull no punches, V.D. Satheesan, the MLA from Parur in Ernakulam district, is quite outspoken with his view of where things are headed now. 

He was among the few in the Congress who openly questioned the UDF government’s vacillation over its liquor policy mid-stream, which eventually led to what was in hindsight the catastrophic stand-off with cash-rich bar hotel owners.

“Until 1999, before the formation of Bevco and the state taking direct control over sale of liquor, auction of licence for shops to sell alcohol, used to fetch between Rs 50 lakh and Rs 1 crore per year. That was the kind of margins the business had then. Sure, this has been minimised by the emergence of over 300 bars in the past 20 years,” he said. “The state government cannot give away the licence to sell liquor absolutely free because business is dull even after paying Rs 28 lakh per year as bar licence. This is a quid pro quo and the new arrangement will continue for long.”

The new arrangement, allowing retail sale in bars, cannot pose any immediate threat to Bevco, which continues to be the wholesale distributor for these retailers. 

And it is for the bar hotel owners to take a call as to how long they will remain satisfied with the 10 per cent margin. Sooner than later, the sales of liquor will embrace the malls as in other states. 

Ultimately, convenience will decide whether the customer would prefer to buy her bottle of drink from a regular store or a bar hotel.  And that may decide the volume of revenue for Kerala in the coming years.

Meanwhile, on day two on Friday, several glitches came to the fore and the government is desperately seeking remedies to ensure the gravy train does not come to a premature halt.

Also read: Kerala could lose Rs 13,000 cr in remittances as over 4 lakh register to return from abroad


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