Assam govt cashing in on alcohol as economy slows down. Here's why

Guwahati, May 6, 2020:

The Indian govt in the new phase of relaxations, also known as Lockdown 3 has allowed the opening up of alcohol shops in the country. This has led to severe chaos in front of the shops on the first day of the relaxation. People were seen violating social distancing norms and were breaking lines.

What do the data tell us?

According to the All Assam Liquor Shops Association, there has been a sale of liquor worth Rs. 25 crore on a daily basis and the government has earned Rs. 30 crore revenue out of the 80 crore sale of liquor approximately. In Uttar Pradesh, sales amounted to Rs 100 crore on day one post easing.

The sales estimates bring drinking habits to the forefront. Consumption of alcohol is about 5.4 billion liters in 2016 and is estimated to reach about 6.5 billion liters by 2020, according to data given by Statista. Another worrying statistic is that more than half of alcohol consumers in India would fall into hazardous drinking. 14 million people are estimated to be alcohol dependent, as published by The Lancet.

States role in alcohol

States have increased the tax on alcohol at the same time. Delhi has increased the tax up to 70% as a corona fee on MRP. This has not deterred people from buying alcohol. Speaking on anonymity, an Assam resident in Delhi has said that he will "definitely buy alcohol but might limit his intake due to the tax". He also states people are even buying from the black market after the shops are closed.

Excise duty on alcohol is the third-largest source of own tax revenues for many states, with an estimated contribution of 12.5 percent in 2019-20. Coincidentally, it's the states that forwarded the view of keeping Alcohol out of the GST.

How is Assam faring?

The lockdown with all its good intentions effectively since March 24 has affected the economy. As the demand for goods decreased and the supply chain disrupted, the consumption slimmed in the economy. The primary problem is the lack of revenue which is linked to the selling of items.

In such a scenario, the revenue source for the govt lessens. Currently, state govt is heavily dependent on petroleum sales. States in India depend on at least 20-30% of its tax revenue from it. As per reports, 23 percent of Assam’s tax revenue comes from petroleum. As global prices of crude have fallen with Brent crude prices reaching 31$ per barrel, the state govt has not relaxed the retail price, and instead on 21 April, Assam increased the rate at which it taxes petrol and diesel. The price of petrol from Rs 71.61 to Rs 77.46 per litre and of diesel from Rs 65.07 to Rs 70.50 per liter. However, the lockdown has affected petroleum consumption and thus the move might not have benefitted as such.

The other way out

Taking cues from the economic fallout, Assam govt under the Centre's guidance has opened up the economy systematically.

Speaking to InsideNE, Assam's Excise Minter Mr. Parimal Suklabaidya says, "as of now we have not increased tax in alcohol but what's happens next can't be assured. Taking about the economy, he says Assam can't neglect the revenue sources due to the COVID 19 and that's why the govt has systematically opened up "chicken, fish and vegetable markets so far".

Following the sale of alcohol, there are many viral videos evident were people have broken social distance norms in the rest of the country. The Excise Minister has taken stock of the situation and says "those episodes are majorly from other states". He maintains that "if healthcare guidelines are broken, then the govt will resort to measure and even cancel the licensing of shops".

Answering the bigger question of whether earning revenue from alcohol is right or not he replied, "we are not a dry state". "It's a business that provides revenue to the state and cannot be closed for a long time".

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