A Spirited Look at India's Liquor Policy

Dear Policy Pals,

India's alcohol industry is booming, and so are the discussions surrounding it. While the nation's overall alcohol consumption remains lower than developed nations, a rise in heavy drinking, particularly among young men, is leading to public health issues like accidents, violence, and liver disease. In India, per capita alcohol consumption increased from 2.4 liters of pure ethanol in 2005 to 5.7 liters in 2016.

However, a major portion of the state government’s revenue comes from the sale of alcohol.

In 2022–23, Uttar Pradesh achieved a record revenue of Rs 41,250 crore from excise duty.

Should states loosen restrictions to boost the economy? How can social problems linked to excessive drinking be addressed? These are just some of the burning questions that continue to be debated in legislative halls and on bustling streets across the nation.

Come learn more about it with me! I'm Jazreen Deboo and every two weeks, I bring you stories of policies with a purpose through three sections of this newsletter - (1) Once Upon a Time (storytelling), (2) Comic Relief (memes and cartoons) and (3) Padho aur Badho (thematic book recommendations).

+Click subscribe to be notified of future editions

Once Upon A Time

Evidence suggests that in the fertile lands of the Indus Valley, alongside the rise of one of the earliest civilizations, folks were enjoying alcoholic beverages. Fast forward a thousand years, and we find the Vedas mentioning "Sura," a potent drink enjoyed by all, from priests to warriors. Ancient ayurvedic texts have acknowledged both the medicinal properties and pitfalls of indulging in "Sura."

Centuries flowed by, and drinking customs in India changed and evolved. Depending on where you were, what faith you followed, and your social standing, alcohol played a different role. Some empires, like the Mauryas, kept a tight leash on the production and sale of liquor. Even the great epics, Ramayana and Mahabharata, offered a balanced view – portraying characters who enjoyed a drink alongside the consequences of overindulgence.

Then came the Mughals. Their Islamic beliefs forbade alcohol consumption, but the thread of drinking continued, albeit a little less visibly.

The British Raj, with its arrival in 1857, brought a new system – the "excise system." This meant high taxes and strict controls on everything from brewing to selling liquor. The idea was to generate revenue for the crown. But this system had unintended consequences. With heavily taxed legal liquor out of reach for many, a dangerous alternative bloomed – the illicit liquor market.

During India's fight for independence, leaders like Mahatma Gandhi, G.K. Gokhale, and B.G. Tilak strongly opposed alcohol due to its harmful consequences. Influenced by Gandhi and the Indian National Congress, the Indian Constitution, adopted in 1950, included a directive principle advocating for prohibition. Following this principle, several Indian states have attempted to ban alcohol. The Indian government established a Prohibition Enquiry Committee in 1954 and again in 1964 to assess the effectiveness of prohibition and develop a nationwide program.

Some states, like Gujarat, went all in with prohibition, while others opted for a model with high taxes and government-controlled shops. The common thread through these policies? A desire to keep the revenue flowing while minimizing the social problems associated with alcohol.

A question that continues to be debated in boardrooms and on bustling streets across the nation - How can India find a balance between the clinking of glasses that brings in revenue, the social ills linked to excessive drinking, and the well-being of its citizens?

Alcohol policy environments vary significantly across the world—67% of high-income countries, 43% of middle-income countries and only 15% of low-income countries have national alcohol policies

In India, liquor policy is a prime example of the complex interplay between the Centre and the states. As per the Constitution, "Intoxicating liquors" fall under the State List. This grants states the primary authority to make laws regarding the production, sale, possession, and consumption of alcohol.

States have the main say in how liquor flows (or doesn't flow) within their borders, with some enforcing complete prohibition (Bihar, Gujarat) and others allowing for consumption with permits (Andhra Pradesh, Telangana).

Though the Centre doesn't have direct control, it can influence liquor policy through certain umbrella laws:

• The Centre can recommend model laws for states to adopt. For instance, the Centre has pushed for uniform age limits for alcohol consumption across states.
• The Centre levies excise duty on alcohol, a significant source of revenue. This gives the Centre some leverage, as states are dependent on this income.

Alcohol revenues account for 1.2% of India's nominal GDP, 7.7% of total tax collection, and 11.7% of indirect tax revenue.

• The 2017 ban on liquor sales near National Highways is a pan-India initiative demonstrating the Centre's role in road safety measures related to alcohol.
• The 1996 Panchayats act empowers Panchayats, village-level governing bodies, to regulate alcohol sales within their jurisdiction. This allows local communities to tailor alcohol availability based on their social context.

Gadchiroli district in Maharashtra presents a unique case study in alcohol policy. Unlike most of India, Gadchiroli has been under complete alcohol prohibition since October 1992. This policy aimed to protect the tribal population, particularly vulnerable to alcohol-related problems. With social activists leading the way, there are still some challenges in the implementation of a dry district model, when alcohol can be sourced from neighboring wet districts.

• The Motor Vehicles Act 1988 act sets the legal blood alcohol concentration (BAC) limit for driving at 30 mg per 100 ml of blood.

Each state wields the power to establish its own rules regarding the production, sale, possession, and consumption of alcohol, resulting in a fascinatingly diverse landscape across the country.

On one end of the spectrum lie states like Bihar, Gujarat, Mizoram, and Nagaland, where complete prohibition reigns. Here, the manufacturing, sale, and consumption of alcohol are strictly illegal. Manipur implements a partial ban, prohibiting alcohol sales in some districts, particularly those bordering Myanmar.

Several states, including Andhra Pradesh and Telangana, have adopted a permit system. This approach aims to regulate consumption and generate revenue for the state. Residents require permits to purchase and consume alcohol, creating a controlled environment.

In stark contrast, states like Goa, Kerala, and Maharashtra allow for the open sale of alcohol with limited restrictions on timings and locations. These states cater to a more relaxed approach, and tourism can sometimes play a role in shaping such policies.

Karnataka charges the highest tax in India, that is 83 percent. Goa charges around a 49 percent tax on liquor. That means a bottle of spirit (non-beer), which costs Rs 100 in Goa, will cost around Rs 513 in Karnataka.

The legal drinking age also varies across states, typically ranging from 18 to 25 years old. Some states might even restrict the sale of certain types of liquor, particularly high-content alcohol. Additionally, shop ownership models differ. While some states allow private shops with licenses, others see government agencies holding a monopoly on liquor retail.

Reportedly, during the COVID-19 lockdown, when the liquor shops were closed across the country, the states were incurring a loss of about Rs 700 crore every day due to the non-sale of liquor.

Stricter regulations can potentially reduce alcohol-related health problems. However, the flip side might see the emergence of illicit liquor markets, posing health risks of a different nature. Open sale states, on the other hand, might attract tourists seeking a more relaxed drinking environment. Ultimately, state policies significantly impact state revenue through excise duty and license fees.

To successfully navigate this tightrope, India needs a policy shift that prioritizes public health while keeping revenue generation in mind.

One crucial step is to leverage the experiences of other countries. Analysing successful strategies like tiered taxation systems (where stronger drinks are taxed more heavily) or stricter advertising regulations used in countries like Finland can provide valuable insights. This data-driven approach can inform the development of effective policies for India.

The core objective, however, should be public health. Measures to promote responsible drinking habits and tackle underage consumption are essential. Educational campaigns and stricter enforcement against illegal production and sales can significantly reduce alcohol-related harms like accidents, violence, and liver disease.

Finding the revenue sweet spot is also important. A calibrated tax system, potentially with higher rates on stronger alcoholic beverages, can discourage excessive consumption while still generating revenue. However, this needs to be balanced with ensuring a legal market doesn't incentivize the growth of a black market.

Collaboration between policymakers, public health experts, and even the alcohol industry is key to creating sustainable solutions. By working together, they can develop a framework that addresses public health concerns without causing undue strain on revenue generation.

Technology can also play a supporting role. Exploring digital ID verification systems to prevent underage purchases and track-and-trace solutions to curb black markets are promising avenues.

Solutions at the community level should be adopted because people within the community understand the local situation, cultural norms, beliefs, and values best. They can use this knowledge to develop solutions that resonate with the community and have a higher chance of success.

Comic Relief

Padho aur Badho

"The Economics of Prohibition" by Mark Thornton dives deep into the economic failures of alcohol prohibition in the US. The book argues that these failures are not unique to alcohol, but rather a pattern repeated whenever governments attempt to control consumption through bans. Thornton exposes the flaws in the logic of prohibitionists and explores the unintended consequences, including increased black market activity, stronger drugs, and higher crime rates. The book also explores alternative solutions and the benefits of a free market approach.

Every statistic on alcohol abuse represents a life potentially impacted.

This isn't just about tax revenue or regulations. It's about families struggling with addiction, communities facing violence, and individuals losing control. Change can feel distant, like a policy shift or a cultural shift. But the power to create a healthier future lies within each of us.

Educate yourself and those around you about responsible consumption. Advocate for policies that prioritize public health. Support organizations helping those struggling with addiction. Every informed voice, every responsible choice, becomes a ripple in the pond, creating a wave of positive change.

My advice to you? Don't take everything you read at face value - stay curious, and dig deeper. And hey, while you're at it, don't forget to take a moment to reflect on what you read. It's all about pausing, pondering, and connecting the content with your own observations and knowledge.

Thanks for reading! See you again with more stories of policies with purpose!

+Click subscribe to be notified of future editions