Unlicensed liquor boosts revenues, ruins lives

The huge money from excise duty means the state government has failed to regulate alcohol sale through unlicensed outlets

A board in Layadagundi hosts a declaration: "Our village bans the sale of alcohol. The aim is to make it alcohol-free. The declaration is made by the villagers and the Gram Panchayat."

It has been nearly a year since the board was put up outside this village in Bagalkot district. The way Basavaraju, an activist from the village describes it, the board was a white flag, offered up after a three-day long intense protest by local women against the sale of alcohol by unlicensed shops in the village.

"They were almost ready to set fire to these shops," Basavaraju says.

There was a reason why the women were exasperated. Most of them faced the brunt of the alcohol-fueled domestic violence, with their husbands squandering their money on drink. Now, they were seeing the children, as young as 14 to 15 years old, getting hooked onto alcohol, which was easily available in the village — from grocery shops to houses.

And in a village of 500 households dominated by backward communities like Kurubas and Madigas, indebtedness was rapidly rising.

"Some families even lost their land due to their alcohol addiction. The situation was bad," says 29-year-old Hema Murmatti, who took part in the protests.

The women, armed with government rules regarding alcohol sales, called a Gram Sabha meeting and got illegal alcohol shops shut down. Those caught selling alcohol within the Gram Panchayat limits are now fined Rs 5,000 on the spot.

"Now, people have to travel nearly nine km to purchase alcohol. This has led to drastic drop in alcohol consumption," Hema says.

Some or the other version of Layadagundi's struggle against liquor before its 'prohibition' continues to play out in countless villages in Karnataka. But few of them have achieved success.

During the winter session of the Assembly in December last year, Speaker Vishweshwar Hegde Kageri lashed out at the government for hiking excise revenue targets, which he said led to a rise in liquor consumption in many parts of the state.

“Increasing excise targets is affecting lives,” he said and requested Chief Minister Bommai to intervene in the matter.

Earlier, Congress MLA E Tukaram from Sandur had complained about the illegal sale of liquor, saying, "Even degree students have started drinking."

Karnataka receives some of the highest revenues from alcohol among Indian states.

In 2020 - 2021, during the height of the pandemic, the excise department collected Rs 23,332 crore, overshooting its target by Rs 600 crore. By December 2021, the department had collected 19,306 crore, achieving 78% of its target.

Excise duties also account for 21% of the state’s own tax revenue, and 12% of its overall income (including its share in central taxes.)

And economists say that at a time when the GST compensation has been repeatedly delayed and the state’s finances are precarious, the guaranteed, dependable income from excise duty comes as a relief.

This dependence was reflected in the state government’s swift move to reopen alcohol shops after the first lockdown in May 2020, while simultaneously hiking excise duty by 17-25% to shore up its finances.

One fallout of this single-minded focus on revenue has been the rapid proliferation of ‘illegal’ alcohol outlets at the villages or gram panchayats that have opened up over the past decade.

Many of the outlets operate out of dhabas, grocery shops or even people’s houses, and have connections with licensed liquor outlets in the vicinity.

This ubiquitous availability of alcohol, however, comes at a high cost. According to a study by Nimhans, alcohol has been linked to more than 60 different health conditions.

A High Court of Karnataka order in December 2020, based on a public interest litigation, emphasised the government’s statutory obligations to curb the illegal sale of alcohol.

Roopakala M, another Congress MLA, said that despite the government’s assurances, there was no direction to curb the illegal sale of alcohol.

Grassroots activists allege that most of these outlets function with the active collusion of excise inspectors on the ground. They say excise officials, in turn, are pressured by higher ups or the government to meet their monthly and yearly targets.

When asked about this, S L Rajendra Prasad, the Joint Commissioner of Excise, categorically denied the allegations. “Let me be clear. There is no setting of targets by the department at all.”

“They would always deny that they set targets, but if the revenue dropped, we were pulled up in the monthly meetings,” says L H Lingegowda, an ex-excise officer who is now a member of the Karnataka Rashtra Samiti, a political party.

When working as an excise officer, Lingegowda says he was dismayed by the conditions in the villages. “Licensed liquor shop owners faced enormous pressures to increase sales or faced the threat of having their license canceled,” he says.

“A licensed liquor shop owner has a margin of 10%. But he has to move a certain volume or sell over and above the MRP if he is to survive — which is against the law.”

Toxic link

In a bid to bolster their sales, these licensed shops sell the alcohol to unlicensed vendors and shops in villages.

Since the state government collects its excise duty directly from the distilleries through the Karnataka State Beverages Corporation Limited, it has little incentive to crack down on these shops.

Selling alcohol without a license is a non-bailable offense under the Excise Act, with a punishment of up to a year.

And despite the regular raids by the department (20,965 people were arrested in 2020 -21) the conviction rate remains low — between five to 10%.

Abhay Kumar, who is associated with the Madhya Nisheda Andolan, says that in his experience, even when the offenders are booked for violating the law, they are booked under sections where they get bail in the lowest courts.

“The other problem is that police and excise departments are reluctant to act against this issue, because they know the government is keen on revenue from alcohol sales. So they keep passing the buck.”

“Just 20% of people do this [selling alcohol illegally],” says Govindaraj Hegde, General Secretary, Federation of Wine Merchants Association, Karnataka.

The association doesn’t approve of the illegal liquor shops because it becomes hard for them to track or control the sale of spurious liquor. “Who is to say where a shop owner or village local sources their alcohol from. It is a problem,” he says.

Hegde says there hasn’t been much pressure from the excise officials over the past couple of years, especially after tariffs were revised.

Looking for alternatives

“Under the current federal setup, there is no substitute for alcohol revenues in the state,” says Sanjib Pohit, a senior fellow at the National Council for Applied Academic Research, who has studied the alcohol taxation rates and prices across different states in India. “It might be possible where there is high industrialisation or other sources of income but in many cases, liquor is the only source of revenue.”

“Money has to be taken where it is available,” says R S Deshpande, a visiting professor at the Institute for Social & Economic Change. He says the better way to deal with the situation is to deal strictly with illegal outlets and sources of liquor, which he hasn’t seen happen.

“Every year, thousands of trademark alcohol bottles are seized, but there hasn’t been a single instance where these manufacturers are held accountable. Why doesn’t this happen?” he asks.

At the grassroots, social activists and villagers have been trying to get alcohol shops out of their villages, with varying effects.

The licensed alcohol shop was first set up outside Anche Chomamahalli village in Chikkamagaluru’s Kadur taluk in July 2020. The shop is right in the middle of a Scheduled Caste settlement called Bapuji colony.

Manjunath, who hails from the Sudugadu Sidda community, says most of the people in the village are daily wage labourers, with some families only recently getting the title deed to their lands. Several houses only have first-generation learners now.

Most of the 97-odd households in the village have taken to drink. “Everyone, from 25 - 30 year old men and old women are drinking. There have been instances of people pawning off valuables to fuel the habit,” he says.

He says young girls and women are the ones suffering the most. Several of them have made pleas with the government offices to shift the shop, but to no avail.

And there are several ‘offers’ to entice people — selling non-veg to meat with alcohol, or providing ‘discounts’ on festival days and holidays. The youngsters say they feel like having a drink when they pass by these shops.

Panditaradhya Swamiji, the head of the Sanehalli Math, has been supporting the movement to ban alcohol. “Right now health, work and families are affected. Curtailing alcohol will help the state but everyone, including the government, is just running after money,” he says.

De-addiction

Attempts to ban alcohol in the state have not succeeded either. In 1994, a community movement led by Veerendra Heggade resulted in the ban of alcohol in Belthangady taluk from 1996 to 1998. H L Manjunath, the president of the Sri Kshetra Dharmasthala Rural Development Programme, says the move created its own set of problems — including the rise of country liquor and alcohol smuggling.

Now, the Jana Jagruti Vedike run by the SKDRDP works on a community-approach to tackling alcohol addiction. Manjunath, who calls alcohol “the enemy of the working class” says the programme is anchored in the local community, with alcohol addicts treatment being sponsored by others in the village.

The state government also has a Temperance Board that is supposed to tackle these issues but is hobbled by lack of funds and leadership.

A total ban on alcohol might not be feasible in Karnataka. But the government’s indifference to the proliferation of unlicensed alcohol shops in villages means vulnerable communities and future generations end up bearing the heavy social cost.

(With inputs from Akram Mohammed in Bengaluru)

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