Chandy said his government would not retract from any of the steps it had taken. "UDF is ready to face the consequence be it good or bad," he said at a meet-the-press programme in Malappuram.
Taking a dig at LDF's liquor policy, Chandy said it was "not clear".
On granting fresh bar licence, he said it was Centre that gave five-star status to the hotels.
Babu also said licences were granted after getting necessary no objection certificate from the respective civic bodies where the hotels are situated.
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"There is no need for any controversy over the issue," Babu said in a statement. It was the Centre that gave five-star status to the hotels in question, he said.
Licences were not given to these hotels at the same time, he said, adding, the licences were issued to the hotels at different time between 2014 and 2016.
The policy envisaged having total prohibition in ten years by reducing availability of liquor.
Babu's clarification came in the wake of CPI-M led LDF Opposition attacking UDF over the issue ahead of the Assembly polls.
LDF had alleged that UDF's propaganda that it stood for total prohibition was a "lie" as more bars were given licence to serve foreign liquor.
Joining the issue, BJP state President Kummanom Rajasekharan said it was a "false propaganda" by Chandy that fresh licences were given by Centre.
"Sanctioning bar licence to five-star hotels is the policy of Oommen Chandy government," he said, adding, "Blaming Centre is to get political mileage".