Bihar to ban liquor sale from April next year

In the run-up to the Bihar Assembly election, the JD(U) stalwart had promised women voters that he would ban liquor in the state

In his first major announcement after being sworn in last week, Bihar Chief Minister Nitish Kumar on Thursday announced a ban on sale of alcohol in the state from April 1, 2016.

Kumar instructed officials to bring in a new excise law before the end of the current financial year to restrict the sale of alcohol. However, there is no clarity on whether the ban is only for country liquor or will be extended to all kinds of liquor.

The excise department officials later clarified that there would be no ban on production of liquor and alcoholic beverages. There are two on-going projects in Bihar for production for liquor. Cobra Beer has a plant at Bihta, while United Spirits is setting-up a beer-bottling plant near Patna.

In the run-up to the assembly election in the state, the Janata Dal (United) leader had promised women voters that he would ban liquor sale. “I still remember the day when, at a government function in Patna, some women demanded the government ban the sale of alcohol in the state,” said the chief minister at an official function to mark Prohibition Day in Patna. “I immediately accepted their demand and promised to fulfil it if voted back to power. I know that women have to bear much pain due to this.”  

He said the poorest of the poor had been consuming liquor, badly affecting their families. “Women are suffering more than anyone else because of increasing liquor consumption. Therefore, I will not go back on my words. I have personally told the chief secretary to start working on the new excise policy, which will be implemented by April 1 next year,” Kumar said.

Kumar confirmed the new policy would cost the state exchequer dearly. But, said the government would implement it for the greater good. He said, “It is a big source of income for the state government. The Centre has reduced its share in several important schemes. We also have to bear the cost of the Seventh Pay Commission’s recommendations. Plus, there is the issue of the state government’s own income. But, we will not change our stand and implement our new policy from next financial year.”

 

However, he refused to disclose the details of the proposed policy. With this ban, Bihar joins Gujarat, Kerala, Manipur, Nagaland, and the Union Territory of Lakshwadeep that have declared prohibition.

Overall, the sale of liquor contributes about 12 per cent of revenue for the state. Liquor sale in the state is controlled by the Bihar State Beverages Corporation, an agency under the state excise department, which procures all liquor and distributes it to the retailer. The agency was set-up by the Nitish government in 2006 to regulate the liquor trade. Excise collection in Bihar was Rs 3,400 crore in 2014-15, and this year it is expected to reach Rs 4,000 crore. But due to the ban, the collections are expected to take a big hit in next financial year.

Analysts feel the ban will have little to no impact on domestic Indian-made foreign liquor sales as the state is a small contributor in this market. But, they confirmed it would impact the sale of toddy and country liquor. “We believe the implementation of the ban will be tough with smuggling likely from neighbouring states. In the past, the ban on pan-masala, gutka and public smoking met with little success in the state,” said Nirav Sheth, head of research at Edelweiss Securities.

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FACT SHEET

• Last year, tax revenue from liquor sales in Bihar was Rs 3,300 crore versus total revenue of Rs 25,600 crore earned through taxes (12% of total)
   
• Bihar forms 8% of India’s population; its contribution to IMFL sales is in single digit
   
• Per capita consumption of IMFL in Bihar is likely to be much low than the national average, given lower per capita income
   
• The ban on sale of alcohol in Bihar is in line with the CM’s promise in his manifesto made during the recent elections to attract women voters

WILL BIHAR LOSE REVENUE TO NEIGHBOURING STATES?

• The neighbouring states of UP, Jharkhand and West Bengal could monetise this ban by setting up shops on the border (similar to what the Tamil Nadu Government did post Kerala’s phased alcohol ban)

IS IT POSSIBLE FOR OTHER STATES TO FOLLOW SUIT?

• Though there will be small impact on IMFL sales by the alcohol ban in Bihar (as the state’s population mainly consumes toddy or country liquor), it is sentimentally negative as more states could follow suit to attract the female vote bank

Source: Edelweiss