When liquor gets taken down a peg or two due to Covid-induced taxes

The Covid-19 virus has dampened spirits – quite literally. Ever since lockdown, West Bengal and Kerala have both taken a major hit on liquor sales, and by extension on the revenue flows. Tamil Nadu, however, has held on gamely, offering spirited resistance to the marauding virus.

Liquor sales in West Bengal have plunged due to Covid-induced higher taxation, data from the State Excise Department and trade associations reveal. Sources in the excise department indicate an 84 per cent drop in the month of April (when lockdown was still in effect), year-on-year, in volume terms.

In May, when there was partial reopening, the IMFL (India Made Foreign Liquor) segment saw sales drop by over 35 per cent, Y-o-Y. June saw a 30 per cent drop; while July 2020 sales were at least 20 per cent lower.

Down South, Tamil Nadu had a slightly different story to tell, however, with demand not dipping despite an increase in excise duty on liquor. Daily sales at the State-owned Tasmac outlets across the State is ₹100 crore to ₹120 crore. The number doubles during Saturdays since Sundays are closed due to complete lockdown. Sales in the last few days have been similar to the same period last year, according to sources.

Sober reality

Kerala, which tops in per capita consumption of liquor, too, has seen monthly sales of ₹35-40 crore plummet to as low as ₹6-7 crore. However, the sales dip was only in part due to higher taxation. The decision to route sales through BevQ, a dedicated mobile app that was launched to avoid crowding at the retail counters in line, could be another factor contributing to plummeting sales. Not many of its customers, who include daily wage earners and the middle-income group, can afford a smartphone. Before the app was launched, it was a common sight to see up to 1,500 customers showing up forming queues, but those vanished, said a distribution agent.

The fall in sales could be of big worry to the State government as liquor contributes almost 20 to 22 per cent of Kerala’s revenue, notes Jose Sebastian, public finance expert, and former faculty of the Gulati Institute of Finance and Taxation, Thiruvananthapuam. In the past, however, no amount of taxation has deterred tipplers in the State.

Perhaps that is what led Thomas Isaac, State Finance Minister to hike the tax rate on liquor by 35 per cent in pandemic-hit June, taking the overall tax to 247 per cent. The idea being to mop up a precious additional ₹2,000 crore.

But while raising tax, the FM, an economist of some standing, did not clearly bargain for the badly bruised family budgets of the tippler community, mostly daily wage earners.

It had completely changed their ‘order of necessities,’ notes Sebastian. This is a drastic change from the past when the concept of ‘necessity’ does not change so long as they earn ₹750 or ₹800 a day. A raise of ₹25 or ₹30 on a quarter or pint could always be adjusted by reducing other household consumption.

So has an invisible virus managed to do what prohibition attempts could not do? A true picture will only be evident in a month or two as the State government realising the problems with the BevQ app has now taken a decision to allow Kerala State Beverages Corporation (Bevco) to retail 180 ml quarter bottles through bars.

Already the tipplers can be seen thronging the bars.

(With inputs from V Sajeev Kumar, N Madhavan, Abhishek Law)

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