The State government has no sources of funds that could compensate for the entire quantum of the revenue loss it would incur in the short term in the event of total prohibition, according to a cross-section of economists, politicians and policymakers.
It is not possible to mobilise funds to the tune of ₹30,000 crore-₹35,000 crore overnight through alternative sources, K.R. Shanmugam, Director, Madras School of Economics, and N.R. Bhanumurthy, Professor, National Institute of Public Finance and Policy, point out.
They, however, feel that Tamil Nadu, where the topic of prohibition refuses to die down, is in a position to raise resources that could match the revenue through liquor sale. But this could take four or five years.
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Their observations assume relevance in the context of the topic of prohibition gaining currency following the Madras High Court’s direction to the State government last week to close down 3,850 liquor shops [outside Chennai and COVID-19 containment zones] run by the Tamil Nadu State Marketing Corporation (Tasmac), which has since approached the Supreme Court against the order.
Suggesting a hike in electricity tariff, water cess and user charges, Dr. Shanmugam says that the government should tap sectors like fishery and forestry to mop up the resources required. Another way for the government to raise funds is by increasing the fees considerably for undergraduate courses in government medical colleges, as those of private medical colleges are “very high”.
Pointing out that additional revenue can be generated by hiking the stamp duty or registration charges in the area of real-estate, and entertainment tax and local taxes on petroleum products, Prof. Bhanumurthy says a decision on prohibition is more a political policy measure than a welfare-oriented or economic decision.
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Concurring with this observation, a Minister in the State government recalls how his party, the AIADMK, couldn’t re-emerge as a principal force in Puducherry after enforcing strict prohibition in the late 1970s.
A former Minister, who belongs to the ruling AIADMK, says that post the introduction of the Goods and Services Tax (GST) regime, there is virtually no scope for States to get more revenue from their own sources, other than having to rely on greater devolution of resources from the Centre.
A senior policymaker says that prohibition can be achieved gradually through a multi-year strategy and sustained implementation of the following steps – a strong social campaign on the ill effects of liquor, health support for de-addiction and high taxes.
Another veteran says the government could continue to earn 50% of the revenue it garners from liquor trade by permitting star hotels to serve liquor and distilleries to sell their produce outside the State or export it. The other 50% could be made up by pruning the size of government departments and restructuring welfare schemes.
However, there is a different school of thought among policymakers who are sceptical about the practicability of the enforcement of prohibition, though there is a widespread feeling that the government’s recent move to open the shops was “ill-timed”.
According to them, given that its neighbouring States and Puducherry are all wet, Tamil Nadu cannot remain “really dry”, as such a scenario would be like “a piece of camphor encircled by leaping flames,” as former Chief Minister M. Karunanidhi had once famously stated.
Emphasising that he does not drink, A.X. Alexander, former Director-General of Police, points out, however, that one has to keep in mind that drinking has become a “socially accepted norm”.