'Total prohibition of alcohol in Tamil Nadu is financially unviable'

Banning alcohol sale in State would mean a loss of Rs. 20,000 crore a year and over Rs. 1 lakh crore in five years, which would mean giving up on populist schemes

July 23, 2015 08:47 am | Updated November 17, 2021 03:05 am IST - CHENNAI:

Total Prohibition? “Impossible,” say public finance experts.

With revenue from liquor amounting to over 20 per cent of the State’s Own Tax Revenue, the government will not be in a position to implement total prohibition even if DMK returns to power in 2016.

“How can you get away with a loss of Rs. 22,000 crore every year? In five years, the revenue loss to the State will be over Rs 1 lakh crore which can’t be substituted at all,” says an official in the Finance Department.

Assuming that the government introduces prohibition partially, how many shops would be closed and how could the revenue gap be adjusted, asks another bureaucrat. “The government can’t do away with power or food subsidy or the social security pensions,” he says.

“Some of the populist schemes can be done away with, but that will add up to Rs 4,000 or Rs 5,000 crores. The gap to be bridged will be huge,” he points out.

While the bureaucracy is unwilling to talk about the politics behind the announcement, officials familiar with the State’s finances strongly think that financially it is not feasible or sustainable.

7th Pay Commission Meanwhile, the Seventh Central Pay Commission is expected to complete its task and submit its report by this year end, say officials in the State Finance Department.

“While it may take effect from January 2016, the State government may implement it in six month’s time – that is by the time the next government takes charge. Again there will be a huge burden on the State exchequer,” an officer points out. The last time, the government paid arrears in three instalments, he adds.

At the time of the Budget early this year, State Finance Secretary K. Shanmugam had admitted that the State government was passing through a difficult time with revenue flow dropping due to a slowdown in business and investments.

To add to the woes, the government has been complaining often about how the 14 Finance Commission was unfair to Tamil Nadu. “When the Central funds are limited, it will be very difficult to do away with existing revenue,” says an official in the Finance Department.

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