Tamil Nadu

Comment | Tamil Nadu’s liquor conundrum

A man displaying the liquor he bought from a Tasmac outlet on Ukkadam - Perur bypass in Coimbatore on Saturday. S. Siva Saravanan S_SIVA SARAVANAN

A man displaying the liquor he bought from a Tasmac outlet on Ukkadam - Perur bypass in Coimbatore on Saturday. S. Siva Saravanan S_SIVA SARAVANAN  

The Tamil Nadu government’s decision to reopen Tasmac liquor outlets after obtaining a Supreme Court stay on the Madras High Court’s order to close them, serves as a timely backdrop to recapitulate the State’s tryst with alcohol, which has been a roller-coaster ride.

In the pre-independence era, the Madras Abkari Act, 1886, banned the local manufacturing of alcohol and levied excise. In 1937, C. Rajagopalachari’s Congress government imposed India’s first prohibition in Salem district, complemented by a sales tax to make up for the loss of revenue. Prohibition was extended across the State by 1948 and Tamil Nadu’s socio-economic foundations were firmly laid during the Kamaraj era, while the State remained resolutely dry. In 1971, the DMK government lifted prohibition citing the revenue loss in the absence of a countrywide ban, only to reintroduce it in 1974.


After mass deaths in the late 1970s, the AIADMK government in 1981 removed the ban, established the Tamil Nadu State Marketing Corporation (Tasmac) in 1983 and imposed a State-monopoly over sale of Indian Made Foreign Liquor (IMFL) in 2003.

One of the overarching refrains professed in support of the liquor policy is that revenue receipts are being used for social welfare measures. A brief analysis of the revenue structure of the State is pertinent in understanding its dependence on liquor.

Firstly, owing to being a developed State, Tamil Nadu generates over two-thirds (69%) of its revenue from own sources [2018-19 Actuals] and has a strong framework of welfare expenditure. Secondly, taxes from alcohol constitutes around one-fourth (26%) of State’s own revenue [2018-19 Actuals]. Thirdly, T.N. saw a 5% average dip in its revenue collection during 2011-2017. Fourthly, the GST regime has hardly helped, wherein T.N.’s dependence on central transfers has risen.

Consequently, Tamil Nadu now has limited control over generating 47% of its own revenue. Fifthly, T.N. records a revenue deficit akin to Andhra Pradesh and Kerala. Therefore, the dependence on revenue sources exclusive to the State has increased significantly. Data suggests that the southern States receive close to 15% of their total revenue from excise duty on alcohol.


While hooch deaths are under check, Tasmac shops have become ubiquitous and government data shows a significant spike in the percentage of people consuming alcohol. As of 2017, 47.4% of rural men and 46% of urban men consumed alcohol. There is also evidence of correlation between increased consumption of liquor and domestic violence on women, sexual abuse, crime, suicide, broken families and lessened productivity.

The immediate way forward does not lie between the binary solutions of sanctimonious prohibitionists or the liberal non-prohibitionists, as neither is tenable socially nor economically. Instead, we could traverse a middle way and deploy a multi-pronged approach.

Firstly, instead of having fixed sales targets, one could rather focus on revenue through differential taxation. A reduction in the number of shops could be followed by a substantial hike in the prices of alcohol sold in the Tasmac-elite outlets.

Further, an Aadhaar-linked cap on quantity of alcohol sold per person could be pondered. The State could accentuate efforts to make further inroads into the intra-country exports and international exports of alcoholic beverages along with online sales. The government should commit a substantial fixed percentage of its liquor revenue to sensitise and impart refusal skills to youngsters and to contain hazardous drinking habits.

For a State that has been a pioneer of federal autonomy, the prudent move in the long-term would be to garner support across States and negotiate for more fiscal freedom vis-a-vis the Centre, instead of playing a precarious zero-sum game.

(C.R. Kesavan is a former member of the Prasar Bharati Board

Vignesh Karthik K.R. is a doctoral researcher at the King’s India Institute, King’s College London)

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Printable version | May 26, 2020 8:21:44 AM | https://www.thehindu.com/news/national/tamil-nadu/tamil-nadus-liquor-conundrum/article31610374.ece

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