Source: The post is based on the article “Sober liquor policy: Delhi shows why all states need smart alcohol regulation and 100% private retail trade” published in The Times of India on 4th August 2022.
Syllabus: GS 2 – Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
Relevance: About alcohol regulation in India.
News: A new retail liquor trade policy introduced in Delhi in 2021 saw state’s withdrawal from the retail trade. This resulted in e-commerce-like discounts, litigations and allegations of corruption. So, less than a year after the new policy, the Delhi government will switch back to the old state-dominated retail trade.
| Must read: Prohibition of Liquor: Benefits and Challenges – Explained, pointwise |
About India’s unique alcohol market
India’s alcohol market is characterised by two features. First, demand for alcohol seems impermeable to economic downturns. Second, alcohol catalyses moralising in India. These two features lead to alcohol’s unique political economy. These include,
1) It’s highly taxed and along with fuel makes up about 24% of the state’s own tax base. State taxes on alcohol raise around Rs 2.25 lakh crore a year. India’s vast welfare system is funded partly by taxes on alcohol, 2) States make the retail trade vulnerable to nationalisation. For instance, in Tamil Nadu, private retailers have been pushed out two decades ago, 3) There is corruption through licensing and regulatory distortions to favour handpicked manufacturers, 4) Prohibition is the most extreme form of distortion. Gujarat’s hooch tragedy showed that the ban merely drives demand underground.
| Read more: Death by hooch – India needs a more honest discussion on the risks and benefits of prohibition |
What should be done to regulate alcohol?
Reforms in Alcohol regulation are pending long due. Manufacturers and retailers need a stable and transparent policy like any other industry. A stable policy will have a positive spin-off on agriculture, a key raw material supplier.
India also needs a straight regulatory system and 100% private retail for alcohol.
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