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Cash-strapped Bengal govt to enter liquor distribution business

india Updated: Jan 14, 2017 17:27 IST
HT Correspondent
West Bengal

A month ago, Uttarakhand's tourism industry faced a strange crisis -- tourists visiting Nainital, Ranikhet, Mussoorie in Uttarakhand could not find their favourite liquor brands in the markets. (HT File Photo)

In a move that won’t win any praise from neighbouring Bihar, the cash-strapped Mamata Banerjee government in Bengal has set up a state-owned agency to enter the alcohol distribution business in both IMFL and country liquor segments.

The state government, which established the West Bengal State Beverages Corporation to shore up its revenues through the alcohol business, has directed district magistrates to identify godowns where bottles can be stored.

The Nitish Kumar-led Bihar administration, in contrast, had banned the manufacture, possession, sale and consumption of alcohol across the state on April 5 last year.

Bengal has around 2,000 bars and a little over 3,000 liquor retailers, besides 104 distributors. “The state-owned company will buy both country-made alcohol and Indian-made foreign liquor from manufacturers and sell it to distributors. They, in turn, will sell the liquor to shops, bars and hotels across the state,” a senior official of the state excise department told HT.

This way, the state hopes to generate about Rs 150 crore in its first year of operations.

Bengal is in a debt trap, and chief minister Mamata Banerjee is desperately looking for ways to shore up its tax revenues. In this backdrop, alcohol has become one of the fattest milch cows for finance minister Amit Mitra to milk.

IMFL distributors have asked the chief minister to stay out of their business, pointing out that it will adversely affect a large number of people dependent on the trade for their livelihood.

In 2014-15, 8.3% of the state’s tax revenues of Rs 45,413 crore – or Rs 3,810 crore – came from alcohol. In 2015-16, it rose to 9.5% – or Rs 4,418 crore – of its total revenue of Rs 46,496 crore. The state excise department intends to mop up to Rs 4,698 crore from the sale of liquor in 2016-17.

Last year, the state government had pulled out all stops to push the sale of liquor in the state. It reduced the number of dry days from 12 a year to just four, and allowed bars to open a window for selling bottles (as is done at liquor shops). Besides this, the government also allowed bars to entertain customers till 2 am on weekends.

The alcohol market in Bengal also got a shot in the arm after Bihar turned dry. Bars and liquor shops in areas bordering Bihar recorded an overnight jump in sales, with residents of the neighbouring state rushing in to quench their thirst.

Industry experts believe the government’s decision will harm wholesalers who supply liquor to shops, bars and hotels across Bengal. “Around 5,000 employees directly associated with the wholesale liquor business will be affected, and the interests of another 12,000 people indirectly involved may also be compromised,” said an industry expert.

West Bengal, however, is not the first state to take such a step. Tamil Nadu, Odisha and Kerala had also introduced similar measures earlier.

The Bengal chief minister faces the task of paying off a staggering Rs 3.34-lakh crore debt. If one adds up the expenditure under the four heads of loan repayment, salaries, pension and subsidies for 2016-17, the sum stands at Rs 94,256 crore – almost double its projected tax revenue of Rs 50,773 crore.

The notification was issued in the first week of January. The corporation is being set up with an initial investment of Rs 20 crore.