The Hindu : Favouring a few?

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Sunday, Nov 02, 2003

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Favouring a few?

Complaints abound about the way the liquor industry is run in Andhra Pradesh. W. Chandrakanth takes a look.

"THE STATE... has circumscribed the statutory discretion conferred upon it and for no discernible public purpose. This policy of self-fettering of its statutory discretion without a demonstrated constitutional statutory of public purpose legitimisation defence, constitutes arbitrary State action." That was the observation of a Division Bench of the Andhra Pradesh High Court while disposing of the writ petitions challenging the "monopolistic policy" of the Government, which favours a few private distilleries.

The irony is that the Chandrababu Naidu Government pursues a partial prohibition policy that leads to a "robust growth in the consumptive pattern" of liquor in the State, so much so that the turnover of the Andhra Pradesh Beverages Corporation Limited (APBCL) has gone up from Rs.2,250 crores in 1998-99 to Rs.3,200 crores in 2002-2003. The Telugu Desam Party came to power under the leadership of its founder-president, N.T. Rama Rao, in 1995 on the promise of imposing total prohibition.

The liquor lobby has gained strong ground in the State in the last eight years. It was not as though earlier it had no power. But this was confined to making or marring the careers of a few individuals. Politicians who were earlier only beneficiaries of the liquor lobby slowly realised the potential of the business and have themselves made forays into it. At least 70 MLAs of various political parties are in the liquor business, directly or indirectly.

There are at present 7,314 licensed IMFL (Indian-Made Foreign Liquor) shops in the State, but in addition to these the business thrives on `belt shops' — the illegal outlets being operated by individuals in the villages and towns as extensions of the existing licensed ones.

The Vigilance Commission, which probed complaints of corruption in the procurement of liquor by the APBCL, found that "wrongful loss to the corporation and wrongful gain to the suppliers" was engineered by manipulating certain provisions of the existing Government Orders.

This became possible when the Government imposed restrictions on the supply of liquor by outside distilleries without any contract with the local distilleries. As the wholesale trade of liquor in Andhra Pradesh is the monopoly of the APBCL, the corporation procures various types of liquor and beer directly from the local distilleries on a rate contract basis and supplies the same to retailers.

The terms and conditions clearly state that the prices must be competitive when compared to other States. But here a price variation was allowed. One brand of whisky, which sold for Rs. 352.39 in Tamil Nadu, was sold for Rs. 826.22 — a clear 134 per cent increase. Likewise, other products too bagged higher prices. Another method adopted to benefit big distilleries was through an amendment to the rules. In one stroke, the APBCL advised the companies to supply liquor with brand names not available anywhere else.

One brand which was supplied to the APBCL at Rs.1,841 a case till then acquired a new name and a new price tag of Rs.1,980. The difference was only in the nametags but not in the contents. The volume of business did not increase much as far as the numbers were concerned, but the profits rose rapidly. Most of the brands acquired the tag of "classic or deluxe" for the Andhra Pradesh market.

A distillery from Goa, which offered supplies at prices far lower than the existing rates, was denied entry into the market on the ground that it did not have sufficient production capacity in the State. Once again, the Government allowed the existing distilleries to increase the bottling lines on grounds of "modernisation" and introduction of 90 ml bottles. The Opposition has alleged that in the recent past, such payments were to the tune of nearly Rs.2,000 crores denying the State exchequer any benefit.

There is also the flooding of the market with "seconds" (non-duty paid liquor) and "thirds" (illicitly made using rectified spirit). The Vigilance and Enforcement Department has categorically stated while probing the excise affairs in the State, that the process of fixing prices in the manner done had caused wrongful loss to the APBCL and wrongful gain to the suppliers. Its report also added "the escalated prices, it can be said with certainty, might have given added fillip or incentive to the smuggling of non-duty paid liquor causing erosion of revenue".

The report was submitted in 1998. It has not stopped the practice of excess payments.

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