Like 'Hindutva', another word is suddenly no longer taboo in Indian politics: Prohibition. Over the last few days, two states have kicked off a ban on liquor – Mizoram implemented its new law on prohibition on May 28, followed on June 1 by Andhra Pradesh (AP), whose new chief minister Jagan Reddy set in motion steps to implement his poll promise of total prohibition within a few years.
With a growing clamour for a liquor ban in many states, and with Baba Ramdev even calling on the new Narendra Modi government to bring in a blanket liquor ban across the whole nation, the question is whether the business of liquor can get over the politics of banning it.
Already, major liquor brands and bottlers in the Indian-made Foreign Liquor category (IMFL) are bracing for the impact in AP, a big state which is estimated to have around a five per cent share of the nation's liquor market (it goes up to seven per cent when it comes to beer). Since the new government took charge in Amaravati and chief minister Reddy entrusted an NGO to chart out the road map for prohibition — in the first stage, illegal liquor vends are being shut and legal ones reduced, with the idea of putting total prohibition in place by 2024 (except in five-star hotels) – share prices of top liquor giants have taken a hit. Shares of both United Breweries and Radico Khaitan tanked last week, while that of United Spirits fell and barely managed to consolidate by the end of the week.
The total hard liquor market in India was estimated at 30 crore cases last year. Once AP puts prohibition in place, this will wipe out almost two crore out of this (some say this could be as high as around four crore cases). Not surprisingly, United Spirits management, in an analysts call last week, reportedly admitted that growth prospects will be affected with many states toying with further restrictions on their products — some through heavier taxation (liquor and cigarettes have some of the highest tax brackets amongst domestically produced consumer goods in the country, though these can vary from state to state) while some are looking at sales restrictions in differing degrees. Even before the bans, the growth rate of India's liquor consumption was seeing a decline, from a high of 12 per cent a few years to single digit growth (eight per cent) last year.
Though liquor bans make little business sense, they have political (read: populist) pull. Many politicians, from Bansilal in Haryana to NTR in Andhra Pradesh, have implemented poll promises of prohibition, only to reverse it as the crippling loss of revenue to the state exchequer became clear soon enough. In Andhra, then-chief minister Chandrababu Naidu had to lift prohibition in 1997 just 16 months after it was put in place, as the state began to reel under a 1,200 crore rupees annual excise loss. Interestingly, Mizoram has also experimented with prohibition before — after bouts of partial prohibition in the eighties, full prohibition was imposed in 1997 and lasted till 2015.
AP and Mizoram join a growing list of states that have implemented prohibition, from the oldest like Gujarat (which has banned liquor since the state’s inception in 1960) to most recently, Bihar. Like in Andhra, in Bihar too a liquor ban was promised during the election campaign, with JDU's Nitish Kumar promptly implementing it after winning the assembly polls in 2015.
Presently, Gujarat, Bihar, Nagaland, Lakshadweep, and now Mizoram, have total prohibitions in place, while the sale of liquor is restricted in many parts of Manipur and Meghalaya. Since coming to power in 2016, Tamil Nadu's present government has progressively shut down liquor vendors and reduced the operational hours of those that remain. The Jammu & Kashmir assembly also toyed with discussing prohibition last year, before President's rule came in.
Despite liquor being a state subject, Baba Ramdev's call for a nationwide ban sent ripples across the country, considering that moving towards total prohibition is a stated objective of the republic and is enshrined in the constitution. In fact, a few days ago, a meme saying prime minister Modi had banned liquor across the nation went viral before being proved fake. Despite the false alarm, the 'high spirits' seem to be fizzling out of India's top IMFL makers.