The Delhi government’s decision to allow the sale of liquor in hotels and restaurants is part of its drive to increase its revenue which was severely depleted due to Covid-19.
By Srishti Ojha
The Delhi government recently decided to allow hotels and restaurants to serve liquor as part of dine-in services and in rooms. Considering the revenue implications, Deputy Chief Minister Manish Sisodia asked the excise department to issue necessary permission for serving liquor in these places.
The order is not final yet and will require approval of the L-G, Anil Baijal. As there have been instances in the past where he has not accepted the Delhi government’s proposals, such as opening hotels and weekly markets in July, it waits to be seen what his answer will be.
As per the Delhi government’s order, bars will remain closed under the provisions of unlock guidelines of the ministry of home affairs. It has made note of the fact that states such as Punjab and Rajasthan have permitted the sale of liquor in restaurants, clubs and hotel rooms. This comes after the National Restaurant Association of India on August 16 wrote to the Delhi government’s excise department seeking permission to serve liquor in restaurants as it would help them deal with the losses suffered due to Covid-19.
While talking to India Legal, advocate Vrushabh K Vig of the Bombay High Court said that considering the current pandemic situation, the decision of the Delhi government is not appropriate. In order to boost the hospitality industry, it would be better to allow only takeaways rather than allowing restaurants/bars to serve alcohol to customers on the premises. If they serve alcohol, the count of COVID patients will drastically increase and may even surpass the current count of patients in Delhi, he said. “Bars must be allowed to sell liquor above 30 percent of MRP and 10 percent of the tax should be given to the government to cope with the mounting pressure of Covid-19.
This will help in boosting our economy and even the government can benefit from it.”
In the past, Kerala had taken a strategic decision to resume sale of liquor on May 28, 2020, levying a tax of 247 percent of the basic cost of liquor, as compared to 212 percent before the lockdown. Liquor sale was allowed through private bars, with a total of 1,168 retail sales points, up from 265 outlets of the Kerala State Beverages Corporation and 36 Consumer Federation sales points before the lockdown. The Kerala chief minister’s office in a statement said that due to the lockdown, all major revenue sources had been affected and there was a huge fall in revenue and thus an attempt was being made to find a new source of income.
The home ministry had in May allowed the sale of liquor and paan in shops in the green and orange zones, but not in containment zones, malls and market complexes in all states. Directions were given to abide by the rules of social distancing, limiting the number of people in the store to five. “Liquor stores and paan shops will be allowed to function in all zones while ensuring a minimum six feet distance (2 gaz ki doori) from each other and ensuring that not more than five persons are present at one time at the shop,” the statement from the home ministry said.
The ministry’s move and subsequent state governments’ decisions to allow liquor sale evoked mixed reactions. Critics had called out the decision owing to the difficulty it would cause for officials to ensure social distancing. Their fear was totally justified as there were instances of large crowds gathering at liquor shops in various states, forcing them to shut down.
In Delhi, videos went viral of people standing in kilometre-long queues to buy liquor, completely defying social distancing rules and even forcing the Delhi police to shut a few shops. Videos of people struggling to hold a large number of bottles as they came out of the shops led to much amusement and shock among viewers.
In Pune too, people flouted the guidelines and social distancing measures and gathered in large numbers before liquor shops even in red zones. While several places saw people thronging the shops even before they opened, there were also instances where they burst crackers before them. Such was the eagerness to get their liquor quota.
The home ministry’s decision proved to be a huge relief for states, especially those where proceeds from alcohol sale form a major part of revenue. It allowed the states to at least start systematising liquor trade again. While some states decided to resume liquor sale immediately, states such as Kerala decided to delay it due to the ongoing pandemic. The Delhi government permitted the sale of alcohol through liquor shops and even asked the excise department to provide it with the list of retail vendors of Indian liquor and country liquor in public sector shops that conformed to the criteria prescribed by the home ministry. Karnataka also decided to resume liquor sale, except in containment zones.
The sale and manufacture of liquor forms a major part of the revenue of several states and its resumption has benefited them as their finances were severely disrupted due to the lockdown. States not only levy excise duty on liquor sale and manufacture but also charge transport fees, special fees on imported foreign liquor, brand registration charges, etc. While Tamil Nadu imposes value added tax, UP imposes a special duty on liquor, levies only excise duty on manufacture and sale of liquor and does not collect VAT separately.
As per a report by CRISIL, the five southern states of Telangana, Andhra Pradesh, Tamil Nadu, Karnataka and Kerala are responsible for around 45 percent of the liquor consumption in India and earn 10-15 percent of their revenue from its sale, which is why they faced a financial crunch during the lockdown. According to an RBI report, state excise duty on alcohol accounts for around 10-15 percent of Own Tax Revenue of a majority of states and is, therefore, a large contributor.
In 2019-2020, the 29 states and the UTs of Delhi and Puducherry had budgeted Rs 1.75 lakh crore from excise on liquor and collected around Rs 15,000 crore per month. Of course, Covid severely impacted this.
The resumption of liquor sale will help these states make good the losses. States have also imposed additional excise duties on liquor sale to get more revenues. Delhi has also imposed 70 percent corona cess on the retail price of liquor. Maharashtra allowed home delivery of liquor but on the price of every bottle, 72 percent will go as excise and cess to the government. Karnataka and Tamil Nadu have also raised excise on alcohol to earn more revenue.
In some states, even doctors’ prescriptions were cited to resume sale of liquor. In March, incidents of suicide and people being hospitalised were reported in Kerala due to withdrawal symptoms as liquor sales were prohibited. The Kerala government even decided to supply liquor as per a doctor’s prescription. However, the Indian Medical Association didn’t agree with this and said that scientific treatment should be given to those who had alcohol withdrawal symptoms and it is not acceptable to offer alcohol to them.
Advocate Abhishek Choudhary told India Legal that sale of liquor was an important factor in the growth of the hospitality sector, especially hotels and bars as it also attracted foreigners and brought in foreign exchange. Presently, the hospitality and travel sector is severely hit due to Covid-19, forcing the government to gradually boost the economy through liquor sales.
Advocate Parth H Zaveri of the Supreme Court told India Legal that the Delhi government’s move allowing restaurants and bars to serve liquor would not only help it to ease the curbs during the lockdown but also economically boost it. “The Delhi government was ready to face a loss of more than Rs 650 crore during the lockdown. Almost 14.1 percent of its income is generated from the sale of alcohol and revenue generation is necessary now. Precautionary measures like social distancing and sanitising play a vital role while taking all such activities into consideration. We have almost forgotten what dining at various venues was all about. This step by the government will allow more generation of revenue and citizens to get back to normalcy.”
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