As the Covid-19 lockdown entered its third phase in India, the clamour from a large section of the population which depended on liquor grew louder and louder. How would they drown their sorrows every evening except by drinking? Ultimately, the government succumbed to this demand and included it as an “essential” item that could be sold during the lockdown not only in “green” zones but “orange” and “red” zones too.

The response to the opening of liquor shops was nothing less than shocking. There were serpentine queues of buyers outside shops and some could be seen carrying numerous bottles as they desperately replenished their stock, not knowing how long this relaxation would last. At many places, there were violent clashes and skirmishes to buy liquor, which was both funny and tragic given the threat of further spread of Covid-19 and the outright flouting of social distancing guidelines.

Social media was quick to react and expressed its anger and anguish at these outrageous scenes and blamed the government for allowing the sale of liquor for increasing revenue rather than caring for human lives. Many people sarcastically said the government was giving more importance to daru (liquor) than to dawa (medicine). Some jokingly called those buying alcohol “Economy Warriors” as they were prepared to sacrifice their lives for “saving” the economy and generating revenue for the government.

In fact, after seeing the massive rush at these liquor shops, many states such as Delhi and UP were quick to seize the opportunity and promptly hiked the excise duty on liquor. This hike served a dual purpose for the government. While it seemed to show that the government was discouraging the sale of this “sinful” substance and thereby achieving a desirable social objective, it would also generate more revenue for cash-starved governments in these hard times. On the face of it, it looked like a “win-win” situation for the government, but there was more to it than met the eye.

There is logic, philosophy and procedure behind the regulation of the liquor business. The government closely monitors, controls and regulates each and every aspect of this business—manufacture, storage, transit and sale of not only liquor but also its raw material, which is primarily molasses in India. One has to have a separate licence for every single activity associated with the liquor trade.

The reason for such strict regulation is not revenue alone. The main objective is to ensure that there is no diversion or leakage of liquor or its ingredients at any stage that may lead to the manufacture and sale of illicit liquor. The logic was that if drinkers really need to consume liquor, they should buy it from a licensed shop. Further, the liquor sold from these shops should be of good or at least acceptable quality and should be available at a reasonable price so that drinkers are not forced to find alternative and illegal sources which could be toxic or even fatal as seen in many cases in the past. In fact, many a time the criminal elements brewing illicit liquor mix it with chemicals and other toxic materials in order to increase the “kick”. In the worst scenario, methanol is mixed in this illicit liquor. The result of such adulteration is devastating and fatal for those who consume it. Even if these victims are somehow saved, there are high chances of widespread morbidity and blindness.

The subject of liquor has often led to the flowing of creative juices. In ancient Hindu literature, it was called som rasa, a tonic of sorts, which was consumed by the gods for pleasure and energy. Famous Hindi poet Harivansh Rai Bachchan (who incidentally was a teetotaller), extolling the virtues of liquor in his famous poem Madhushala, wrote: “Mandir Masjid bair karate, mel karatee Madhushala (While temples and mas­jids create enmity, a liquor shop leads to unity).” Urdu poetry too would lose much of its charm without dwelling upon the joys of liquor—”hangama hai kyun barpa, thodi see jo pee lee hai (why all the fuss, I have just taken a small quantity)” said one poem. Hundreds of Bollywood songs also melodiously de­scribe the effects of alcohol, while mov­ies such as Devdas and Sharabi are centred on the theme of alcoholism. Who can forget the famous quote of Winston Churchill: “I’ve got more out of alcohol than alcohol has taken out of me.”

The consumption of liquor is also a cultural phenomenon that varies from place to place and country to country. While it is considered a sinful activity in India, in most of the western world, it is a way of life and there is no stigma attached to it.

In India, there has been a lot of debate on the subject of prohibition, including in the Constituent Assembly that framed the Constitution. After much deliberation by this august body, it was resolved to include prohibition as a part of the Directive Principles of State Policy. Article-47 of the Cons­titution lays down that the State shall endeavour to “prohibit the consumption of intoxicating drinks and drugs which are injurious to health”. While most states are yet to implement this policy for various reasons, Gujarat has been a notable exception and has implemented prohibition for a long time. Bihar too introduced prohibition a few years back as part of the election promise made by the Nitish Kumar government.

There are strong arguments on both sides of the prohibition policy. Those supporting it highlight the social benefits—more money available to meet the basic needs of the family—and health ones too. While alcohol abuse is a major cause of domestic violence, liquor consumption is also responsible for a large number of deaths in road accidents.

On the other hand, those opposing prohibition stress the sizeable loss of excise revenue and smuggling and bootlegging that inevitably stem from it. There is also an apprehension that in the absence of liquor from authorised shops, habitual consumers may turn to dangerous, illicit liquor or even drugs. Not surprisingly, it is alleged by many that it is the powerful liquor smuggling mafia which is clandestinely the strongest supporter of the prohibition policy in Gujarat. Similarly, there have been reports that due to strict implementation of prohibition laws in Bihar, there has been a rise of the excise mafia and consumption of drugs.

Also, the idea that hiking excise duty will lead to an increase in revenue collections is quite fallacious as the demand for and consumption of liquor are highly elastic. The consumption of country liquor, mostly by the poor, is particularly price sensitive and even the smallest increase (or decrease) in price has a significant impact on its consumption. Foreign liquor demand is also not totally inelastic and its consumption is likely to go down with the increase in prices. The actual excise revenue collected by the government is the multiplication of excise duty rate and consumption. Therefore, it is quite possible that revenue collection may go down as a result of this hike in excise duty. Further, there is always an apprehension that poorer consumers may drift towards illicit liquor or even drugs.

This puts policymakers in a delicate situation. While hiking excise duty would definitely serve the social objective of reducing the consumption of liquor and may partly fulfil the Directive Principles of State Policy, it may or may not lead to an increase in excise revenue. At the same time, there is always a risk of smuggling, proliferation of illicit liquor, drugs and associated dangers. Hopefully, the policymakers will take a balanced and calculated view after taking note of all the pros and cons.

—The writer is a retired IAS officer who worked as Secretary to the Government of India as well as Chief Secretary and Chairman, Board of Revenue in the government of UP. He also served as Excise Commissioner, UP from 1999-2002. The views expressed are personal 

Photo: UNI

The entire world is facing an unprecedented crisis today during these Covid-19 times. Nations, including India, are struggling hard not only to save the lives of their citizens from this deadly disease but also their economies that have been severely impacted by lockdowns imposed for containing the spread of the coronavirus.

Economists and social scientists have argued that unless governments evolve an effective survival strategy for farmers, daily wage labourers, workers and businesses, the death toll from starvation and suicides due to job losses and unemployment may be higher than that from the Covid-19 epidemic itself. We have already witnessed shocking and heart-rending stories of migrant labourers, thrown out of their jobs, walking hundreds of miles back to their homes and many succumbing to hunger and starvation on the way.

The big question facing India as well as other countries is how to strike a balance between imposition of a lockdown for containing this pandemic on the one hand and saving businesses and jobs on the other.

The prime minister in his address to the nation has, while extending the lockdown period up to May 3, 2020, made some relaxations in the guidelines and allowed farming activities and other critical economic business related to manufacture and supply of essential goods, medicines and items critical for combating the epidemic such as Personal Protection Equipment, etc. He also assured that in areas declared free from Covid-19, some additional economic activities might be permitted from April 20 and this has been acted on.

The relaxations for farming activities, particularly harvesting of crops, sale of produce in mandis and procurement of foodgrains under the Public Distribution System would definitely provide a lot of relief to farmers and also some employment to agriculture labourers residing in rural areas. The government has also provided financial support to  farmers through the PM Kisan Samman Nidhi Yojana. Farmers and agricultural labourers constitute more than 60 percent of the population (nearly 160 million households) and are totally dependent on agriculture and allied activities for wages and livelihood. However, the extent of coverage under this Yojana varies from state to state. In some states where the maintenance of land records is not up-to-date, the benefits have not percolated to the entire targeted population.

The labour ministry has also advised states and Union Territories (UTs) to utilise the cess fund available under the Building and Other Construction Workers’ Welfare Cess Act, 1996. As per information available, nearly Rs 52,000 crore is available in this cess fund across various states and UTs. Many states such as UP are providing ex gratia financial support to construction workers and other labourers in the unorganised sector through this fund by Direct Benefit Transfer. Such measures are welcome and will provide much-needed relief and sustenance. Not only do they need to be continued further but scaled up in terms of coverage.

However, these measures might not be enough to save businesses and the economy from slowing down or sliding into recession if the lockdown continues. Industries and services that are not regarded as “essential” or “critical” for combating the Covid-19 epidemic are also quite important for economic growth and provide employment to millions of workers. The immediate economic impact of the lockdown is almost complete loss of revenue for such industries and businesses.

Many sectors such as civil aviation, tourism, hotel industry, fashion, malls, retail businesses, etc., that provide employment and livelihood to millions and are regarded as the engines of growth, have come to a near standstill during the lockdown. However, in order to ensure income support to employees working in these sectors, many governments are insisting that they be paid their wages regularly. Many industrial units have received notices that if they fail to do so, they would face prosecution and penal action.

This has put the industries in a difficult situation as many units are unable to pay wages in the absence of any income from grounded operations. Even if they manage to pay wages for a month or so from their reserves, they would definitely be in no position to sustain it for long if the lockdown gets extended (which is likely too). If the government presses too hard on payment of regular wages when there is no work, then many MSMEs and other units may be forced to close down and file for bankruptcy or insolvency. Such a scenario would be counter-productive and hurt the economy even more. This would neither help businesses nor their employees who might get their wages for a month or so but would lose their jobs permanently if the industry itself closes down.

Even after the lockdown is over and normalcy returns, we have to ensure that industry does not lose trained and skilled employees and is able to restart operations quickly without having to recruit and train fresh candidates. Therefore, we need to evolve a strategy to somehow keep the engines of the economy running, even during the lockdown.

Internationally, the US adopts a policy of lay-offs as soon as the industry finds itself in financial trouble. This helps cut down the wage bill and ensures long-term survival and economic health of the industry. However, the workers that are so laid off are covered by compulsory government insurance and entitled to unemployment dole. They can submit their claims to the insurance company for this. As per reports, as many as 3.3 million US citizens have already filed for this dole due to the lockdown. Many European and other countries also have a social security net or insurance programme to provide minimum support to their workers during such a crisis.

In India too, employees are entitled to receive compensation under the Industrial Disputes Act, 1947, in case they are laid off due to some financial crisis. Further, there is the Employees’ State Insurance Corporation (ESIC) under the ministry of labour with its stated objective of providing socio-economic protection to workers. However, at present, the ESIC is mainly providing medical care and support to employees registered with it through its network of hospitals across the country. It also provides insurance cover and financial support to employees insured by it in times of physical distress.

Some legal experts argue that the present lockdown should also be treated as an employment injury and employees should be entitled to claim compensation under the ESI Act, 1948. It is stated that at present, nearly Rs 84,000 crore is available with the ESIC, which may be well utilised to give financial support to employees covered by it. Such an option, if legally admissible, should definitely be explored in this time of crisis. Even if the present provisions do not allow for such financial assistance, an ordinance can be brought in to suitably amend the ESI Act 1948 and provide for it.

Another option that may be considered by the government is to follow the German model of “Kurzabeit” in which all three stakeholders, namely (i) the industry, (ii) its employees and (iii) the government make some sacrifice in order to manage in these difficult times. This scheme was successfully tried by Germany earlier during the financial crisis of 2008 and it has again reverted to the same tried and tested model now.

In India too, we may have a scheme similar to the German “Kurzabeit” wherein employees agree to accept some wage cuts, say 30 percent, while the industry and the government agree to share the remaining wages equally, i.e. 35 percent each. This scheme should be acceptable to all three stakeholders and can be a relatively less “lose-lose” proposition, if not a “win-win” proposition for everyone. Under this scheme, while employees would get 70 percent of the wages without any work or for doing some minimal work, which should be sufficient for their basic needs and survival, the industry would also gain by retaining and keeping its employees engaged and would not have to go through the long-drawn-out process of recruitment and training new employees when operations are restarted.

The government too would be a gainer in the long term by preserving and sustaining businesses and providing employment to millions of workers who would be rendered jobless otherwise.

In the absence of any income, not only will millions of unemployed workers face penury and starvation, the economy too would go into a tailspin of recession due to a slack in demand. Thus, payment of wages to the workers, even at reduced levels, will keep expenditure levels at sustainable levels and keep the economy going.

As regards funding such a scheme, the government may consider using unclaimed funds lying with the Employees’ Provident Fund Organisation (EPFO). As per an affidavit filed by the central government before the Nagpur bench of the Bombay High Court in a PIL in 2017, more than Rs 40,000 crore was lying unclaimed in inoperative accounts with the EPFO. This amount would definitely be much higher now. There cannot be a more suitable time and a better cause than the present one to use these funds for saving industry and the economy. In case any legislative amendments or executive orders are needed for utilising these funds for industry’s survival, the government may consider bringing in the necessary amendments to the Act through an ordinance or passing the necessary executive orders. In case any additional funds are required, a part of the funds collected under “PM Cares” may also be utilised for this purpose.

If the government considers these suggestions favourably, it may well be possible to save businesses without throwing millions of workers out of their jobs.

—The writer is a retired IAS officer who worked as Secretary to the Government of India as well as Chief Secretary and Chairman, Board of Revenue in the government of UP. The views expressed are personal

Lead picture: andritz.com