It was just a matter of time before the central government allowed states to open up liquor shops in order to stabilize the sinking state economies.
Mumbai| The new order issued by the Ministry of Home Affairs (MHA) extending the lockdown by 2 more weeks came a few days before the second phase of lockdown was supposed to end on 3 May. With the new order, came new relaxations in the lockdown imposed to curb the spread of coronavirus. One such relaxation bewildered many. Alcohol sale is now allowed in green and orange zones classified according to the spread of Covid-19. Liquor shops will now function in these zones. Some states like Maharashtra went a step further and allowed the sale of liquor in all parts of the state except the containment zones for the virus. Why was this step taken amid the necessity to maintain social distancing?
Many states were trying to bring alcohol sales under the essential commodities. Though, they were faced with social pressure and opposition by their rival parties. These states are not particularly bothered about those who cannot go without drinking. While a look at the state economies shows that the Chief Ministers are scared of losing crucial revenue at a time when they need every penny they can get in taxes.
Alcohol is the second-largest revenue generator for the state governments besides petroleum products. The majority of states get 15-20% sales tax on petroleum products while the excise duty on alcohol amounts to 10-15% of tax revenue, making alcohol one of the supporting pillars in state economies. From 2017-18 to 2018-19 many states have increased alcohol taxes to meet revenue demands. In 2017-18, 35% of states gained 5-10% of their revenues through alcohol tax but within one year 31% of states were earning 10-15% of their total revenue through the sale of alcohol. Moreover, 27% of states were earning between 15-20% of their total revenue through excise duty on alcohol sales.
In almost 40 days of lockdown, the state government treasuries suffered the worst blowback. It would not be difficult to understand which states suffered the most if we look at this study done by Statista in 2016.
Tamil Nadu, Haryana, Maharashtra, Karnataka, and Uttar Pradesh were the top 5 states to earn from the revenue generated by the liquor sale.
Looking at the revenues alcohol generates for states every fiscal, and considering the economic squeezing the state treasuries suffered due to lockdown shutting almost all the economic activities, the liquor sale was always on the cards. It was just a matter of time before the central government allowed states to open up liquor shops in order to stabilize the sinking state economies.
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