While opposition parties in the State have been crying themselves hoarse about bringing in prohibition if they are elected, it remains to be seen how Tamil Nadu can cope with the Rs. 29,672 crore hole in its economy if prohibition is imposed.
In 2014-15, liquor giant TASMAC raked in about Rs. 26,188 crore in revenue and this is expected to shoot up by 13 per cent in 2015-16. With 25-30 per cent of the State’s tax revenue at stake, is prohibition feasible? There is a precedent — and the last time liquor was banned, it didn’t turn out to be such a disaster.
In 1937, prohibition was introduced in Salem district on a trial basis and later expanded to cover the entire State. To make up for the loss in revenue, the Madras General Sales Tax Act, 1939 was brought in by the then Congress Ministry headed by C Rajagopalachari. This sales tax has grown by leaps and bounds, now contributing about 70 per cent of the State’s tax revenue — Rs. 65202.06 crore of the total Rs. 91835.35 crore in tax revenue, according to budget documents.
“What was introduced to plug the hole in finances, left by banning liquor, has now turned out to be one of the major contributors to the State’s revenue,” observed Dr K Jothi Sivagnanam, HoD, Department of Economics from University of Madras.
If liquor is banned now, the State can come up with new taxes — levies on natural resources — to fill the gap, suggested Sivagnanam. Former IAS officer M G Devasahayam concurred. “Levies on river sand and granite, for instance, and streamlining revenue collection for these resources will lead to an increase in at least 15-20 per cent revenue,” he felt.
“In the granite scam in Madurai, U Sagayam (former Madurai Collector) had indicated that there was a loss of Rs. 15,000 crore to the government. I am told that the loss is in fact, much higher. If this is the case in just one district, what is the case for the entire State,” he wondered.
Total prohibition and any major financial losses associated with them are “myths”, contended Devasahayam. “Liquor will not be banned completely. If TASMAC winds up and a regulated trade with good quality liquor is ensured, about Rs. 10-15,000 crore of the revenue can be retained,” he said.
Dismissing the idea of major financial losses, Devasahayam added, “The major loss is now — people losing out on health and productivity. I have observed on construction sites, what used to be tea breaks have now become liquor breaks for several people,” he said.
“FAW Dixon, then the British Collector of Salem (in 1937 after prohibition was imposed), reported that after the district went dry, people began spending more on tea, food and clothes. So the money that had been spent on liquor still circulated in the economy,” said Sivagnanam. “It is for the political parties to debate the move ideate on how best to fill the gap in the economy,” said Sivagnanam.
Thoughtpourri 