A relatively slow news week in India has ensured that Kerala’s move towards prohibition has received a tremendous amount of attention in the media. As policy decisions made on the basis of political expediency tend to be, Kerala’s prohibition drive is ill thought-out and half-baked.
While 700-odd bars in the state are to be shut within a fortnight, 16 bars in five-star hotels will continue to operate. So if you fancy your Dom Perignon or Glenfiddich and are willing to pay a hefty mark-up on it, you needn’t worry. For the rest of you, it’s a bit of a crapshoot. Liquor shops in the state (already a shoddily-run state monopoly) will be wound up in a staggered manner such that they will all be shut in 10 years. Sundays will be “dry days”. However, country liquor will remain unfettered, and there’s no official word on “beer and wine” licences.
Ostensibly, this move is to curb the scourge of alcoholism that afflicts the state. In reality, it is Chief Minister Oommen Chandy’s coup de grâce on arch rival VM Sudheeran who had, prior to this, been in the ascendancy in state Congress circles, riding high on his crusade against bars.
Both the Catholic church and the Muslim League, Chandy’s ally in the United Democratic Front (UDF) coalition, have made it clear that they favour prohibition. While Sudheeran was perceived as the anti-liquor idealist and Chandy was starting to acquire the reputation of a pragmatist, he has managed to pull off this dazzling volte-face that took even his colleagues in the UDF by surprise.
What is less than surprising is that very little in the way of rationale has been put forward to back this decision except to state that it’s designed to curb alcoholism and its ill effects. There are no studies cited, no experts consulted, and no data that has been analysed to show how, if at all, this is going to benefit the state.
Looking at prohibition experiments elsewhere, data regarding alcohol consumption in the state, and widely-accepted economic principles, it would appear that this policy is not merely going to fail to achieve its stated objective, but it is likely to cause profound harm to the state in several new ways.
Data on consumption
Let’s start with a reality check. Virtually every story and news report about Kerala’s newly-announced prohibition policy takes care to emphasise that Kerala has “India’s highest per-capita consumption of alcohol.”
Thankfully, The Hindu has taken pains to actually go looking for data on the subject and has come to the conclusion, based on NSSO data, that Kerala is in fact, not the highest consumer of alcohol in the country. It is (erstwhile) Andhra Pradesh, with 665 ml per capita per week, which tops the list (Kerala’s 196 ml per capita per week seems paltry in comparison).
According to The Hindu’s calculations, Arunachal Pradesh, Sikkim, Pondicherry, Goa and Andhra Pradesh exceed Kerala in consumption of beer and spirits, and Andhra Pradesh, Assam, Jharkhand and Bihar exceed Kerala in consumption of country liquor.
What is even more interesting when you glance at the NSSO data is that the consumption of toddy and country liquor in Kerala is roughly double that of beer and spirits, which means that this prohibition is going to impact only about a third of the alcohol consumption in the state at best.
Failed experiments with prohibition
While there’s little doubt that alcoholism is a serious problem in Kerala, the fundamental mistake that the Kerala government is making is to assume that prohibiting alcohol is the cure for alcoholism. A classic example of failed prohibition is the US, where prohibition was introduced in 1920, with some of the same stated objectives.
After amending its Constitution and experimenting with prohibition for more than a decade, the US withdrew this policy amid a broad consensus that not only had it failed, it had given rise to many other evils, including providing impetus to large crime syndicates engaged in bootlegging, like the one headed by Al Capone.
It is widely accepted that when prohibition is imposed, the supply of the prohibited item does not cease, it merely goes underground. One of the concepts that evolved out of the prohibition experiment in the US is called the “Iron Law of Prohibition”, coined by Richard Cowan in 1986, which states that the more intensely prohibition is enforced, the more potent the prohibited substance becomes.
Milton Friedman, dead wrong about many other things, gets this particular issue spot on in this video. When prohibition is in force, and you’re a bootleg operator, it would make sense for you to make a much more potent beverage from which you can extract greater sales and profit.
In this unregulated and unscrutinised industry, there is obviously little to no economic incentive for producers to pay any heed to safety or well-being of consumers.
The US failed to learn from its own experiments with prohibition when it launched its war on drugs, and now there is a growing body of thought among economists and policymakers that drug prohibition is in serious need of a rethink.
The London School of Economic Expert Group on the economics of drug policy recently submitted a detailed report where it concludes that, “The [war on drugs] strategy has failed based on its own terms. Evidence shows that drug prices have been declining while purity has been increasing. This has been despite drastic increases in global enforcement spending. Continuing to spend vast resources on punitive enforcement-led policies, generally at the expense of proven public health policies, can no longer be justified.”
Kerala’s own experiment
One need not look as far as the US to see how prohibition can fail spectacularly. Kerala has conducted its own little experiment with prohibition. The Attappady block in Palakkad district has had “total prohibition” since 1996, and this has meant that vaattu charayam, illicitly brewed country liquor, is widely available. This unregulated and potent beverage has not only led to high levels of alcoholism and addiction, but has been responsible for a serious public-health crisis in the area.
Brewers are said to add insecticides Furadan, Sulphate, used torch batteries, and various reptiles to improve the “kick”, a perfect example of the Iron Law of Prohibition in action.
Alcoholic hepatitis is common, and so is acute anaemia, tuberculosis and gangrene. The incidents of death relating to alcohol, including suicides, have gone up dramatically from pre-prohibition days. Even children in the area consume vaattu charayam.
Prohibition has failed in Nagaland, Manipur and Gujarat — the other states that have tried to impose it. Lax regulation and impetus of illicitly brewed and/or transported liquor have meant that while there is no lack of availability of alcohol in these states, the excise departments lose out on vast amounts of revenue. It is estimated that the Gujarat government loses anywhere between Rs 3,000 to 4,000 crore in revenue on account of prohibition.
Which brings us back to the situation in Kerala. According to the Kerala State Beverages Corporation, it contributed Rs 7,240 crore to the government (including sales tax, excise duty, gallonage fee, and licence fee), in 2012-2013.
According to the latest state Budget, the total revenue of the state in 2012-2013 was Rs 44,137 crore. This would mean that alcohol contributed a substantial 16.4 per cent of the state’s total revenue.
Although this is less substantial than the 22 per cent figure being widely cited in the media, in a state that’s running a heavy budget deficit already (Rs. 825 crore in 2013-14) there’s no word on what the government plans to do to avoid a serious deficit crisis.
In addition to this, there are easily thousands of people who depend on the alcohol sector for their employment. Although accurate figures are unavailable, loss of employment right from production through transportation to service of alcohol is likely to be considerable. While the government has promised rehabilitation to these people, it’s hard to imagine how the state that continues to boast an unemployment rate three times the national average, and which is the highest among the larger states, is up to such a task.
There are also fears about the impact of prohibition on the tourism sector, which is the biggest industry in the state. Kerala receives 15 per cent of international tourists who come to India, and earns revenues of Rs 23,000 crore from tourism. It is inevitable that introduction of prohibition will drive away a good number of tourists.
There are fears of a significant impact on the Meetings, Incentives, Conferences and Exhibitions (MICE) sector, with conventions and exhibitions certain to seek out less puritanical locations. Although the potential impact on tourism is unknown, hoteliers and industry leaders have gone on record expressing their grave concern about the impact this move will have on the industry.
What the government ought to do
Rather than target alcohol, the government should target alcohol abuse and its manifestations. The government must invest heavily in education and awareness. The government must crack down heavily on domestic violence and drunk driving. The government must invest in women’s empowerment and in creating employment opportunities for women (Kerala has significantly higher unemployment among women compared to men).
The Rs 7,240 crore of revenue that the government is willing to forgo in the name of prohibition would go a long way to implement these measures and would do much more to solve the actual problems affecting the state, than a misguided attempt to stop the supply of alcohol.
With so much to fear from the move, and very little in the way of historical examples or data to favour it, the sheer cynicism of this prohibition plan is staggering. One hopes the state doesn’t have to suffer too much before the government realises its folly and corrects its course.