The recent white paper on the excise policy of Andhra Pradesh, presented by Chief Minister N. Chandrababu Naidu highlights a plethora of issues that have allegedly arisen under the previous Y.S. Jagan Mohan Reddy administration between 2019-24.
The document revealed numerous flaws and inconsistencies leading to significant economic and social repercussions. While terming it the ‘biggest scam’, Mr. Naidu announced that the government would order a thorough probe by the Andhra Pradesh Crime Investigation Department and refer it to the Enforcement Directorate (ED).
The white paper starts by detailing the promises made by Mr. Jagan during his 2019 general election campaign regarding the reduction of liquor outlets and a phased approach to limiting sales to five-star hotels. However, the reality starkly contrasts these promises.
The assumption that increasing liquor prices would reduce consumption and improve the quality of life is another flawed aspect of the policy. Despite frequent price hikes, this assumption was not properly analysed, leading to increased crime rates, black marketing, and bootlegging, Mr. Naidu informed.
The white paper outlines several orders that introduced various tax rates and changes, creating market instability and confusion. For instance, the levy of the Additional Retail Excise Tax in 2019 and subsequent modifications led to an increase in smuggling and illicit liquor distillation. The significant difference in liquor prices between Andhra Pradesh and neighbouring States exacerbated these issues.
The Special Enforcement Bureau, created to control illegal liquor activities, failed to achieve its objectives. Despite the restructuring efforts, the lack of coordination among authorities led to confusion and poor performance.
The policy’s economic impact has been severe, with significant revenue gaps compared to neighbouring States. In Telangana, the gap amounted to ₹42,762.15 crore for 2019-24 and ₹4,186.70 crore for 2014-19. This gap indicates a severe loss of potential revenue. In addition, the revenue foregone was estimated as ₹18,860 crore for 2019-24. The revenue loss is attributed to the policy’s failure to curb illegal liquor production and smuggling, as well as the mismanagement of the liquor market.
The decline in Indian Made Foreign Liquor (IMFL) sales volumes further illustrates the policy’s failure. The IMFL sale volume gap with Telangana for 2019-24 was minus 324.96 lakh cases, contrast to the positive gap of 131.41 lakh cases for 2014-19.
The white paper also exposes a disturbing trend of preferential treatment and alleged corruption. The manual and discretionary procurement procedures have led to the monopolisation of the liquor supply chain by local entities. Major multinational companies and national brands have faced discrimination, with their market shares plummeting from 53.21% in 2018-19 to just 5.25% in 2023-24. In contrast, local suppliers saw a significant increase in their market share, raising questions about the integrity and fairness of the procurement process.
The removal of low-priced liquor brands, which served the low-income sections of the population, is another issue.
Mr. Jagan responded to the allegations by explaining that his policy aimed to protect consumer health by increasing prices and reducing sales volume. He also maintained that the YSRCP government, in the past five years, did not introduce a single distillery, adding that Mr. Naidu, during his 14 years previous tenure, permitted 14 out of around 20 distilleries. He also said that his government did not allow any belt shops (unauthorised shops), which existed till 2019, and ensured that liquor was sold only by the government outlets. Regarding the change in the low-priced brands, he said that all brands were provided by the same distilleries, and they changed the brand names to attract the consumers.
The white paper on excise policy highlights the need for urgent reform and proper inquiry into the alleged scam. To restore public trust and ensure the policy’s success, the State government must commit to transparency and consistency in policy formulation and implementation. They should also conduct thorough economic and social impact analyses before introducing new policies and eliminate manual and discretionary procurement procedures in favour of transparent, automated systems.
