Financial Daily from THE HINDU group of publications
Tuesday, Sep 07, 2004
Industry & Economy
Government - States
For States, revenue flows through liquor
New Delhi , Sept. 6
ARTICLE 47 of the Constitution, forming part of the Directive Principles of State Policy, envisages that the Government "shall endeavour to bring about the prohibition of the consumption except for medicinal purposes of intoxicating drinks."
The ground reality though is different, with State Governments probably having a vested interest in doing quite the reverse, given the extent of their dependence on liquor as revenue sources.
During 2003-04, the combined earnings of States from alcohol (State excise) were estimated at Rs 21,574.39 crore, accounting for over 13 per cent of their own tax revenues.
Liquor was, in fact, the second largest contributor to the States' aggregate revenue kitty after sales tax (Rs 98,449.06 crore) and ahead of stamps and registration fees (Rs 15,014.31 crore) and vehicle tax (Rs 9,474.73 crore).
The reliance on alcohol is particularly pronounced in the North. In absolute terms, Uttar Pradesh is the leader, with excise collections of Rs 3,136.05 crore (including Rs 286.05 crore of Uttaranchal). But as a proportion to its total own tax revenues, Uttar Pradesh's dependence on liquor (19.60 per cent, excluding Uttaranchal) is lower than that for Himachal Pradesh (28.92 per cent), Uttaranchal (23.83 per cent), Punjab (23.68 per cent) and Jammu & Kashmir (21.34 per cent).
Among the northern States, only Rajasthan, Haryana and Delhi exhibit lower liquor addiction.
The picture is somewhat better in the South, where, barring Karnataka (18.3 per cent), no State raises more than 15 per cent of its tax revenues from alcohol. But it is in the East and the West that the ratios are in the sub-10 per cent range. A State like Maharashtra annually mobilises about Rs 2,250 crore from liquor, but this forms just 8.64 per cent of its total tax revenue mop-up of Rs 26,052.69 crore.
Then, of course, there is Gujarat the only State that abides by Article 47, at least on paper that collects a paltry Rs 56 crore from excise.
Another way to measure alcohol dependence of States is to look at revenues in relation to population size. Punjab is the undisputed No. 1 here, with its Government extracting roughly Rs 617 from its residents every year as revenue from liquor. The corresponding numbers are Rs 482 for Haryana, Rs 477 for Himachal, Rs 436 for Karnataka, Rs 364 for Tamil Nadu, Rs 232 for Maharashtra and Rs 172 for Uttar Pradesh. It can be said that States (except Gujarat) have gone the whole hog in mobilising resources from the one commodity, on which their powers to tax is not confined just to the point of sale, but also extends to manufacture (excise).
The State List contained in the Seventh Schedule (Article 246) includes, among others, "intoxicating liquors, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquor".
Besides liquor, another remunerative revenue source for State Governments is lotteries, with their earnings from this `non-tax' head budgeted at Rs 8,578.16 crore during 2003-04. And significantly, here too, Punjab (Rs 2,520.33 crore) is only behind Maharashtra (Rs 2,718.14 crore). Sikkim (Rs 1,257.35 crore) and Karnataka (Rs 682 crore) are the other major lottery-dependent States.
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