1|Page

DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY,

VISAKHPATANAM, AP

ECONOMICS PROJECT WORK

FACULTY : Abhishek Sinha sir

PROJECT TITLE : ECONOMIC AND LEGAL ANALYSIS OF LIQUOR BAN

DONE BY :
SUNKARA VISHNU AMEYA
2018 LLB 090
SECTION : B
2|Page

ACKNOWLEDGEMENT
I would like to profusely thank my Economics faculty, Mr. Abishek Sinha sir for allwing me
to work on the topic “Econmic and Legal Analysis of Liquor Ban”. Through this project, I
have come to know about how Liquor ban has impacted our economy and the legal rationale
and consequences of it.
3|Page

ABSTRACT & SYNOPSIS

ABSTRACT

According to a liqour ban it is absloutely illegal to buy, sell and even possess liquor. Alcohol
prohibition in India is in force in the states of Bihar, Gujarat and Nagaland as well as in the
Union Territory of Lakshadweep. In Manipur they have partial liquor ban since 2002. All
other Indian states and union territories permit the sale of alcohol.

But this has two aspects which are both sides of the same coin

1. The Economic aspect

As liqour is a great source of income to states if liqour is banned, the states shall suffer
economic loss. Apart from that, liqour ban is also expensive to implement as it takes
additional force to curb liqour. Hence liqour ban is something in which the state faces losses
monetarily. The liqour ban also changes from state to state, as excise and police come under
the state list. As these are under the state list, they vary from state to state aspects like
punishment, penalty and the quantity of liqour vary. Due to these variances the economics of
the states imposing liqour ban too vary.

2. The Legal aspect

According to the Directive principles of state policy, there must be some restrictions on the
consumption of liquor. This aspect is illustrated in Article 47 of the Constitution of India
which reads as, “the State shall endeavor to bring about prohibition of the consumption
except for medicinal purposes of intoxicating drinks and of drugs which are injurious to
health”1. As per Article 37 which too is a DPSP the state must try to ensure that the laws fit
under the DPSPs, but DPSPs shall not be enforceable. Article 38 pertains to the fact that the
state must strive to promote welfare in lines of social, economic and justice 2. The states
which banned liqour or where there is a ban on liqour contend that by banning liqour, they
are promoting health and acting under the scope of Article 38 and are promoting welfare on
the lines enumerated in that article. A DPSP is something which shall remain sacrosanct, in
order to revoke it or amend it, there should be a constitutional amendment.
1
https://www.clearias.com/directive-principles-of-our-state-policy/
2
https://www.mea.gov.in/Images/pdf1/Part4.pdf
4|Page

SYNOPSIS

TITLE : ECONOMIC AND LEGAL ANALYSIS OF LIQOUR BAN

AIM/OBJECTIVE OF THE STUDY :

The primary concern of this study is the impact on economy by liqour ban in some states.

SIGNIFICANCE OF THE STUDY :

The significance of the study is that it analyzes the topic, i.e liquor ban not only from an
economic perspective but also from a legal perspective. This contributes in better
understanding of the subject because through this one can get to know the ground reality of
the ban, the number of people being benefitted out of it and the impact on revenue of the
government.

SCOPE OF THE STUDY :

As the topic is about the economic and legal analysis of liqour ban, the scope of the study is
restricted only to the economic and legal aspects and how the country is being affected due to
it. It is confined only to the geographical limits of India, which includes the states in which
liqour is banned and the time frame being from independence to before the implementation of
GST.

LITERATURE REVIEW

EFFECTS OF TOTAL LIQUOR BAN ON GUJARAT’S ECONOMY by Prof.

TanuSachdeva, DurgaMahavidyalaya, Raipur C.G and Prof. Jasneet Soni,Mahaveer College
of Commerce Jaipur.

This paper pertains to how, Gujarat being the only state in India to award death penalty to
those found making spurious liquor. This paper delas about the liqour ban in Gujarat
objectively from grassroots level and how is it effecting the economy of Gujarat on a whole
and in aspects like tourism, employment and investment.

This was accessed at :

https://www.academia.edu/9912636/EFFECTS_OF_TOTAL_LIQUOR_BAN_ON_GUJAR
AT_S_ECONOMY
5|Page

PROHIBITION OF ALCOHOL IN BIHAR : A Study of Socioeconomic Impact Dr.

Sudhakar Prasad Singh, Patna Training College, Patna University Patna, India, EUROPEAN
ACADEMIC RESEARCH Vol. IV, Issue 4/ July 2016.

This paper pertains to the liqour ban in Bihar, its efficacy and its impact socially and
economically in Bihar. In Bihar as alcohol is completely banned. This is a radical step to be
taken in the 21st century. But Bihar has done it. It is also about how laborious it was and how
the government had to put in extra resources in this regard. Apart from this, the Bihar
government lost 6,000cr it would have otherwise gained if liqour were not banned.
6|Page

TABLE OF CONTENTS

1. INTRODUCTION

2. ABSTRACT AND SYNOPSIS

3. HISTORICAL BACKGROUND

4. THE PRIMARY REASONS BEHIND IMPOSITION OF BAN ON LIQUOR

5. THE EFFICACY OF THE BAN

6. THE REPURCUSSIONS OF THE BAN

7. CONCEPTUAL FRAMEWORK

8. THE STATES IN INDIA THAT PROHIBOTED LIQUOR

9. LIQOUR BAN AND CRIMES IN THE SOCIETY

10. REVENUE TO STATES THROUGH LIQUOR

11. LIQIOR BAN - CHALLENGES

12. EFFECTS OF LIQUOR BAN

13. LIQUOR BAN - IMPACT ON INDIAN ECONOMY

14. SUGGESTIONS / RECOMMENDATIONS and CONCLUSION.

15. CONCLUSION

16. BIBLIOGRAPHY
7|Page

INTRODUCTION

Liqour ban is such type of a blanket ban wherein the mere presence 0f liqour in that area
where the ban is imposed is absolutely prohibited and is illegal and unlawful. This is usually
done by the states with the reasoning that liqour is an intoxiacting substance and deprives the
person of rationality.When a perosn is under the influence of alcohol he becomes of unsound
mind and cannot control his actions. The state also argues that such a ban will drastically
reduce the amout of crime prevalent in the society. It will also ensure that people residing in
the state are kept free from the menace of cancer, heart attack, liver cancer, kidney failure etc
and lead a healthy life. This aspect is sound in economical terms as economics is not just
confined to health and an array of substances like health, standard of living etc come under its
purview. At present liqour ban is in force in the states of Bihar, Gujarat, Nagaland and the
Union Territory of Lakshwadeep. But other states like Andhra Pradesh too had liqour ban at
some point in the past.

The Constitution of India too espouses some impediments towards the availability of liqour.
This is enshrined in the DPSPs or the directive principles of state policy. Though the DPSPs
are not legally binding and one cannot approach a court merely because a government is not
following the DPSPs and the policies and the laws made by the government are contrary to
and not compliant with the DPSPs enshrined in the Constitution. At their best, the DPSPs
serve as the ideal state of affairs and imbibe the spirit and ideas the founding fathers of the
Constitution had after extensive debating in the Contwhile drafting the constitution. They are
a picture of how the ideal state of affairs must be. As this is something based on idealist
principles and a bit of socialist principles it is not binding in nature. Article 47 of the
Constitution places some restrictions on the consumption of liquor. Article 47 reads as, “The
state shall endaevour to bring a ban on intoxicating substances like liqour and narcotic
substances”3.

The Judiciary too cannot entertain cases in which implementation of a DPSP is called upon
for. The Judiciary can repeal a policy of it is a polar opposite of a DPSP. In order to reverse a
DPSP, a constitutional amendment must be done. In the past some states have banned liqour

3
https://www.clearias.com/directive-principles-of-our-state-policy/
8|Page

but by also reinforcing their claim that it is contrary to a DPSP. But they have later lifted the
ban as they were facing losses in revenue.

HISTORICAL BACKGROUND

In India, alcohol had been viewed as something to be intoxicant and something which was an
attribute of a particular people. But in the present daya and age this has changed. In many
parts of the country local liqour is consumed during certain occasions like festivals or any
other family occasions. But many great philiosophers and social reformers have viewed
alcohol to be an intoxicant and something which is a bane or a liability to the society. These
reformers include Swami Vivekananda, Sri RamaKrishna Paramahamsa, Sri Dayananda
Saraswati and Sri Kandukuri Veerasalingam of Andhra Pradesh. According to some of the
social norms of the society too liqour is not considered to be a good sign. The Constitution of
India too advocates a ban on liqour. Even during the independence struggle, Mahatma
Gandhi advocated the Temparance Movement which advocated the ban of liquor.

THE TEMPARANCE MOVEMENT IN INDIA

The Temparance movement in India started primarily as a resistance towards alcohol as the
British were using it as a tool to intoxicate our freedom fighters who were going against the
British Government. Gandhiji viewed it as a poison and condemned it heavily, he even
condemned the consumption of it and even censured those found consuming it. Gandhi
created a great impact on the minds of the Indians in this issue.

As India was under the British rule then, Temparance movements were going on Britain too
and as India was under the British rule the Temparance movements there had impacted India
and had even spread to India. In 1907, Sir Balchandra Krishna had told that temperance
movement’s sole focus is to ensure there is no flow of alcohol and this common goal would
act as an instrument in uniting all people irrespective of their religion, caste, race etc.

Christian Temprance movements were established in India and even Women Christain
Temprosne Movemwts were established in India. These movemens actively used Christianity
as an instrument to propogate temparance in the country throughout the Indian sub continent.
The womens’ temprance movement in India was an active instrument in consolidating the
support of women in the fight against liqour. These Temprance organisations like AMADA
9|Page

and WCTU still work on educating people about the ill-effects of liqour and espouse the
cause of liqour ban.

India was engulfed with the ethos of liqour ban and temparance till independence, i.e, till
1947 and even after attaining independence many states still had imposed a ban on liqour
while some states had revoked it as they viewed it as a source of income.

After Independence too, many women after being frustrated by their husbands who would
binge drink booze and would inflict physical pain on them by beating them. This also caused
mental trauma to them apart from physical trauma. To put an end to all this violence, women
from the districts of Nellore and Kurnool fought back, they would hamper the selling of
liqour and if any of the men would drink liqour they would tie a garland of chappal or
slippers around his neck in the centre of the village and shave his head. The government was
shaken by this. Their request was simple, “either ban liqour or bury us”4.

In the year 2016 too, many women in Tamil Nadu blamed liquor to be the cause behind their
husbands beating them and absuing them. They appealed to the Chief Minister to take action
on this issue. When Jayalalitha came to power she shut down 500 liqour shops in the state.
Bihar too, was daunted with the same challenge, the women in Bihar were facing violence
due to the spread of alcohol in Bihar. The Chief Minister, Nitish Kumar promised that he
would take action on this issue. Since signing prohibition legislation, “Murders and gang
robberies are down almost 20 percent from a year earlier, and riots by 13 percent. Fatal traffic
accidents fell by 10 percent”5.

4. THE PRIMARY REASONS BEHIND THE IMPOSITION OF LIQOUR BAN

1. Health factors

The usual reason behind the imposition of liquor ban is to protect and preserve the health of
the public living in the state. Alcohol consumption has adverse health effects as it can cause
heart attacks, liver failure, damage of blood, kidney failure, vomitings and even death if
consumed excessively6 . Alcoholics are also reported to have lack of attention. Apart from
that, alcohol is highly addictive and alcohol users must consume alcohol whenever the urge
to consume kicks in. If this is not done, it has cascading affects on the user which include
nerve urges and sudden increase in Blood Pressure and Brain damage.

4
https://www.jstor.org/stable/4399090?seq=1#metadata_info_tab_contents
5
https://timesofindia.indiatimes.com/city/patna/crime-graph-fell-after-liquor-ban/articleshow/63085187.cms
6
https://blog.ipleaders.in/ban-alcohol-consumption-really-help/
10 | P a g e

2. Crime Rates

As Alcohol intoxicates a person and deprives him from sanity and rational thinking the
mental fortitude and the cognitive ability of the person consuming it is affected harshly. This
include drunken-driving, affary or fighting in public which is an offence as per the IPC,
domestic violence, spousal violence and violence in general including killing. This is done
during times like New Year’s Eve where there are many instances of accidents caused by
drunken driving.

3. Moral/Religious reasons

As Liquor is something which is usually considered to be immoral and profane in the eyes of
the Society due to its ill-effects a ban might be imposed. One such example is the case of
Saudi Arabia where all kinds of liquor is banned absolutely7.

7
https://blog.ipleaders.in/ban-alcohol-consumption-really-help/
11 | P a g e

5. THE EFFICACY OF LIQOUR BAN

Though the ban exists on paper, if it is not implemented properly it reaps no benefits. The
man lacuna is that many a time what is liquor is not properly defined and the local liquor due
to lack of awareness is usually exempted. An example to this is the case of Mizoram. In
Aizwal, the capital of Mizoram, near the foothills a local brew of liqour called Zeu is sold.
Hundreds of locals gather and consume it. Though on paper, Liquor is banned under
Mizoram Liquor Total Prohibition Act of 19968.

6. Repurcussions of Liquor Ban

The Liqour ban is really expensive for the Government. Firstly, the Government is at a loss
here as the Government is not earning revenue in form of taxes which are imposed on liquor.
Secondly, inorder to enforce the ban there needs to be a proper machinery by way of Law-
Enforcement officials. If there is any laxity or corruption among them the Government would
be the biggest looser as it is neither earning revenue through liquor and even the money spent
on curbing liquor too is waste. In Bihar, when ban on Liqour was introduced the Police
Stations had kept the seized Liquor as evidence but about 900,000 litres of Liquor had
disappeared which, the Police claim that the rats had consumed it9 .

The Liqour ban also has a lot of effects on those employed in the liquor industry as they loose
their livelihood and must have some means to fend themselves. For instance, when liquor was
banned in Andhra Pradesh in the year 1995 about 45,000 workers who were associated with
the Liquor industry directly or indirectly lost their livelihood. The Government is then faced
with a complexity of accomodating them. If they do not find employment in any other sector
then they might indulge in crime for their livelihood which again is both socially and
economically expensive for the state. Providing them cash incentives to them too is expensive
for the state as the entire idea of liqour ban is expensive on the state and this would aggravate
the expenses. Apart from that, this would also increase the laxity among the workers and they
would prefer cash incentives to working hard and earning. One such illustration is seen in the
case of Manipur where Liquor was banned but this posed a threat to the Wine-yard workers

8
https://blog.ipleaders.in/ban-alcohol-consumption-really-help/
9
https://www.bbc.com/news/world-asia-india-39814446
12 | P a g e

who for generations have been doing it. As a consequnce they agitated against it and the
Government allowed them to sell it to Army Contonments 10.

7. CONCEPTUAL FRAMEWORK

PRODUCER

A producer is the one in simple words, the one who creates and supplies goods and services.
What a producer does may encompass a number of factors like cost of production, this cost of
production includes all that it takes for producing it like raw material, labour costs, machine
cost, electricity charges, transportation costs, if any skill is to be imparted to the labpurers etc.

CONSUMER

A consumer is the one who uses that economic good or service produced by the producer.

MARKET

A market is a place where exchange takes place. This process of exchange takes place
through many means, it can be a barter system, it can be a system wherein goods and services
are exchanged by cash or by other goods and services. A market encompasses an entire
spectrum of things like systems, infrastructure and institutions.

EXPORT

Export in simple words is something wherein goods or perhaps services are sent to another
country for sale or in some cases, for further exports. The sale and export of such goods
contributes to that nations’ GDP.

IMPORT

Import is the polar opposite of export. Exporting pertains to sending the goods out of the one
country to another country whereas importing pertains to the influx of goods to one country.
Unlike exporting there are some restrictions in the case of importing as importing is
detrimental in many cases to the country’s indigenous industries. To avoid this, the
government imposes some tariffs on imports so that the government also gains some revenue.
But some imports like Petroleum and crude oil are indispensable for India. These imports are
bought by the people dwelling in the country or the residents. The imports are not just

10
https://blog.ipleaders.in/ban-alcohol-consumption-really-help/
13 | P a g e

confined to tangible goods and even include intangible goods. They can be transported by a
wide host of products like shipping, through airplane or even through the internet.

Hence, in simple words imports are those goods and services which are sold by a foreign
country to one country.

INFLATION

Inflation is a kind of disruption to the economy wherein the prices of goods and services are
soaringly high and as a consequence the value of currency in the country plunges. Central
banks avoid inflation as it is a hidrance to the economy.

DEFLATION

Delfation is a decrease in the general price level of goods and services. It occurs when the
inflation is lesser than zero. In other words, it is negative inflation and is the extreme form os
disinflation.

DISINFLATION

It is the decrease in the rate of inflation. It is also harmful to the economy. But the
generalprice level of goods and services in the nation’s GDP is still positive.
14 | P a g e

8. THE STATES IN INDIA WHERE ALCOHOL IS PROHIBITED

8.1 GUJARAT

Gujarat had had an alcohol ban since it was part of Bombay. The Bombay Presidency had
liqour ban since 1949-1958. This was banned under the Bombay Prohibition of Liquor Act,
1949. Again it was in order since 1958. But when Gujarat got bifurcated from Bombay
Presidency in the year 1960 wherein the huge Bombay Presidency got split into two large
states, viz. Gujarat and Maharashtra. In Gujarat since then there is a blanket ban on alcohol
till now. But in Maharashtra alcohol is legal though it must be sold by the person who has the
licence to sell it. If sold without a licence it is an offence. In gujarat though, alcohol is
completely banned. In the year 2009, the state of Gujarat had enacted a law in which there is
death sentence for a person who prepares home-made alcohol and if this alcohol results in
fatalities. This was done to curb the numerous deaths due to home-made liqour. The act under
which this is done so is called The Bombay Prohibition (Gujarat Amendment) Bill, 2009.

About THE BOMBAY PROHIBITION (GUJARAT AMENDMENT) ACT, 2009

This Act is probably the most serious act in India in the context of liqour prohibition. Under
this act, those found guilty of making home-made spurious liqour which results in fatalities
shall be punishable by death. The reason behind the passing of this act is because of a tragedy
which occurred due to the consumption of Latha or a kind of country liqour or spurious liquor
which contained methanol as a result of this, about 148 people lost their lives in the tragedy
called as the hoonch tragedy which took place in Ahmedabad. The gujarat government setup
the Latha Commission to look into the matter and make recommendations. Based on its
recommendations, the Gujarat Government passed this Act. This act not only calls for
stringent punishment for those involved in the latha business but also bans latha and it is also
a punishable offence to have a distillery or brewery which brews latha. Apart from that, to
ensure no methanol is smuggled while on transit, the Committee even recommended the use
of electric locks. This act is so stringent that even vehicles found guilty of plying liqour shall
be seized.

8.2 BIHAR

The Chief Minister of Bihar, Nitish Kumar on 26 th November 2015 announced that liqour
shall be banned in Bihar from 1st April 2016. Kumar said on 5th April 2016, “that All type of
liquor will be banned in the state from today. Sale [and consumption] of any type of alcohol
15 | P a g e

in hotels, bars, clubs and any other place will be illegal from today onwards.” Violating the
law carries a penalty of 5 years to 10 years imprisonment.

But on 30th September 2016, the Bihar High Court had quashed the law and termed it as
impractical, illegal and unconstitutional. Even though the Bihar High Court had quashed the
ban, the Bihar government went ahead with the policy and imposed by the ban on 2 nd October
2016, only to stay recalcitrant to the order of the High Court.

Under the new law, those who are found guilty of selling and transporting liqour would be
imprisoned for a minimum period of 1 year to a maximum period of lifetime imprisonment.
The fines levied on the perpetrators would be from 1 lakh rupees to 10 lakh rupees.

On 7th October 2016, the Supreme Court of India, in a bench headed by the then Chief Justice
of India, Justice TS Thakur gave a hearing to the Bihar government. It gave a stay order to
the Bihar High Court’s decision and said that “fundamental rights and liquor ban do not go
together”. The SC also stated that it would hear the matter after 10 weeks.

On 25th October 2016, the Bihar government allowed liquor in cantonment areas. On 21 st
January 2017, more than 30 lakh people formed a human chain in support and solidarity of
the liquor ban imposed by the government.

According to the law, producing liquor is a non-bailable offence and the police can raid any
place on suspicion. It also provided that any case pertaining in the acts done by the authorities
in futherance of the ban must be done by special courts under that act.

The act also empowered the government to confisticate the premises in which liquor is
produced or even consumed. This was challenged in the patna high court, but the supreme
court again stayed the proceedings and held that any petition challenging that act must be
placed before the supreme court. But the Bihar government on 23 rd July brought an
amendment in which those caught drinking for the first time shall be punished only by 50,000
and need not face imprisonment11.

In the state of Bihar, people who consume liquor admit that they even go to the neighbouring
state of Harayana and some even go to Nepal just to consume liquor. But the government is
dealing with all of this with an iron fist, in Bihar there is strict surveillance on those who
come from Nepal and even in airports. There are checkpoints exclusively to check if there is

11
https://www.businesstoday.in/current/economy-politics/bihar-liquor-ban-nitish-kumar-government-amends-
prohibition-bill-fine-for-first-time-offenders/story/280577.html
16 | P a g e

any posession of liquor. The Chief Minister of Bihar, Nitish Kumar admits that he expects a
defecit of about 5,000 crores in the state’s revenue 12 The Chief Minister of Bihar’s reasoning
is that, this change though slow and time consuming will succeed eventually as people will
spend their money on better things and gradually government will gain its lost revenue13.

BIHAR PROHIBITION ACT

The Bihar Prohibition Act calls for a total and absolute ban on liquor throughout the state.
Those found guilty of producing and plying alcohol would be fined and even face
imprisonment which could also extend to life. The Act even prohibits manufacturing,
bottling, distribution, transportation, accumulation, possession, purchase, sale or consumption
of any type of liquor, intoxicating substance including bhang14.

But even after the enactment of this act, there is rapid smuggling of Liquor in Bihar. Every
now and then it is heard through the news that large amounts of liquor is being smuggled into
Bihar. It is said that more than 16 lakh litres of Liquor was smuggled into Bihar . Even
though Liqour is banned in Bihar many people go to the neighbouring states of Jharkhand
and Harayana to consume liquor15.

8.3 LAKSHWADEEP

Lakshadeep islands is the only union territory where alcohol is banned. The ban is extended
to the sale and consumption of alcohol. This is prohibition done by the The prohibition of
alcohol in Lakshadweep is governed by The Lakshadweep Prohibition Regulation, Act, 1979.
It bans the import, export, transportation, possession and manufacture of liquor or any
intoxicating drugs in the Union Territory of Lakshadweep16.

8.4 NAGALAND
12
https://iogt.org/blog/2017/04/18/bihar-faring-better-worse-alcohol-ban/
13
https://iogt.org/blog/2017/04/18/bihar-faring-better-worse-alcohol-ban/
14
http://excise.bih.nic.in/Acts/Bihar-Prohibition-and-Excise-Act-2016.pdf
15
https://www.hindustantimes.com/patna/in-dry-bihar-liquor-flows-in-many-shapes-and-forms/story-
2x3M7v0911sieMuqY11BRI.html
16
http://164.100.47.190/loksabhaquestions/annex/10/AS184.pdf
17 | P a g e

Alcohol is banned in Nagaland by the NLTP Act or the Nagaland Liquor Total Prohibition
Act, 1989. As per this act, liquor is banned absolutely in Nagaland. But the enforcement of
this act is not that satisfactory, as the authroities turn a blind eye to the ban that is imposed.
Liquor is readily available in posh restaurants, grocery shops and even hotels. It is also
available in homes of officers and VIPs. It is even available in paan shops and is consumed
openly during festivals while alcohol is banned in the state according to the NLTP Act or the
Nagaland Liquor Total Prohibition Act17. Some even say that, the ban be lifted as atleast the
state would earn revenue through excise18.

About THE NAGALAND LIQUOR TOTAL PROHIBITION ACT, 1989

The Nagaland Liquor Total Prohibition Act, 1989 totally prohibits the sale, consumption and
storage of liqour. It also takes the ban a notch further by even banning the apparatus by which
alcohol is made. The use or possession of denatured spirit or any material, utensil, implement
or apparatus whatsoever used for manufacture of liquor. Publishing or display of
advertisements of liquor or any other preparation fit for use as liquor in the newspapers and
periodicals is also banned19. Chapter 2 of the act contains these provisions20.

8.5 Andhra Pradesh

In the year 1995, the then Chief Minister of Andhra Pradesh, Sri Nandamuri Taraka Rama
Rao garu popularly known as NTR announced a total ban on liquor on February 28, 1995.
This affected the liqour industry drastically as it would cause a loss of about 500 crores in
distilleries and 300 crores in bottling of liquor. Apart from that, about 45,000 workers would
loose their employment . These workers were facing mass unemployment and there was a lot
of hue and cry by them. The next Chief Minister of Andhra Pradesh, Sri Nara Chandrababu
Naidu garu then repealed this law in the year 1997 and made liquor legal. But even when
liqour was banned, the locals of the state went to the border town of Bidar and consumed
alcohol. Andhra Pradesh was to an extent successful in curbing the smuggling and illicit sale
of liquor.

17
http://morungexpress.com/on-ban-of-liquor-in-nagaland/
18
http://morungexpress.com/on-ban-of-liquor-in-nagaland/
19
http://nagapol.gov.in/PDF/NLTP%20Act%201989.pdf
20
http://nagapol.gov.in/PDF/NLTP%20Act%201989.pdf
18 | P a g e

9. Liquor ban and its releationship with crimes in the Society

According to the Hon’ble Governor of Bihar, Satyapal Malik there has been a sharp decline
in the crime rate of Bihar. The National Crimes Bureau statistics too echo the same thing.
According to the National Crime Records Bureau also known as the NCRB, the crime rate for
cognizable offences is about 233.6/lakh in for 2016. Whereas in Bihar, it was 157.4/lakh 21 .
The cases of dacoity and kidnapping for ransom fell by 24% to 28% in 2016 and 2017 22.

10. REVENUE TO STATES THROUGH LIQUOR

State governments are increasingly funded by booze and it makes up about 20% of their
revenue and this is on the rise.

If the money earned through liquor for states is to be measured then Karnataka stands at the
first place wherein it had earned about 15,332 crore rupees just through liquor 23. Tamil Nadu
had earned about 29,642 crores rupees through liquor in just that time frame 24. The time
frame here is the revenue earned in the year 2016.

According to a study conducted by the Economic Cooperation and Development (OECD),

per capita liquor consumption in India grew at 55 per cent between 1992 and 201225 .

Another study by the World Health Organisation found an increase of 38 per cent in the per
capita alcohol consumption in India. Naturally, increased consumption has led to better
income for the states 26.

Prohibition of Liquor is both a political & election issue in most states of India. While
political parties sing the tune of prohibition while in the opposition, they change the tune
once in power. In most Indian states, liquor contributes up to 20% of the total tax revenues of
a state. The tax revenue from liquor is rising by the year while the number of incidents of
consumption of spurious liquor is also growing by the year. Close to 3000 people lost their
lives during 2012-2014 because of the consumption of spurious liquor27 .

21
https://timesofindia.indiatimes.com/city/patna/crime-graph-fell-after-liquorban/articleshow/63085187.cms
22
https://timesofindia.indiatimes.com/city/patna/crime-graph-fell-after-liquorban/articleshow/63085187.cms
23
https://www.indiatoday.in/india/story/booze-revenue-alcohol-economy-prohibition-tamil-nadu-bihar-
supreme-court-345588-2016-10-08
24
https://www.indiatoday.in/india/story/booze-revenue-alcohol-economy-prohibition-tamil-nadu-bihar-
supreme-court-345588-2016-10-08
25
https://indianexpress.com/article/india/india-others/alcohol-consumption-rising-fast-in-india-oecd-report
26
https://www.businesstoday.in/lifestyle/off-track/indian-guzzlers-at-work-per-capita-alcohol-consumption-
more-than-doubled-from-2005-to-2016/story/282735.html
27
https://mha.gov.in/MHA1/Par2017/pdfs/par2016-pdfs/ls-020816/223%20E.docx
19 | P a g e

Alcohol (Liquor) is a very contentious issue in India. A complete or partial ban on liquor is
an election issue in most states. Tamil Nadu has seen violent protests over this issue recently
and even in the state of Telangana, opposition parties rallied against the government over the
issue of cheap liquor. While the state government coffers are rising on account of excise
revenue, more & more people are falling prey to spurious liquor.

THE REVENUE THAT CAN BE EARNED THROUGH EXCISE

As the consumption of liquor is increasing in the country, the state governments also are
earning money. In states like Karnataka the percentage of revenue earned through liquor is
about 20% of the total revenue. The states earn this through various instruments in tax like
sales tax, excise tax, VAT, import fee etc. Karnataka alone earned about 1200cr. Rupees from
liquor through taxes. In other large states this is about 1,000 crores in revenue.

11. LIQUOR BAN AND ITS CHALLENGES

The acid test to know whether any policy has succeeded is the efficacy of the policy from
grassroots level. Liquor ban is no exception to this cardinal principle. Many states have
imposed liquor ban claiming the objectives to be, to follow the ideals in the Constitution, to
ensure people are not sufferers, to curb crime rates in the society and to ensure the all round
well-being of the society. Hence, the reasons given by the states which have imposed liquor
ban seem to be ranging from implementing the ideas as enshrined in the Constitution to
health factors, religious factors, moral factors, sociological and legal factors like crime
reduction. One of the cardinal principles in the demand-supply theory is that, when the supply
is low the demand of that particular quantity whoose supply is low will shoot up. This too is
the case in liquor ban. Some of the challenges have been enumerated below :

1. THE CONSUMPTION OF ILLEGAL or SPURIOUS LIQUOR

State Governments are primarily responsible for controlling the sale of spurious liquor and
prevent any such incidents of death due to consumption of spurious liquor. With the increase
in the sale of licensed liquor, sale of spurious liquor is also thriving.

As per records available with the Ministry of Home Affairs, more than 3000 incidents of
consumption of spurious liquor took place in the country resulting in the loss of 2927 lives.
The number of such incidents in 2012 was 72528 .

28
https://mha.gov.in/MHA1/Par2017/pdfs/par2016-pdfs/ls-020816/223%20E.docx
20 | P a g e

While the number of incidents came down to 520 in 2013, they went up exponentially to
1797 in 2014, an increase of more than 250%. These cases resulted in 731 deaths in 2012,
497 deaths in 2013 and 1699 deaths in 201429 .

If the context of states is considered, Maharashtra accounted for the most number of deaths
being 401, this is followed by Karnataka at 395 deaths, this is followed by Uttar Pradesh at
271 deaths, the erst while state of Andhra Pradesh faced about 253, this was followed by
Madhya Pradesh at 229 deaths.

In Gujarat even though the ban is in place, there were 177 deaths due to the consumption of
illicit/illegal liquor. These 8 states make up for 70% of all the deaths. All these states make
substantial tax revenue through manufacture & sale of liquor. The only notable exception to
this list is Tamil Nadu where not a single case has been registered in the last 3 years. In Tamil
Nadu, the government manages the retail shops as well.

SEIZURE OF ILLEGAL LIQUOR

29
https://mha.gov.in/MHA1/Par2017/pdfs/par2016-pdfs/ls-020816/223%20E.docx
21 | P a g e

The National Crime Records Bureau or the NCRB has started collection of data of illegal
liquor seized from the year 2014. The NCRB publishes this seizure data in its Crime in India
report. In 2014, a total of 2.85 crore liters of illegal liquor was seized by the state
governments. Out of this, 41% was factory made, 32% was country made and 27% was the
rest30.

12.EFFECTS OF LIQUOR BAN

30
22 | P a g e

Though the liquor ban is a radical step that has been done in contemporary times as liquor is
one such aspect that is a source of revenue to many state governments. The liquor ban from
grass-roots level has received mixed responses from the Indian society.

The Positive Effects

1. The reduction in crime rate

In the state of Bihar, the deaths caused due to road accidents had declined sharply and the
crime rate in the state of Bihar rad reduced sharply by 27%. The murder and and gang
robberies have reduced by 13%, fatal housesold accidents also fell down by 10%31

2. People spending their money on better things

The people are now spending money on better food and nutritious food, for instance,
Household spending has risen, with milk sales up more than 10% and cheese sales growing
by 200% six months after the ban. Sales of two-wheeled vehicles rose more than 30%, while
sales of electrical appliances rose by 50%, Brick houses are rising in villages where mud huts
used to predominate.

3. Reduction in the cases of domestic violence

Earlier, when liquor was not banned it was common for husbands to come home drunk and
beat wives, now with the liquor ban as the cases of domestic violence have dropped
drastically it can be discerned that there has been a reduction in the cases of domestic
violence.

4. Improved rural household economy

As liquor is no longer available in the market, people who would otherwise spend their
money on liquor are now spending it on their household functions and thereby being frugal
and economical with the money they have in hand.

5. Improved and enhanced social harmony and tranquility

Earlier people used to consume liquor and get in to brawls and affary as people who consume
liquor are intoxicated and cannot control themselves due to which they loose themselves and
either they, themselves fall prey to such fights or become the assaulters. These instances are
common in daily life.

31
https://iogt.org/blog/2017/04/18/bihar-faring-better-worse-alcohol-ban/
23 | P a g e

6. The people are buying better food for themselves and for their family members

As liquor is banned people are no longer wasting their money on something which is
detrimental to themselves and the society as a whole and are buying better things which is
useful for them and their family. For instance, There has been a staggering 380% increase in
the purchase of honey and 200% increase in the purchase of cheese in since the ban. Families
also reported a weekly increase of 32% in household expenditure and 19% of households
reported acquiring a new asset 58% of women said that they felt more respected since the
ban32.

For instance, a study conducted by DMI based on primary data collected from collected from
2,368 households in five districts - Nawada, Purnea, Samastipur, West Champaran and
Kaimur. According to this study, families reported a weekly increase of 32% in household
expenditure and 19% of households reported acquiring a new asset33.

7. Decrease in the addiction of Alcohol

As liquor is not available in the market it must be smuggled illicitly in order to consume it. If
there is an effective ban on liquor then naturally, it will act as an instrument of detterence
among those consuming and those who are already addicted as liquor is one such substance
which is highly addictive. If the supply is curbed it will act as a deterrent and due to the
gravity of profanity it carries around will be a deterrent to those consuming it and those
considering to consume.

8. Improvement in quality of life

If liquor is banned, the ill-effects of liquor like uncontrollable addiction of liquor, liver
failure, kideny failure, heart failure, pancreatic problems, neurotic disorders and other
psychological problems too will be placed at a curb as liquor per se is illegal and if effective
implementation of this is done, liquor will no longer be a crippling health menace to the
society.

9. The reduction in the supply of alcohol

32
https://www.businessinsider.in/ban-on-liquor-in-bihar-has-resulted-in-positive-consequences-
report/articleshow/64633388.cms
33
https://www.businessinsider.in/ban-on-liquor-in-bihar-has-resulted-in-positive-consequences-
report/articleshow/64633388.cms
24 | P a g e

According to a study the supply of alcohol too is reduced34.

The ill-effects of Liquor ban

1. Drop in Tourism

If liquor is banned the tourism of the state which is a great contributor of revenue for any
state will most likely suffer. The primary reasons for this is that in the present day and age,
the amount of alcohol has increased sharply. Alcohol is also used as something which is
people in a group do in having fun, chill, unwind and have a good time. Due to this, when
people visit a new place for tourism people are most likely to consume liquor. Apart from
that even investors who come to states may nevertheless be excited if the ease of doing
business and other aspects for setting up a business are conducive but if liquor is banned, they
will not be able to have a toast incase the company has success like mergers etc. Though this
aspect is not that significant and substantial it might effect the old traditions of the company
and it might effect the corporate etiquette apart from tourism which causes loss to the society.

2. Generation of unemployment

As liquor is banned all the distilleries and breweries which act as instruments in producing
liquor are shut down it is not only those directly employed in these factories who are left
unemployed, but also those who are indirectly involved in the production like transporters,
suppliers of raw-materials and those working in shops are affected drastically by the liquor
ban. Apart from these, those who work in the hospitality sector like hotels, restaurants, bars
and liquor shops are affected. If one looks at those involved in the liquor busness, it begins
from the farmers who produce the raw material, he is assisted by some labourers. From the
farm the raw material is moved to the factory where it is produced, the factory employs a
large number of people from there it is again transported to shops, hotels, restaurants and bars
where again a large number of people are employed. For instance, It is feared that over 1
million jobs could be lost in the hospitality sector. What the exact figures would be, post the
latest notification regarding roads inside the city remains to be seen35 . This reduction in
employment is in the tourism alone. The aggregate unemployment level could even be worse.
Hence as a large number of people are left unemployed, this could even affect the GDP of
that state.

3. Decrease in the revenue collected by the state

34
http://www.internationaljournalssrg.org/IJEMS/2017/Volume4-Issue8/IJEMS-V4I8P107.pdf
35
https://www.nrilegalservices.com/tag/liquor-ban-positive-impact/
25 | P a g e

As excise tax is imposed on liquor the states which have banned liquor will face shortage in
revenue as a consequence of banning liquor. This is primarily due to the fact that excise
comes under the state list. If liquor is banned, the state will not only face a revenue backlash
by loosing revenue, it is also expensive for the state to implement the ban on liquor as the
state has to shell out money for building check-points to curb liquor, it even has to pay for the
Law-Enforcement officials for curbing it.

4.Overload of work for Law-Enforcement Officials

As liquor is banned or prohibited in the state, there must be no presence of it in that state
where the ban is imposed. Hence, in order to enforce this effectively, the state must ensure
that the Law-Enforcement officials go that extra mile in effectively enforcing the liquor ban.
This would mean that they would be engulfed with additional work apart from the work they
are already assigned to do. In order to balance this, the state government may even recruit
more officials. For instance, in the state of Bihar, there was a dog-squad exclusively to curb
liquor36.

5. The sale of alcohol in Black Market

As alcohol is completely banned, even its mere presence is illegal and its possession and sale
is an offence. As a result liquor is sold in black market. If this is done, the biggest looser is
the state as the objective of the ban is not fulfilled and the state is facing huge losses in terms
of revenue as liquor is illegal and the amount of money the state could have otherwise earned
through excise is now lost. Apart from that, liquor ban is also expensive to impose. Hence if
liquor is sold in black market as the supply is really low the demand of liquor will reach
soaring heights and liquor will be really expensive.

6. Nexus between alcohol sellers and law-enforcement officials

If there is a clear-cut nexus between the law-enforcement officals and the alcohol sellers then
again it is the state which will be the greatest looser as neither the objective with which the
ban has been imposed,i.e, to promote health of the population, to enforce the ideals as
espoused in the Constitution, for moral, religious and social reasons and all in all to ensure a
better social well-being among the population of the state, this cannot be done as on one hand
the state is a looser in terms of revenue and as the state has to invest its resources for the
effective implementation of the ban which too is expensive making the state the biggest
36
https://www.hindustantimes.com/patna/in-a-first-bihar-gets-a-dog-squad-to-unleash-on-liquor-
smugglers/story-t4Czmqmplp14IzUVJ1el5I.html
26 | P a g e

looser in economic terms. And on the other hand, the ideals with which the state had imposed
such a ban too would be futile and in both the ends it is the state which is at a loss.

13. RECOMMENDATIONS/SUGGESTIONS

1. Incase a liquor ban is imposed, the state must ensure there is effective
implementation of it

As liquor ban is something which causes economic loss to the state, the states must ensure
that incase they impose a liquor ban they must implement and enforce it effectively. If not,
the states face huge economic losses.

2. Instead of resorting to a total liqupr ban the state should try to educate the masses
about the ill-effects of it

As liquor is harmful to the health and the society, many states with that intention of curbing
that impediment impose a ban on liquor, but given the infrastructure and the various lacunae
in in enforcing the ban becomes really tough with the existing machinery. With the soaring
increase in demand, many states even face illicit smuggling of liquor due to which the states
face huge losses in revenue. Hence, the more viable method would be of reducing alcohol
intake would be regulation through taxation coupled with the policies of alcohol-education.
Not only does the state gain revenue from sale of alcohol but also alcohol-related deaths
decrease. In the long run, these policies decrease the demand for alcohol and in so doing
achieve the aim of reduced alcohol consumption.

3. People might look at alternative sources of intoxicants to get high

For instance, as alcohol is banned people might have a propensity to consume narcotics as a
substitute for alcohol. This is much stronger in the cases wherein people are strongly addicted
to alcohol.

14. CONCLUSION
27 | P a g e

Hence, as liquor ban is something due to which the states loss their revenue, as the state is
loosing the money it would have otherwise gained through excise tax. Though the state
imposes with the intention of ensuring the promotion of health and the promotion of social
well being. Due to the presence of illicit liquor alcohol is being sold and sometimes even
being smuggled through neighbouring states, it becomes increasingly difficult for the state
governments to curb this. If the states want to ensure that there is proper curbing of liquor
they must ensure that there is the proper infrastructure and machinery in the state to curb it
before taking such a radical move. As change is something that must be intrinsic and not be
forcefully and arbitrarily be enforced by some external changes, the state should try to
educate the masses regarding this aspect, but this might be a bit too idealistic. So the state can
have a policy which couples taxation with policies which pertain to alcohol education.

BIBLIOGRAPHY
28 | P a g e

1. https://www.indiatoday.in/india/story/booze-revenue-alcohol-economy-prohibition-tamil-
nadu-bihar-supreme-court-345588-2016-10-08

2. https://www.jstor.org/stable/4399090?seq=1#metadata_info_tab_contents

3.https://timesofindia.indiatimes.com/city/patna/crime-graph-fell-after-liquor-
ban/articleshow/63085187.cms

4. https://blog.ipleaders.in/ban-alcohol-consumption-really-help/

5. https://www.bbc.com/news/world-asia-india-39814446

6. https://www.businesstoday.in/current/economy-politics/bihar-liquor-ban-nitish-kumar-
government-amends-prohibition-bill-fine-for-first-time-offenders/story/280577.html

7. https://iogt.org/blog/2017/04/18/bihar-faring-better-worse-alcohol-ban/

8. http://excise.bih.nic.in/Acts/Bihar-Prohibition-and-Excise-Act-2016.pdf

9. https://www.hindustantimes.com/patna/in-dry-bihar-liquor-flows-in-many-shapes-and-
forms/story-2x3M7v0911sieMuqY11BRI.html

10. http://164.100.47.190/loksabhaquestions/annex/10/AS184.pdf

11. http://morungexpress.com/on-ban-of-liquor-in-nagaland/

12. http://nagapol.gov.in/PDF/NLTP%20Act%201989.pdf

13.https://timesofindia.indiatimes.com/city/patna/crime-graph-fell-after-
liquorban/articleshow/63085187.cms

14. https://www.indiatoday.in/india/story/booze-revenue-alcohol-economy-prohibition-tamil-
nadu-bihar-supreme-court-345588-2016-10-08

15. https://www.businesstoday.in/lifestyle/off-track/indian-guzzlers-at-work-per-capita-
alcohol-consumption-more-than-doubled-from-2005-to-2016/story/282735.html

16. https://mha.gov.in/MHA1/Par2017/pdfs/par2016-pdfs/ls-020816/223%20E.docx

17. https://iogt.org/blog/2017/04/18/bihar-faring-better-worse-alcohol-ban/

18.https://www.businessinsider.in/ban-on-liquor-in-bihar-has-resulted-in-positive-
consequences-report/articleshow/64633388.cms

19. https://www.nrilegalservices.com/tag/liquor-ban-positive-impact/
29 | P a g e