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The Final Seconds

Krishna goes after non-duty-paid liquor, figures follow

The Final Seconds
Pranav Purushotham
The Final Seconds
For decades, liquor has been a mother lode of power and pelf for politicians and businessmen in Karnataka. It has raised the spirits of many a politician who has benevolently looked away when markets were flooded with 'seconds', a euphemism for non-duty-paid liquor. Political parties have even gifted away plum positions in Bangalore and faraway New Delhi to leading lights of the liquor lobby.

But now, some of the tycoons and their political patrons are beginning to sweat as CM S.M. Krishna has set out to hit them where it hurts the most: corporatise (take over) the distribution and sale of every ounce of IMFL (Indian Made Foreign Liquor) produced in Karnataka to thwart the flow of seconds into the market. According to sources, the quantum of non-duty-paid liquor was four times that of stocks arriving with duty-paid stamp.

The initiative has already set the cash registers ringing for the government. It has also discovered that the industry had fudged the volume of sales in order to escape paying taxes. In its two months' existence, the new entity called Karnataka State Beverage Corporation Ltd (ksbcl) has production figures of 5.3 million litres for July and 6.8 million litres for August. (This is up from the stagnant 1.9 million litres a month, the normal average accounted for by the industry for several years now.) Moneywise, that translates into more than Rs 190 crore a month. Enthused, the state government intends to bring about a change in the IMFL duty regime so as to effect a two-fold increase in revenue. Besides, the excise department has cracked down on non-tax-paid liquor. Says Ramasheshan, managing director of ksbcl: "We are monitoring the figures every week so that nobody can fudge their figures (production) any more."

In addition, the government has rationalised the duty slabs on IMFL—that means a significant fall in the prices of top-end brands, including scotch. Brands such as VAT 69, costing Rs 1,150 earlier, now sells at Rs 750. Smirnoff vodka is available for Rs 360 as against the earlier

Rs 580. Lower-end brands such as Raja and Silver Cup, which were about Rs 25 a quarter earlier, have now gone up to Rs 32, a move the government says is part of its initiative to encourage people to pick up quality liquor. These lower-end brands had the maximum seconds which could sometimes even be spurious. Says Ramasheshan: "The retailers and wholesalers had a huge incentive to take big risks and indulge in the seconds business. With the new policy in place, it's not worth the risk any more."

A slew of other measures will soon be introduced to enforce the ban on non-duty-paid liquor. The government proposes to announce an incentive of 10 per cent of the seized stock for excise department staff. It also proposes to register cases of cognisable offence against those violating excise rules. Most importantly, it proposes to introduce an accounting of production and sales at every distillery and brewery by professional cost accountants to curb figure-fudging. Last year, excise revenue from IMFL was Rs 642 crore. The government hopes to earn double this time.

According to Vijay K. Rekhi, president, spirits division of the UB Group, the rationalisation of duty and a crackdown on the sale of seconds will mean "more revenue for the government, consumers will get liquor at the same price as in neighbouring states and manufacturers whose brands were duplicated and sold as non-duty-paid liquor will not be allowed to enter the market. The duty structure was such that it encouraged seconds.... The government must now plough back some of the revenue earned from these measures to step up vigilance."

The government's new liquor policy has no doubt gone down well with tipplers. But those consuming lower-end brands, many dealers fear, will move to cheaper illicit liquor.That's one problem the government will have to address. But for now, Krishna has all the bouquets. The big question is whether he will be able to sustain the campaign.
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