The Indian Liquor Industry Prohibition Story



Themes: Ethics in Business
Period : 1995-1999
Organization : -
Pub Date : 2002
Countries : India
Industry : Food, Beverages & Tobacco

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Case Code : BECG011
Case Length : 08 Pages
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The Indian Liquor Industry Prohibition Story | Case Study

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Prohibition in India Contd...

In 1990, the women of Dubagunta, a small village in the Nellore district of the south Indian state of Andhra Pradesh began an anti-arrack agitation. They pressurized men to swear that they would stop drinking, physically restrained habitual drinkers, attacked liquor shops and godowns and fought with the police, liquor mafia and the drunks. The movement spread like wildfire to 800 villages throughout the state in a short period of time. Women in these 800 villages not only prevented the entry of liquor into their villages, but also prevented district collectors from holding arrack shop license auctions.

It was reported that the women were beaten with rods, sticks, boots and rifle butts by the liquor contractors' henchmen as well as the police force. Non-bailable cases were filed against agitators who were then imprisoned. There were even reports that many women activists were raped and murdered.

These events soon become a matter of national debate and eventually led to the then Congress government of Andhra Pradesh announcing a statewide ban on the sale of arrack from October 1993. In the next state assembly elections, N T Rama Rao (NTR) of the opposition Telugu Desam Party (TDP) promised total prohibition and made it the party's main election plank. The TDP won the polls and NTR announced total prohibition soon after becoming Chief Minister.

The AP government lost $ 362 million in annual revenues after the prohibition. Despite new taxes on vehicles and consumer goods, the state's budget deficit rose to $ 242 million.

However, prohibition continued in the state till 1997. In that year, the new CM Chandrababu Naidu lifted the ban on liquor, claiming that he was forced to do so because of the state's financial problems. This move met with unprecedented criticism in the media. Critics claimed that the state could have easily avoided unnecessary expenditure on many other fronts, such as salaries and various subsidies.

Besides AP and Haryana, Gujarat, Mizoram, Meghalaya, Kerala and Tamil Nadu had also experimented with prohibition. While Gujarat continued to remain completely dry even in late 2001, Kerala and Tamil Nadu had opted for a partial-prohibition policy3. Ten months after prohibition was imposed in Haryana, two surveys making contradictory claims regarding the efficacy of prohibition were made public.

While the government-sponsored survey claimed that prohibition was successful, the independent study said it had failed miserably. Covering all the districts of the state, the latter survey interviewed over 900 persons, of whom 54% felt that prohibition was a failure, 36% said it was partially successful, and only 8% said it was a success. The survey claimed that people were drinking openly and the police was simply ignoring them.

To counter these allegations, the government quoted the findings of a survey report made by the Chandigarh-based Institute of Development and Communications. Interviewing 6,000 people in six districts, the study concluded that 58% of the alcoholics had kicked the habit following prohibition. The study claimed that liquor consumption in Haryana had come down by 67%4.

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3] Under a partial-prohibition policy, only country-made liquor is completely banned while trading is allowed in IMFL with certain restrictions.
4] An interesting side effect of the imposition of prohibition in Haryana was the fact that many poor families were able to earn money through illegal liquor trading. According to reports, after one year of prohibition, many families in villages near Haryana had built houses and the consumption of food, clothes, transistors, wristwatches etc. in the area had gone up.