india

Updated: Nov 27, 2015 13:15 IST

Bihar will be a dry state from April 1 next year after chief minister Nitish Kumar announced on Thursday a complete ban on the sale of alcohol, keeping a promise he made prior to the recent assembly polls.

Kumar’s announcement spooked the stock market as shares of liquor companies plunged as much as 8% during the day’s trading. Shares of United Spirits settled at Rs 3,211.45 on the BSE, down 4.74%, while Radico Khaitan’s tumbled 6.92% to close at Rs 114.25. United Breweries dropped almost 3%, before recovering some lost ground.

“I had made a promise that if my government returns to power we will impose prohibition. The government is committed to fulfill its promise,” he told a function on Excise Day in Patna, his first official programme after taking oath for the fifth time on November 20.

Bihar earns revenue of around Rs 4,000 crore annually from liquor sale. “Despite the government generating sizeable revenue, growth in the sale of liquor has adversely impacted households of the poorest of the poor in rural areas. This has to stop,” Kumar said.

The chief minister did not spell out whether the ban would include the sale of Indian Made Foreign Liquor (IMFL), but dropped hints that it could. “We will deal with the apprehension of liquor finding its way into the state through unofficial channels, when it happens,” he said in a clear warning to bootleggers and manufacturers of local brews.

The state had earlier tried its hand at prohibition in 1977-78, but failed to implement it effectively.

Kumar said alcohol has been at the root cause of social evils such as domestic violence, rise in crime and parents ignoring children’s education. “We are ready to calibrate expenditure in certain sectors to offset the fall in revenue but will not allow women to suffer.”

The chief minister assured women self-help groups at a state-level programme in July that prohibition would be imposed if he retained power.

Ironically, it was excise revenue that helped Kumar roll out his government’s most ambitious bicycle scheme for girl students and finance the self-help model to empower women at the grassroots level.

In 2007, the Kumar government changed its liquor policy to shore up internal revenue in the fund-starved state. It paid dividends and revenue collection from over 9,000 outlets and vends registered a more than 10-fold jump, from a paltry Rs 319 crore in 2005-06 to Rs 3,650 crore in 2014-15, after the excise ministry took over the management of liquor distribution and supply through the Bihar State Beverages Corporation.

On the flipside, women became increasingly unhappy as crimes associated with alcohol and the adverse effect on household income started taking a toll. But after his prohibition promise, women overwhelmingly backed Kumar and his alliance in the assembly polls, the vote share shows.

Liquor companies felt the ban would hit the state’s economy. Bihar government will probably lose over Rs 4,000 crore in tax revenue. How will they make up for this? The government should have perhaps looked at banning country liquor and not put a total ban. We will lose a fair amount of revenue and profits … Out of about 37 million cases (annual sales), Bihar accounted for about 1.4 million cases,” said Deepak Roy, executive vice-chairman, Allied Blenders and Distillers.

The chairman and MD of Tilaknagar Industries, Amit Dahanukar, called the decision a retrograde step. “As such, prohibition has never been successful anywhere. States have porous borders, so liquor smuggling from other states will rise. Then there is also the issue of illicit brewing.”

Alcohol has been traditionally frowned upon in India for religious and cultural reasons, but a growing middle class has made the country a booming market for drinks makers, and only a handful of states have an outright ban, including Gujarat. The southern state of Kerala is introducing limits on alcohol sales.

(With agency inputs)