CASIRJ

Volume 5 Issue 5 [Year - 2014]

ISSN 2319 9202

EFFECTS OF TOTAL LIQUOR BAN ON GUJARATS ECONOMY

Prof. Tanu Sachdeva
DurgaMahavidyalaya,
Raipur, C.G.

Prof. Jasneet Soni

Mahaveer College of Commerce
Jaipur(Raj.)

Abstract
Gujarat has a restrictive law in force that prohibits the sale, purchase and consumption of
alcoholic drinks. The legislation has been in force since 1 May 1960 when Bombay State
dissolved into Maharashtra and Gujarat. Gujarat is the only state in India that has the death
penalty for those found guilty of making and selling spurious liquor which causes death. But
predictably, smuggling and illicit sale of alcohol are very common.Gujarats prohibition policy
encourages bootlegging. This paper details the impact of Total Liquor Ban on Gujarats
Tourism, Investments, Employment and Economy as a whole. The paper unveils the real story of
Total Liquor Ban in Gujarat and also answers to the question- Did prohibition really work in
Gujarat?
1. Total Liquor Ban:
1.1 Introduction: Gujarat is one of the most developing industrial states in India. The ban of
alcohol consumption in Gujarat is since 1961 as homage to Mohandas Karamchand Gandhi and
his idea was India should be pure and there should not be any trade or consumption of alcohol in
this country which later on was followed by no other state but Gujarat.After independence every
state of India was given the rights to make their own rules regarding ban or to allow sales of
alcohol.Alcohol industry has been one of the biggest industries in India which does bring lot of
profit to the state and country. Moreover Gujarat being one of the most growing states
economically can be in a better position after bringing alcohol industry but still Gujarat
government supports the ban.

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The legal drinking age in India and the laws which regulate the sale and consumption of alcohol
vary significantly from state to state. In India, consumption of alcohol is prohibited in the states
of Gujarat, Manipur, Mizoram and Nagaland as well as the Union Territory of Lakshadweep.
All other Indian states permit alcohol consumption but fix a legal drinking age of between 1825
years. In some states, the legal drinking age is different for different types of alcoholic
beverages.
An alcohol or liquor ban prohibits the possession or consumption of liquor for specific
days, hours and public locations. The bans are set by local councils, usually as a by-law. Liquor
bans are usually introduced because authorities are concerned with the increasing level of
disorderly behaviour and criminal offending that is linked to the consumption of alcohol in
public places.
1.2 Background:
1.2.a.The Noble Experiment:Also known as The Noble Experiment; Liquor Prohibition was the
period in United States history in which the manufacture, sale, and transportation of intoxicating
liquors was outlawed. It was from 1920- 1933. After the American Revolution, drinking was on
the rise. To combat this, a number of societies were organized as part of a new Temperance
movementwhich attempted to dissuade people from becoming intoxicated.At first, these
organizations pushed moderation, but after several decades, the movement's focus changed to
complete prohibition of alcohol consumption.
1.2.b.Volstead Act:While it was the 18th Amendment that established Prohibition, it was the
Volstead Act (passed on October 28, 1919) that clarified the law. The Volstead Act stated that
"beer, wine, or other intoxicating malt or vinous liquors" meant any beverage that was more than
0.5% alcohol by volume. The Act also stated that owning any item designed to manufacture
alcohol was illegal and it set specific fines and jail sentences for violating Prohibition.It was soon
clear that criminalizing liquor had increased the power of organized crime and the corruption of
law enforcement, and that consumption of liquor continued.

By the early 1930s, public

sentiment was on the side of decriminalizing the liquor industry, and in 1933, the 21st

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Amendment overturned the 18th and prohibition ended. Some states however continued to
permit a local option for prohibition, or to control liquor statewide.
1.2.c. Prohibition in India:Mahatma Gandhi identified the consumption of alcohol as a major
social evil and encouraged complete prohibition in India. With this in mind, the Constitution of
India included Article 47 in the Directive Principles of State Policy, which reads, "The state shall
endeavour to bring about prohibition of the use except for medicinal purposes of intoxicating
drinks and of drugs which are injurious to health."
Madras Province and Bombay State implemented prohibition between 1948 and 1950, and total
prohibition was in operation in Madras State, Maharashtra, Gujarat and 11 districts of Andhra
Pradesh from 1958 to 1969.
One-fourth of India's population was under prohibition by 1954, and in the same year, the
Prohibition Enquiry Committee set April 1958 as the target to achieve national prohibition.
However, the potential loss in state revenue due to loss of excise revenue from the sale of alcohol
discouraged most state governments from enforcing long-term prohibition. Alcohol accounted
for almost 10% of total state revenues, and over one-third in the case of Punjab. In 1964, the
Centre offered to compensate the state governments 50% of their loss in excise revenue caused
by the implementation of prohibition. A renewed push for prohibition occurred under the Morarji
Desai government in 1977, but it failed to achieve nationwide prohibition. The negative effects
of prohibition including wide-scale sale of spurious and cheap liquor, the rise of organised crime
and bootlegging due to the growth of a black market for alcohol, a large police force required
implementing prohibition and loss of employment connected to the alcohol industry reduced
demands for prohibition and led to calls for regulation of alcohol. Most states did not take up the
proposal and lifted prohibition; however, Gujarat retained it.
2. Prohibition of Liquor in Gujarat:Other than Mizoram, Gujarat is perhaps the only state where
there is total prohibition of liquor.Yet liquor business in the state is the largest thriving enterprise
and consumption of alcoholic drinks is high.Ironically, the only champions and supporters of the
prohibition law (besides Gandhians and social activists) are the police and the bootleggers in
Gujarat and the adjoining districts of other states. The non-enforcement of the law is wellplanned and the result of a tacit understanding between the law enforcers and the law-breakers.
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2.1 The Real Story:The haftas (weekly payoffs) flow regularly and smoothly from the bottom to
the top in government and police department. Regular raids on liquor dens and bootleggers, and
arrest and imprisonment of offenders, are mere drama which provides the police with some good
publicity. For, the truth is that the liquor mafias ensure that families of arrested or jailed
bootleggers are not short of money while the hafta collection continues. This has been a regular
feature of prohibition in Gujarat from the beginning. It is estimated that the money involved in
illicit liquor business is almost equal to the loss in excise and customs duty of the state
exchequer.
The state government has done away with the lengthy procedure to get liquor permits for the
tourists making it easy for them to drink in Gujarat. Realising that the prohibition laws were
becoming a deterrent, the new rule allows tourists landing in Gujarat to get their drinking permits
at the time of arrival at airport itself. Earlier, the formality ended at the respective police
headquarters.The rule revision has come at a time when Gujarat has been aggressively into
tourism promotion. Prohibition and its tough laws have always been cited as one of hindrances in
attracting tourists to the state with 16,000 long coastline and rich culture and heritage.
2.2Effects of Liquor Ban in Gujarat:
2.2.a. Inter State Smuggling: Gujarat is known as the Jewel of the west and shares its borders
with Maharashtra, Rajasthan and Madhya Pradesh. Truckloads of liquor are smuggled into
Gujarat from these states.More than 130 people died after consuming bootleg liquor in Gujarat in
2011. While prohibition is in place in Gujarat, liquor is often smuggled in from neighbouring
states and people are forced to buy it at inflated prices. What can the poor do? They cannot
afford to buy branded alcohol so they consume illicit liquor. Plastic pouches called potlis of
illegally brewed liquor are available for as little as ten rupees.
2.2.b. Law breaking: Each year most of the people in Gujarat are convicted for breaching
liquor ban by-laws, these are people between 18 and 24 years old, with a median age of 20 in
2011 and 2012. The majority (between 86% and 90%) of the people convicted for breaching
liquor ban by-laws prosecuted by the Police were male. In each year, between 61% and 68% of
the people convicted for breaching liquor ban by-laws were people of Gujarat, and between 28%
and 33% were others.
2.2.c. Declined Tourism: Gujarat's alcohol prohibition policy left a negative impact on
tourism."Gujarat has the potential to become another Goa. Some of the beaches along its 1,600km-long coastline are beautiful. Lifting prohibition could work wonders for the state." Most
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foreign tourists refuse to take the risk of even having their customary drink. The state tourism
department's effort to convince the government to relax prohibition has had little response so
far.At present, Gujarat's prohibition law allows a permit to foreigners and outsiders but the
process for obtaining it is cumbersome. The state also gives group liquor permits for conferences
and meetings but again the process is not so simple.
The following data brings in light the effect of prohibition of alcohol on the number of tourists,
tourism revenue and the growth in number of foreign and domestic tourists visiting different
states, specifically Gujarat:

Source: www.tourism .gov.in

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Source: www.tourism .gov.in

The above details show that while in 2010-2011 the percentage growth rate to foreign tourists
visit in Gujarat was 27% for foreign tourists, it drastically fell to about 5% in the year

2011-

2012.
2.2.d. Unemployment: The effect of fall in tourism can be clearly seen in the employment of
locals. The local people can be the part of so much employment opportunities which will open
up if beach tourism is developed. But as it has been seen since so many decades that no investor
wants to invest and develop any beach unless the prohibition has been lifted. The only view they
have is that tourists won't flock unless alcohol flows. Shacks, small restaurants, beach huts,
resorts, flea markets and what not might develop and it can really benefit the local people in
terms of employment. Also with so many youngsters in cities getting into so called rock bands
and many amateur singers coming up, they can make some extra bucks by singing and
performing at this shacks and resorts.
2.2.e. Loss in State Revenue: The revenue receipts of State Excise come mainly from Country
Spirits, Country Fermented Liquors, Malt Liquor, Liquor, Foreign Liquors and Spirits while a
small contribution is from Commercial & Denatured Spirits & Medicated wines, Medicinal and
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Toilet preparations containing alcohol and opium, Opium, hemp and other drugs, and Fines and
Confiscations.The states, if they are to spend money, must first make it. One easy way is to
demand from its citizens a tax every time they drink.
This levy, also called State Excise in India, is imposed mainly on liquor sale, for which reason it
is also commonly called Liquor tax. Liquor taxes collected from various states are:
Andhra
States

Karnataka

Tamil Nadu

Gujarat

Pradesh

Maharashtra

Punjab

Kerala

2003-04

2346(54.24)

2273(63.55)

47(52.42)

1920(78.07)

2300(100.03)

1500(25.04)

687(32.42)

2004-05

2805(54.92)

2549(53.29)

47(53.29)

2092(78.97)

2218(101.62)

1486(25.38)

746(32.7)

2005-06

3396(55.59)

3176(54.14)

48(54.14)

2684(79.85)

2823(103.21)

1568(25.72)

841(32.98)

2006-07

4495(56.25)

3986(54.97)

41(54.97)

3436(80.71)

3300(104.8)

1367(26.05)

953(33.26)

2007-08

4766(56.9)

4764(55.8)

47(55.8)

4040(81.55)

3963(106.38)

1861(26.39)

1169(33.53)

2008-09

5749(57.55)

5755(56.62)

48(56.62)

5752(82.37)

4433(107.97)

1809(26.72)

1397(33.8)

2009-10

6946(58.18)

6740(57.43)

65(57.43)

5848(83.17)

5056(109.55)

2100(27.04)

1514(34.06)

2010-11

8284(58.8)

8115(58.23)

62(58.23)

8264(83.96)

5961(111.11)

2373(27.36)

1699(34.31)

2011-12

9775(59.41)

9975(59.02)

72(59.02)

9612(84.73)

8605(112.66)

2754(27.67)

1883(34.56)

2012-13

11300(60.02)

12473(59.8)

80(59.8)

10500(85.49)

9550(114.18)

3800(27.98)

2376(34.8)

Excise Revenue figures are in Rs crores and from the RBI annual reports. Year-wise Population
estimates, in millions, are shown in brackets.
The above table shows that while the other states like Karnataka, Tamil Nadu, Andhra Pradesh,
Punjab and Kerala earn a major portion of their revenue from the State Excise, it is a poor
contributor in Gujarat. While these states earn the State Excise Revenue in thousands of rupees
Gujarat land up only to a double digit figure.
A clearer picture is shown in the Liquor revenue gained per capita for each state:
2003- 2004- 2005- 2006-

2007-

2008- 2009- 2010- 2011- 2012-

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Karnataka

433

511

611

799

838

999

1194

1409

1645

1883

Tamil Nadu

358

398

491

612

727

871

1013

1211

1479

1838

States

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Gujarat

Volume 5 Issue 5 [Year - 2014]

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11

11

12

13

246

265

336

426

495

698

703

984

1134

1117

Maharashtra

230

218

274

315

373

411

462

536

764

836

Punjab

599

586

610

525

705

677

777

867

995

1358

Kerala

212

228

255

287

349

413

445

495

545

683

Andhra
Pradesh

Source: www.rbi.org.in

Source: www.rbi.org.in
The above graph clearly depicts Gujarat lags far behind the other states in terms of per
capitaLiquor Revenue gained.
2.2.f. Tainted Home Brewed Liquor: The liquor ban in Gujarat has forced the residents to
prepare their own home made liquor. In the year 2009, 43 people from western India died due to
drinking this very tainted home-made liquor out of which 23 were from Ahmadabad. Deaths
from drinking illegally brewed cheap alcohol are common in Gujarat, where few people can

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afford licensed liquor. Known locally as desidaru, illicit liquor is often spiked with pesticides or
chemicals to increase its potency.
2.2.g.Drunken driving and related accidents: Drunken driving and related accidentsarenot so
low in Gujarat because most of the truck drivers consume country liquor which are cheaper and
easily accessible. But these figures are no way close to how it is in other states. So relatively
drunken driving is lower. This is a direct effect of prohibition policy, as the drivers are cautious
about paying the hefty fine if got caught drunken. Moreover, rather than taking such chances
people in Gujarat always cross to nearby states during weekend to have a Spirited weekend.
3. Conclusion:
India has been developing very quickly and in spite of attempts to prohibit alcohol in states like
Haryana and Andhra Pradesh, its not been successful but Gujarat is the only state which is still
continuing the alcohol prohibition.People are facing ill health due to flaws in rules of the Gujarat
government and illegal trade of the alcohol. Finally the one who are acquiring advantage are
politicians and smugglers at the expense of lives of people of Gujarat.
In the 1990s, Andhra Pradesh took up and abandoned the prohibition policy in less than two
years. Despite the best efforts, the prohibition-related offences, particularly illicit distillation and
smuggling, had been steadily increasing in the state and hence prohibition was lifted.
A huge section of the general public still wants to live with this prohibition thinking that it brings
fewer troubles to people on the roads of Gujarat. Less nuisance from the so-called anti-social
beings and less trouble of eve-teasing and drunken driving. Majority of the women still don't
want this prohibition to be lifted as they still very strongly think that it can be one of the biggest
reasons of eve teasing and the free movement of women at night on the road might become a
thing of the past.
But to bring about the prohibition of intoxicating drinks and drugs that are injurious to health, if
banning alcohol puts people in the way of more harmful drinks, then is the government fulfilling
the constitutional mandate?Gujarat, having the longest coastline with some beautiful and serene
beaches is still totally under developed. Beach lovers from Gujarat have to travel to Diu, Goa or
to southern states to chill out under the sun with some chilled beers. Its been long the
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government of Gujarat have been missing this opportunity to attract tourists from India and
around the world and earn some big time revenue. Taking into consideration the pros and cons, it
is concluded that steps should be taken to reduce the consumption of liquor and other
intoxicating drugs but the total prohibition should be lifted from the state of Gujarat.

4. References:
Reference books:

ChandranathJha,AabkariVidhiSangrah, the Lawyers home, Indore, 2009.

Gupta, S.P., Statistical Methods, Sultan Chand & Sons, New Delhi, 2005.
Jindals Madhya Pradesh Excise Manual, Rajkamal Publications, Indore, 2012.
Kothari, C.R., Research Methodology- Methods and Techniques, New Age International
Publishers, New Delhi, 2009.
Internet:

Gujarat's outdated alcohol prohibition policy leaves negative impact on tourism,

http://indiatoday.intoday.in/story/gujarat-outdated-alcohol-prohibition-policy-negative-

impact/1/175159.html

Gujarat Tourism Revenue, http://gujaratindia.com/about-gujarat/gujarat-tourism.htm

Gujarat Government portal, http://www.gujaratindia.com/

Key Staitistics, http://gujecostat.gujarat.gov.in/?page_id=2

Khanna, Sumit (2013): Gujarat share in FDI slips to 2.38%, 6th rank, Daily News and
Analysis, 12 April,http://www.dnaindia.com/ahmedabad/report-gujarat-share-in-fdi-slips-

to-238-6th-rank-1821712
The Popular Claims, 2013,http://centreleftindia.wordpress.com/2013/09/30/howsignificant-or-substantial-are-the-claims-of-modi-supporters-frequently-quoted-modisachievement-pointwise
Newspapers

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DainikBhaskar

The Economic Times

Nav Bharat

The Indian Express

ISSN 2319 9202

Times of India

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