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Why Andhra tipplers are willing to pay more than MRP for booze

by Mahesh Vijapurkar  Dec 27, 2011 17:04 IST

#Andhra Pradesh   #Booze   #MRP   #Only In India  

The booze business in Andhra Pradesh is quite something. Startlingly so.

Anyone wanting a tipple has to shell out between 30-40 percent more than the stipulated maximum retail price (MRP) printed on the bottle. And MRP factors in, to the uninitiated, the cost of production, marketing, the dealer’s commission, the brewer’s profits, and the state’s levies.

By law, nothing can be sold above the MRP; if discounts are offered to remain competitive in the market, then the retailer takes a bit of a hit and no one else is the loser. Everyone gets his due, including the consumer.

But how does this practice persist in Andhra Pradesh which had once — briefly, during the late NT Rama Rao’s regime — imposed prohibition?

Booze

Anyone wanting a tipple in Andhra Pradesh has to shell out between 30-40 percent more than the stipulated MRP printed on the bottle. Charles Platiau/Reuters

The answer can be found in poor governance, the political stranglehold on the booze business, and the connivance of the official machinery which is more intent on collecting bribes (for itself and on behalf of politicians) than enforcing the law. Add to this the role of media personnel in this business, and the brew does indeed get rich.

Given the widespread penchant for quenching one’s thirst with alcohol, especially after sundown, everyone is on a roll in Andhra Pradesh, baring the consumer. It’s the same, whether one consumes India-Made Foreign Liquor (IMFL), a category hardly known to exist in any other country, or the illicit stuff.

Such devoted consumers are called ‘patriots’ in Andhra: they pay the liquor tax on the bottle and, come to think of it, even more. They willingly allow themselves to be overcharged.

That higher “tax”, however, does not go to the government. It is pocketed by the retailer after sharing it with excise personnel, and the politicians who run the syndicate of which the retailer is a part. The government blinks because its constituency is the politician, not the consumer.

Andhra’s booze trade also has its unique terminology. There are ‘seconds’ that are sold across the country. This is the category of liquor produced by breweries beyond their licensed capacities and pushed into the market. The consumer does not know that excise and other duties have been evaded and pay for it as though it is the legit stuff.

Then there are the ‘belt shops’, unlicensed outlets which sell ‘seconds’ as well as contraband from across Andhra’s borders. Their strength is their easy accessibility; any business outlet, from a paan-bidi shop upwards, can be the place where the stuff can be picked up. Since all this is unrecorded, the state suffers an unquantified, but surely a huge, loss.

But belt shops need a supportive, coercive mechanism bolstered by muscle. Come election time, they are handy too. Since all these are components of the booze syndicates, everyone winks at them.

The key to understanding the entire business is the auction system for liquor vending permits. Since high bids are made, the assumption is that the consumer is willing to pay. They do, but the high auction fees still have to be recouped.

Having forked out huge sums, the losses borne even before the word ‘go’ have to be neutralised before profits are earned. That comes by setting prices above MRPs. The logic of such a business model involves a gamut of players, including state-players. Being a politician helps, for that accounts for extraordinary clout. Syndicates are the route.

For instance, the rights for fiscal 2010 in Adilabad were sold for Rs 304 crore against the previous year’s Rs 167 crore. That straightaway made the much desired business unviable – when business is growing only at 10-11 percent a year. Top-ups on MRP are what will enable the bidder to make money from such a huge bid.

The syndicates are a combination of officials, politicians and retailers. One large syndicate, which allegedly includes a former chief minister, reportedly has 76 politicians, including unnamed ministers. This power group ensures that the bids are high enough to keep rivals out, and to recover the outlays, they enable overcharging. Pesky officers are kept at bay by mamools and they remain bought. In most cases, they even become the foot soldiers of the mafia.

The mechanics of the syndicates were not unknown but the frightening dimensions came to light recently when, towards the second half of this month, the Anti-Corruption Bureau began to take interest in this business. The ACB found big fish in the network, including leading anchors of some regional news television channels. In some districts, as in the backward Adilabad district, which has 800 accredited journalists, several scribes were involved.

Having chalked up, according to latest figures, Rs 18,000 crore by auctioning the rights to sell liquor, the state went into hibernation — as it has year after year. The auctions are the core reason why unreasonably high bids are made.

In this context, two issues are of note. One, Chief Minister Kiran Kumar Reddy has asked the excise department to ensure that liquor is sold only at MRP and nothing else; two, he has been silent on the involvement of politicians in this business, even though some have confessed to being in the liquor trade.

During his predecessor, K Rosaiah’s tenure, a panel to improve awareness of the ills of consuming alcohol ended without even filing a report.

Seems booze is a good business in Andhra Pradesh for everyone involved.