The political expediency with which the Kerala chief minister Oomen Chandy announced his total prohibition plan has been completely exposed with the state finance minister KM Mani saying that he is the biggest victim of the move.
More over, even though the revenues from liquor sales haven't dried up, the state is in a financial crisis. With no money to run the state, the government on Friday borrowed Rs. 100 crore from the Reserve Bank of India and will also issue bonds for Rs 500 crore. The state is falling into this overdraft situation after eight years.
With such precarious finances, how will the government run the state when about Rs 7,000-8,000 crore dries up on account of prohibition? Although it is planned in a staggered way, the finance minister has announced that it will lead to an annual shortfall of Rs 1,800 crore. This figure will rise in coming years.
Interestingly, the first salvo against Chandy has been fired by none other than Mani himself when he told a news channel that he shouldn't be blamed if the state’s finances are badly hit. Earlier, at a party meeting, his supporters also criticised the government decision and said that the decision was taken in haste. Surprisingly, Mani and his Kerala Congress supported Oomen Chandy, along with the Indian Union Muslim League, when the Chief Minister announced the prohibition plan.
Most surprising, however, was the the change of stand of the Church, which said that people might view the decision on prohibition as something that was done in haste. Earlier, the Church had threatened the government with dire consequences if it didn't implement prohibition.
Besides Mani, labour minister Shibu Baby John also is critical of the government decision, purely from the point of view of revenues. He said the if the government runs out of money and is incapable of paying its employees, the responsibility is collectively on the entire cabinet. Earlier, Congress MP and former union minister Shashi Tharoor reportedly said the decision would negatively impact the state’s tourism sector.
Given the financial woes of the government, whose revenue sources are extremely limited, the loss of revenue from liquor sales appears to be a public concern in the state. The state has a debt of Rs 114,000 crore accounting for 28.29 per cent of its GDP. The CPM has repeatedly attacked the Chandy government for its careless handling of the finances. CPM leader and former finance minister TM Thomas Issac has demanded a white paper. During the CPM government, the state’s finances were far healthier and economists in the state are of the opinion that inefficient revenue collection and profligacy has led to such a situation in the last two years.
To maker matters worse, the neighbouring states seem to be readying to attract tipplers from the state across the border. Local TV channels reported that in districts that share the border with Tamil Nadu and Karnataka, liquor shops, bars and hotels are likely to come up to attract customers from the state. People are reportedly scrambling for properties to set up bars and hotels in the border areas.
This is what had been predicted by critics of Chandy's liquor policy, including former Supreme Court judge Markandey Katju. Prohibition will lead to a parallel system of mafia that the state law enforcement agencies will find difficult to handle. Citing examples where prohibition existed in India, they said that it will lead to revenue losses and illegal networks.
Chandy, in response to Mani’s expression of concern, said on Monday that he was happy with the decision and that the state's people were with him. He said although there would be a loss in revenue, the indirect socio-economic gains of prohibition will be much higher. However, what he or his government is not clear is how they will plug the resource-gap, particularly given the perennial financial trouble that the state is in.
The problem with Chandy’s hasty decision is that there was no planning or thought process on the issue. He was under pressure of being upstaged by state Congress chief VM Sudheeran and he had to salvage the situation somehow. The only option before him was to upstage Sudheeran and make the announcement first. Thus came his government’s prohibition plan.
Now, the reality is slowly sinking in, particularly when needing to overdraw paltry sums from the RBI to run the government. In the coming days and months, the rift between the prohibitionists and the pragmatists will certainly widen. Chandy will still have no answer on how he will make up for the loss in revenue from liquor sales even as neighbouring states make a killing in the border towns.
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Updated Date: Sep 09, 2014 12:30:11 IST