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Excise taxes levied at cost of public health

ALBERT Camus once said that "by definition, a government has no conscience. Sometimes it has a policy, but nothing more." This axiom is so true of Punjab''s excise policy that one could affix these words as a preamble to it.

Excise taxes levied at cost of public health

PRICING PUZZLE: The manufacturing cost of a pint of beer is less than that of an equal quantity of many fizzes and colas.



HMS Rosha
Jt Excise & Taxation Commissioner (Retd)

ALBERT Camus once said that "by definition, a government has no conscience. Sometimes it has a policy, but nothing more." This axiom is so true of Punjab's excise policy that one could affix these words as a preamble to it. 

But first, let us touch upon two points:

(i) Why does the government make this policy at all;

(ii) How much supervision and control does the government exercise over the excise trade.

Goal of excise policy

Our Constitution stipulates in the Directive Principles of State Policy (Article 47) that the improvement of public health shall be among the states' primary duties, and, in particular, the state shall endeavour to bring about prohibition of the consumption, except for medical purposes, of intoxicating drinks and drugs which are injurious to health. It is in pursuit of this goal that all states formulate a policy every year, so that they can review the progress made towards this goal. 

As for supervision and control, it is stringent and absolute. The manufacture, storage, sale and even consumption of liquor is a carefully supervised and regulated industry. It is conducted under the direct control and supervision of the government. No distilling equipment is built or operated, and no storage or sale of alchoholic substances allowed without a licence, which is always precarious in nature, being subject to immediate cancellation, if the licencee should infringe upon or violate any regulation. 

Related to this issue is the matter of prohibition. Prohibition is a regressive option, leading to the proliferation of bootlegging and other crimes and depriving the government of the much-needed revenue. It also induces the youth to take recourse to substances more harmful to the community's health. But at the same time, improving public health is the primary duty of the state. And this is where the excise policy utterly fails the consumer, the citizen and the Constitution.

Beer, wine healthier than hard liquor

Ideally, the excise policy's aim should be to discourage the consumption of liquor, especially hard liquor, and to promote the consumption of softer and less harmful drinks. Beer and wine are the two healthier alternatives to stronger beverages like whiskey, rum, vodka, gin et al. Does the policy encourage their consumption over more injurious beverages? The answer is a resounding No! Obtaining a good, light beer or a table wine in most towns of Punjab is not an easy task. Even if available, these are astronomically priced. Daily wage workers, rickshaw-pullers, persons of lower and middle income groups, looking for a high, opt for a bottle of raw country liquor or cheaper brand of equally raw whiskey, rather than a bottle or two of beer or a pint of wine. Both these drinks are, on the contrary, priced in the higher bracket and are thus projected as sources of entertainment for the higher income groups. They are sold and served only in swanky shops and bars.

Perhaps, most people do not know that the manufacturing cost of a pint of beer is less than the manufacturing cost of an equal quantity of many fizzes and colas. The final price of this beverage that emerges in the market is after the addition of government levies and sellers' profit. It is a medically acknowledged fact that consumption of beer is less harmful than some of the colas and other processed soft drinks flooding the market. Then why this anomaly in the prices? 

It is the same story in the case of wine. It is well known to be a healthier option than all the other hard drinks. Why has there been no attempt to influence people's choices to consume wine in place of whiskey or rum or other such hard beverages? Succeeding governments have failed to give any incentive to either the manufacture or sale or consumption of these healthy beverages. Rather, our policy literally goads society into consuming drinks more injurious to health.

Wither ‘Tandrust Punjab’

This is so because most governments have lost sight of why in the first place they formulate a policy. Now only two objectives guide the policy:

(i) To garner the maximum revenue. 

(ii) To protect the licencees’ interest. 

These guiding principles are not in themselves bad as long as they remain in tandem with the Constitution and the interests of the consumer. If it were the policy of the government to dissuade people from consuming harmful drinks and, therefore, it levied excise taxes on them, then it would be a laudable aim. Then such taxes would be a natural corollary to this policy and there could be no connotation of unrighteousness attached to them. The state would be justified in raising revenue from a commodity, the consumption of which has an unhealthy effect on society, and to use this revenue for public welfare. But this not being the case, and the state levying taxes at the cost of public health, these levies degenerate into repressive taxes. One would call it a "sin" tax if the connotation of sin is applied to the state. 

By adopting this policy, the state is jeopardising the health of our workforce and our youth and destroying the peace and harmony of many a home and hearth. Wither my "Tandrust Punjab"? 

How to change drinking habits

This situation needs to be changed and it doesn't require too much imagination to do so. By tweaking the pricing method of lighter beverages, like beer and wine, and pushing them from the upper bracket into the lowest group, the cost of these items can be drastically reduced. The duty, licence fee, assessed fee etc lost because of such adjustment can be compensated by increasing the same on hard liquor. This would place the harmful drinks more out of reach of the consumers, while encouraging them to consume the less harmful ones.

Another measure that will change the drinking habits of people is allowing beer and wine to be sold out of malls, stores, and shops, and to be served out of cafes, bars and ahatas. Restrictions on such measures only help to make them more scarce and pricey. Such steps, in concert with competitive and affordable prices of these beverages, will usher in the much-needed change in the drinking habits of society, especially the poor.

Possibly, these measures will upset the liquor lobby. But this is not an industry that the state is obliged to protect. (The ones that needed such protection have already fled). Also, possibly, a small dent may be there in revenue, which is a call the Finance Minister has to take, being the king of this realm. As Shakespeare said, the excise policy is the  "......thing, where we'll test the conscience of the king".

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