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Liquor licences thru auction to fill coffers

In what may change the way for the cash-strapped state to monetise its resources and locate fresh sources of revenue, the Maharashtra government will auction retail liquor licences with thinking underway to extend these auctions to even manufacturing and wholesale licences in this sector.

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In what may change the way for the cash-strapped state to monetise its resources and locate fresh sources of revenue, the Maharashtra government will auction retail liquor licences with thinking underway to extend these auctions to even manufacturing and wholesale licences in this sector.

"We are looking at (new) methods to raise revenues. One way is auctioning retail liquor vending licences from Gadchiroli and Wardha districts which are under prohibition," Excise Minister Eknath Khadse told dna. "This auction will cover licences for wine shops and permit rooms in these districts and also from Chandrapur, where the state is planning to impose prohibition," he added.

"We will appoint consultants to gauge revenue generation through this route... the cabinet will consider the (auction) proposal," said Khadse.

Senior officials said the government is also planning to adopt the auction route for all licences given by the state Excise department like manufacturing, wholesaling and retailing of IMFL, beer, country liquor and wine.

"This will yield thousand of crores in the first year itself, considering factors like brand value, stock exchange and liquor demand... this monetisation of virtual assets will boost revenues and take Maharashtra from the present deficit situation to a surplus," the official said, pointing to how it otherwise earned just around Rs 500 crore as licensee fees. This will also help break monopolies and ensure that revenues generated in the sector flow to the government as well.

Maharashtra has around 23,000 state excise licences including around 40, 45, 12 and 72 manufacturers respectively of country liquor, IMFL, beer and wine. It has 225 country liquor and 241 IMFL wholesalers, 4,250 country liquor retailers, 1,700 wine shops, 12,000 permit rooms and 4,500 beer parlours. Due to opposition from prohibition activists, no new wine shop licences have been issued since 1973.

While southern states like Tamil Nadu and Karnataka have state-run beverages corporations to market genuine liquor at reasonable prices, some like Madhya Pradesh, Haryana, Uttar Pradesh bid out licences.

"Present excise revenues have reached saturation levels as we have raised excise duty and licence fees from time to time," said the official, adding that between 2011-12 and 2014-15, the duty was hiked by 60% and the licence fees saw a 50% rise. "This leaves little room for a further hike by raising these fees," the official pointed out, adding that the state did not want to form a beverages corporation, leaving only the auction route open.

"However, this will have to be a political decision as there will be tremendous opposition from the bureaucracy and some entrenched elements in the liquor lobby who have made massive gains with little accruing to the state," the official admitted, pointing out that presently, though these licences were given for a one year period, it was as if they were handed out in perpetuity.

Maharashtra follows a policy of discouraging liquor consumption through high prices and low sales and has one of the highest excise duty regimes in India. This leads to the brew being smuggled in from neighbouring states with lower duties.

In 2013-14, Maharashtra generated Rs 10,537 crore revenues, compared to Karnataka (Rs 12,828.32 crore), Madhya Pradesh (Rs 5,908.05 crore), Chhattisgarh (Rs 2,931 crore), Goa (Rs 235 crore), Daman and Diu (Rs 198 crore). This year, Maharashtra has a Rs 11,500 crore target.

Incidentally, Khadse, as the Excise minister during the previous Shiv Sena-BJP government, had brought in the ad valorem taxation system based on manufacturing cost of liquor, replacing the earlier one which levied it at a specific rate (ensuring the same tax rate for expensive and cheap liquor). This had met with opposition but led to a rise in revenues by around Rs 700 crore at the first go.

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