INTRODUCTION

ALCOHOL IN INDIA
India is the fastest growing alcohol market in the world. The alcohol
consumption in India is about 6,700 million litres. It grows approximately at a
rate of 30% annually. It is expected to cross 19,000 million litres by 2015.
Whisky is the most preferred alcoholic beverage.
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 (except on the
island of Bangaram). All other Indian states permit alcohol consumption but fix
a legal drinking age of between 1825 years. In some states, the legal drinking
age can be different for different types of alcoholic beverages.
Whisky is the most preferred alcoholic beverage, comprising 80% of the 6,700
million litres of liquor sold through authorised liquor shops annually. The Indian
whiskey market which currently stands around 40,500 crore is expected to
cross 54,000 crore (US$11.88 billion) by 2013.
Beer made from malt is popular among the youth and its consumption is
expected to reach 2.4 billion litres by 2012. The market comprising beer, wine
and spirits would cross 140,000 crore (US$30.8 billion), selling 19,000 million
litres, in 2015 from the current 50,700 crore (US$11.15 billion) market.
India produces almost 70% of alcohol and accounts for 10% of the imports in
southeast Asia, counterfeit bottles form 15-20% of the total outtake.

According to Government statistics 21% of adult Indian men and 2% of women

drink. About 60 million Indians are alcoholics.
Kerala is the largest consumer of alcohol in India, followed by Punjab. Kerala
alone accounts for 16% and Punjab accounts for 14% of all the liquor consumed
in India. Andhra Pradesh, Haryana, Himachal Pradesh, Karnataka, Rajasthan,
Tamil Nadu and West Bengal are leading liquor consuming states in that order
accounting for 40% of all the liquor consumed in India. The union territories of
Chandigarh and Pondicherry account for almost 6% of all the liquor consumed
across India.
LIQOUR TRADE IN KERALA AND TAMILNADU
Both the states have a separate public sector company fully owned by the
respective governments. These company have a monopoly over wholesale and
retail vending of alcohol in the states. It controls the retail sale of Indian Made
Foreign Liquor and beer trade in the state.
KERALA - Kerala State Beverages (M&M) Corporation Ltd
TAMILNADU - Tamil Nadu State Marketing Corporation
The reorganisation of retail alcohol trade in the states has brought record
revenues for the governments allowing them to increase spending on welfare
schemes. The revenue from alcohol sales constitutes nearly half of the states
annual tax revenues. Tamil Nadu ranks first among the states of India in alcohol
sales by volume. While consumption of alcohol has increased among the
population, deaths due to consumption of contaminated illicit liquor (common
during the prohibition era) have gone down. Kerala is one of the highest per
capita consumption of alcohol in India, alcohol related problems are on the rise

with even the President expressing deep concern about the rising alcoholism in
Kerala.
The monopoly trade has led to widespread irregularities like adulteration,
corruption, overpricing and black marketing in the retail outlets.
Alcohol as a major source of Indirect tax revenue has always been the centrepoint of the policy makers thinking and little pain and consideration were given
to look on to the social aspect and economic consequences. Alcohol policies
especially those relating to production, consumption and taxation have varied
widely across the states. Alcohol policy and legislation in India is based on
political compulsions rather than interests of public health. Part of the reason is
that there has been little attempt to examine the economic and social burden
generated by misuse to provide a sound guide for policy makers.
Article 47 of the directive principles of state policy described in the Indian
constitution says: the state shall regard the raising of the level of nutrition
and standard of living of its people as among its primary duties and in
particular, 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.
This study is done to check whether the states, Kerala and TamilNadu, uphold
the constitutional promise. The study also focuses to trace the sales and revenue
trend of liquor market in the states. Apart from that, the growing necessity of the
revenue raised from the liquor market for the respective state governments
exchequer is also explained.

OBJECTIVES
3

The objectives of our study are focused to bring the comparison between liquor
policies of Kerala and TamilNadu, two states in India, where there is a large
consumption of alcohol.

To compare the liquor license and policies of the states.

To compare and study the sales, revenue and pricing of liquor in the
states.
To give suggestions and recommendations based on the study.

CHAPTER: 3
METHODOLOGY

RESEARCH METHODOLOGY

(A) EXPERIMENTAL PROCEDURES

The research methodology is discussed under the following headings.
1. Selection of area
The areas selected to conduct the research were five star hotels in
Trivandrum and Chennai, two capitals of the states. The reasons for
choosing Trivandrum and Chennai are that they helped in saving more
time and were more accessible. This ensured the smooth flow of the
research work.
2. Selection of subject
The subject chosen for the research is A comparative study of the Liquor
license of Kerala and TamilNadu. The above research subject gives an
insight into the importance of a better liquor policy to reduce the impact
of the signature pattern of hazardous alcohol use in the states.
3. Selection of method
Primary - The data was collected after interviewing the guests
who were staying in the hotel. This was done with the help of a
questionnaire and a verbal interview.
5

 Secondary - The data was collected from Internet, Hotel Journals,

periodicals and books.
Both the sources were used in completion of this project.

REVIEW OF
LITERATURE

EVOLUTION OF ALCOHOL USE IN INDIA

Alcohol use has been an issue of great ambivalence throughout the rich and
long history of the Indian subcontinent. The behaviors and attitudes about
alcohol use in India are very complex, contradictory and convoluted because of
6

the many different influences in that history. The evolution of alcohol use
patterns in India can be divided into four broad historical periods (time of
written records), beginning with the Vedic era (ca. 1500-700 BCE). From 700
BCE to 1100 CE, ("Reinterpretation and Synthesis") is the time of emergence of
Buddhism and Jainism, with some new anti-alcohol doctrines, as well as postVedic developments in the Hindu traditions and scholarly writing. The writings
of the renowned medical practitioners, Charaka and Susruta, added new lines of
thought, including arguments for "moderate alcohol use." The Period of Islamic
Influence (1100-1800 CE), including the Mughal era from the 1520s to 1800,
exhibited a complex interplay of widespread alcohol use, competing with the
clear Quranic opposition to alcohol consumption. The fourth period (1800 to the
present) includes the deep influence of British colonial rule and the recent half
century of Indian independence, beginning in 1947. The contradictions and
ambiguities-with widespread alcohol use in some sectors of society, including
the high status caste of warriors/rulers (Kshatriyas), versus prohibitions and
condemnation of alcohol use, especially for the Brahmin (scholar-priest) caste,
have produced alcohol use patterns that include frequent high-risk, heavy and
hazardous drinking. The recent increases in alcohol consumption in many
sectors of the general Indian population, coupled with the strong evidence of the
role of alcohol in the spread of HIV/STI infections and other health risks, point
to the need for detailed understanding of the complex cross-currents emerging
from the past history of alcohol use and abuse in India.

ALCOHOL AND PUBLIC HEALTH

Prevalence of alcohol use India is generally regarded as a traditional dry or
abstaining culture. A recent National Household Survey of Drug Use in the
country, the only systematic effort to document the nation-wide prevalence of
7

drug use, recorded alcohol use in only 21% of adult males. Expectedly, this
figure cannot accurately mirror the wide variation that obtains in a large and
complex country like India. The prevalence of current use of alcohol ranged
from a low of 7% in the western state of Gujarat (officially under Prohibition) to
75% in the Northeastern state of Arunachal Pradesh. There is also an extreme
gender difference. Prevalence among women has consistently been estimated at
less than 5 per cent but is much higher in the Northeastern states. Significantly
higher use has been recorded among tribal, rural and lower socioeconomic
urban sections).
The per capita consumption is 2 litres/adult /year (calculated from official 2003
sales and population figures). After adjusting for undocumented consumption,
which accounts for 45-50% of total consumption, this is likely to be around 4
litres, but still low compared to that in wet nations. Licit and illicit spirits i.e.
government licensed country liquor (rectified spirit mixed with water at Indian
made foreign liquors like whisky, rum, vodka and gin (42.8%v/v); and illicitly
distilled spirits (of indeterminate composition) constitute more than 95% of the
beverages drunk by both men and women. Beer accounts for less than 5% of
consumption (70% of beer sales is dominated by strong beers at strengths over
8% v/v). Wine is a nascent but growing market.

LIQUOR TRADE IN KERALA

HISTORY
Excise Department is one of the oldest Departments in the State, and it
contributes a major share of the State Revenue.
The word ABKARI derived from Persian (abkara from kar- business) strengers
Persian English Dictionary defines it as tax on the manufacture and sale of
8

Spirituous liquors and intoxicating drugs. According to the glossary of judicial

and revenue terms it means revenue derived from duties levied on the
manufacture and sale intoxicating drugs whether in substance, infusion, extract
as opium, charas, etc.
After the formation of the State of Kerala, it was noticed that different Abkari
Acts were in force in different parts of the State, namely; Travancore Abkari Act
for Travancore, Cochin Abkari Act for Cochin, Madras Abkari Act for Malabar.
Existence of the different Acts created much practical difficulties and a unified
Act for the whole of the state became necessary. Therefore Government decided
to extent the Cochin Abkari Act for the whole of the state with necessary
amendments. The Cochin Abkari Act I of 1077 was renamed as the Abkari Act
I of 1077 and was extended to the whole of the state with effect from
11.05.1967. Various amendments were made in the Abkari Act from time to
time.
The original Act viz., the Cochin Abkari Act was passed by His Highness the
Maharaja of Cochin on the 5th day of August 1902, corresponding to 31st day of
Karkadagom 1077.
Excise Department was functioning under the Board of Revenue till 30.6.98.
Excise Commissioner is the administrative head.
The Department is administering laws related to Liquor, Narcotic Drugs and
Psychotropic Substances, Medicinal Preparations containing alcohol and
narcotic drugs, etc.
The Acts enforced by Excise Department are [1]. The Abkari Act 1 of 1077, [2].
The Narcotic Drugs and Psychotropic Substances Act 1985, [3]. The Medicinal
and Toilet Preparations (Excise Duties) Act, 1955 [4]. The Spirituous
Preparations (Inter State Trade and Commerce) Control Act 1955., and [5]. The
Prohibition Act 1950 (Sections 1, 7 & 11 only). The NDPS Act and the M&T.P
Act were enacted by the Central Government.
9

The various rules formulated under the Abkari Act, NDPS Act, M & TP
Act are furnished below:
1.
2.
3.
4.

Abkari Shops (Disposal) Rules 2002.

Kerala Foreign Liquor Rules 1953.
The Kerala Liquor Transit Rule 1975.
The Kerala Foreign Liquor (Compounding, Blending and Bottling) Rules

1975.
5. Abkari Shops Departmental Management Rules 1972.
6. Kerala Rectified Spirits Rule 1972.
7. Kerala Winery Rules 1970
8. The Kerala Distillery & Warehouse Rules 1968.
9. The Kerala Spirituous Preparation Control Rules 1969.
10.The Brewery Rule 1967.
11.Cochin Denatured Spirit & Methyl Alcohol Rules 1965.
12.Varnish Rules 1965.
13.Foreign Liquor (Storage in Bond) Rules 1961.
14.Tree Tax Rules 1959.

Form

Details of Licences
I -- Indian Made Foreign Liquor

L-1

Wholesale licensee of Indian Made Foreign Liquor

L-2

Retail vend of Indian Made Foreign Liquor/Beer.

L-3

Service of liquor in a hotel (to the residents in their rooms).

L-4

It is granted to independent restaurants for service of liquor.

L-5

Service of liquor in a bar/restaurant attached to a hotel.

L-5A

Retail vend of foreign liquor in a bar/dining car in a luxury train.

L-6

Retail vend of Indian Made Foreign Liquor in duty free shop.

L-6A

Retail vend of foreign liquor in duty free shops off the premises.

L-7

Retail vend of Indian Made Foreign Liquor in a military canteen.

Source:ksbc.kerala.gov.in
The principal duties of the Department are protection, augmentation and
collection of Excise Revenue and enforcement of the above acts and various
10

Rules made there under. The Department prevents leakage of revenue, and
exerts effective control on the abuse of liquor and Intoxicating Drugs. The
duties of Excise Department are broadly classified as Collection of Revenue,
Enforcement activity to prevent illicit liquor production, sale and trafficking and
Campaign against Alcoholism.
Liquor includes spirits of wine, arrack, spirits, wine, toddy, beer and all liquid
consisting of or containing alcohol. Individual has no fundamental right over the
manufacture and trade of liquor. Absolute right on liquor is vested with the
State. Government formulates Abkari policy of the state every year. The policy
formulated by the State Government is implemented by the Excise Department.

KERALA STATE BEVERAGES CORPORATION

(KSBC)
KSBC was formed on 23.2.1984 to take over the wholesale distribution of
liquor in a phased manner and to eventually set up distilleries and blending units
to produce spirit, arrack and IMFL. Since then the distribution of liquor has
been brought under the control of the Corporation. By a decision in 2001 the
majority of the retail outlets also has been entrusted to the Corporation. As at
present the whole activity of IMFL from procurement to distribution and sale to
the consumer is controlled by the Corporation except for loose vending of liquor
by Bars / Clubs and a small portion of the retails by Consumer Federation.
HISTORY

11

The judicial commission of inquiry appointed by the Government to streamline

the

liquor

trade

in

the

state

recommended

(1) To provide genuine liquor at reasonable price, through Government

agencies.
(2) Exploitation through increased taxation and exploitation by middleman
should be stopped and consumer protection must be the guiding policy.
For achieving the above, nationalization of entire liquor trade was suggested.

In line with the suggestion the Government decided to set up a Public Sector
Corporation to procure spirit and arrange blending, bottling, sealing and
distribution of arrack and also for dealing with the sale of IMFL. An amendment
was made in the Abkari Act in 1984 to give effect to the same.

OBJECTIVES OF THE ORGANISATION

(1) To provide genuine quality liquor to consumers at reasonable prices.
(2) To make available supplies of liquor commensurate to demand.
(3) To evolve a proper system to prevent misuse, distribution of spurious liquor
through unauthorized sources and evasion of duties and taxes by middlemen.
(4) Consumer protection and satisfaction.
RULES & REGULATIONS
Purchase Procedure:
Every year, the Corporation invites offers from prospective Indian Made
Foreign Liquor/BEER suppliers situated throughout the country by inviting
12

tenders for entering into rate contract for sales and supply of Indian Made
Foreign Liquor /BEER for the ensuing financial year (April to March). This is
being done as per directions of the government. From Financial Year 2001-2002
the offer was extended for supply of Foreign Made Foreign Liquor also.

The invitation to offer is advertised positively by February/every year in

important newspapers. Notices are also sent individually to the existing
suppliers in this regard. The offer document stipulate the conditions for supply,
the quality specifications, payment terms, general conditions to be complied etc.
The offerors have also to submit an earnest money deposit of Rs.10 lakhs each
for FMFL / IMFL / Beer for a value of business upto 15000 cases and shall
progressively increase by Rs.1 lakhs upto addition of every 15000 cases
transacted. The maximum Security Deposit is Rs.75 lakhs. For exclusive Wine
suppliers the EMD is Rs.50,000 and for value of business of Wine above 550
cases and upto 1100 cases, Security Deposit will be Rs.1 lakh and shall
progressively increase by Rs.25,000 for every additional sale of 550 cases of
Wine. The maximum Security Deposit will be Rs.3 lakhs. The documents
received within the stipulated date are tabulated and presented to the Board of
Directors. Suppliers who satisfy the conditions stipulated for supply are
accepted by the Board. The list of suppliers, so approved shall from the
suppliers

rolls

of

the

Corporation

for

the

ensuing

financial

year.

The rate contract agreement for supply of liquor is not a competitive tender.
Each supplier has definite approved brands. Only the approved supplier who
owns the brand can supply the respective brands to the Corporation Eg. Mc
Dowelll brandy can only be supplied by Mc Dowell & Co. Ltd., Hercules Rum
by M/S Khoday Industries and King Fisher by Premier Breweries Ltd.
Therefore the choice of the Corporation is to accept the rate offered or to decide
13

not to purchase the brand. As per the provision in the rate contract agreed the
Board of Directors of the Corporation is empowered to fix the supply prices.
Accordingly the Board of Directors fixes the supply prices at the time of
finalization of the rate contract agreement, which will be FIRM during the rate
contract period. The Corporation has however fixed a minimum price of
Rs.235/- for a case of Indian Made Foreign Liquor. This is done on
consideration of cost analysis of various elements that constitute cost and
thereby the minimum price at which supply could be made is arrived at. The
quality of Foreign Made Foreign Liquor and Indian Made Foreign Liquor and
BEER supplied confirm to the standards indicated in the offer condition. This
has been fixed in consultation with the Chief Chemical Examiner to the
Government of Kerala. The Chemical Examination Certificate and a certificate
showing that ENA has been used in production (in case of Indian Made Foreign
Liquor) is to be sent to the Corporation against dispatch of each batch of Indian
Made Foreign Liquor/Beer. For Indian Made Foreign Liquor such Chemical
Certificates

should

be

duly

authenticated

by

the

Chief

Chemical

Examiner/Authority recognized by the State and ENA Certificate by the Chief

Executive of the distillery authenticated by Excise Authority. Chemical
Examination Certificates of Beer should be authenticated by the Chemist/Brew.
Master of the Brewery and duly authenticated by Excise authority of the
Brewery. The Corporation also reserves the right to periodically subject the
samples for Chemical Examination/Verification of standards and the Expenses
incurred by the Corporation for such Chemical Examination/Verification will
have to be borne by the supplier. These stipulations are strictly adhered to.

Government have issued guidelines vide G.O.No.24112/DL/85/TD dated

28.10.1985 to place orders by and large only on replacement/replenishment
basis. Accordingly purchase of Indian Made Foreign Liquor and BEER are
14

based on the average monthly sales of the respective supplier. The average is of
the previous three month sales. The average monthly sales are reviewed every
month and a re-order quantity (ROQ) based on the requirement is placed. The
ROQ is normally 30 days, 40 days, 45 days requirement as the case may be.
When the stock plus the order pending execution falls below the ROQ, the
shortfall

is

replenished

on

daily

basis.

The arrangement to replenish stock could be applied only if a supplier has an

average monthly sales. Unless an order is given to companies who quote for the
first time there cannot be an average monthly sales for the respective supplier
and consequently the norm cannot be implemented. It is to ensure this the initial
order of a few loads are given for new suppliers at the commencement of the
financial year. In order to ensure uniformity in placing purchase orders at the
commencement of the year all the companies are uniformly given initial orders.
Thereafter from the next fortnight onwards, orders as per formula indicated
above

is

being

given.

Special orders are also placed on trade discount basis to the supplies depending
upon the requirement. That is if a company offers a trade discount of 10% for
IMFL and 5% for Beer, special orders are placed to the extent of a maximum of
two

loads

when

the

stock

is

nil

or

meager.

A Purchase Committee consisting of the Company Secretary, Internal Auditor,

Finance Manager, Administrative Officer , Regional Manager and Senior
Manager reviews the procedure above. Recommendations of the Committee are
placed before MD, who gives final orders for placement of purchase orders. The
orders so placed are subsequently ratified by the Board of Directors.

15

LIQUOR TRADE IN TAMILNADU

The Prohibition and Excise Department is a major revenue earning department

of the State
functioning under the administrative control of Home, Prohibition and Excise
Department.
1. Commissionerate of Prohibition and Excise;
2. The Prohibition Enforcement Wing of the Police;

16

3. The Narcotics Intelligence Bureau (NIB);

4. The Tamil Nadu State Marketing Corporation Limited (TASMAC).
are the four organizations functioning under this department.
The Excise administration is done by the Commissioner of Prohibition and
Excise. Two Joint Commissioners and five Assistant Commissioners are
working to assist the Commissioner in the headquarters. The Commissioner is
responsible for enforcing various provisions of the Tamil Nadu Prohibition Act,
1937 (Tamil Nadu Act X of 1937) and the rules made thereunder and he
oversees and controls the entire excise administration in the State. He is vested
with powers for granting necessary privileges and licences with prior approval
of the Government for the establishment of Distilleries, Indian Made Foreign
Spirit, Wine and Beer manufacturing units and for renewing their licences
annually. The District Collector supervises the excise administration at the
district level. He exercises various statutory powers under the Tamil Nadu
Prohibition Act, 1937 and the rules made thereunder. The Collector is assisted
by an Assistant Commissioner (Excise) in the cadre of Deputy Collector in all
Districts except Chennai and Coimbatore, where Deputy Commissioners
(Excise) in the cadre of District Revenue Officer are assisting the Collectors. In
the Distilleries and Indian Made Foreign Spirits / Beer manufacturing units,
Deputy Collectors are posted as Distillery Officers and Excise Supervisory
Officers respectively. Officers of the Revenue Department in the cadre of
Tahsildars and Deputy Tahsildars are posted as Excise Supervisory Officers and
Bonded Manufactory Officers in the chemical units and Bonded Warehouses to
supervise the proper use of alcohol and to levy excise duty on excisable articles
under the Tamil Nadu Prohibition Act, 1937 and the Medicinal and Toilet
Preparations (Excise Duties) Act, 1955 and the Rules framed there under.
17

Molasses produced as a byproduct in the manufacture of Sugar in the Sugar

Mills is used as the raw material in the manufacture of alcohol. There are 42
sugar mills in the State, out of which 16 are in the Co-operative Sector, 3 in the
Public Sector and 23 in the private sector. The details of the Sugar mills and
their capacity for storage of molasses is indicated in Annexure-I.
The Tamil Nadu Molasses Control and Regulation Rules, 1958 governs the
possession, sale, use, transport and export of molasses. An Administrative
Service Fee at the rate of Rs.300/- per metric tonne is being levied for export
and import of Molasses.
Distilleries and Alcohol
Major use of alcohol in the State is for the manufacture of Indian Made Foreign
Spirit products. However, alcohol in small quantities are used in Educational
institutions, Laboratories and Research institutions. Two Distilleries in Cooperative Sector and fifteen Distilleries in private sector are manufacturing
alcohol from molasses in the State. Three out of eight distilleries which have
been granted permission for expansion to enhance their total existing production
capacity viz., Tvl. Sakthi Sugars Limited, Tvl. Bannari Amman Sugars Limited
and Tvl. Dharani Sugars and Chemicals Limited have completed the expansion
work and commenced the spirit production to the enhanced capacity. During the
year 2009-2010, distillery licence has been issued to Tvl.S.V.Sugars Limited for
the operation of a new distillery at Palayaseevaram Village, Kancheepuram
District with 100 KLPD production capacity of alcohol from molasses. Again in
2009-2010 privilege has been issued to three distillery units for the production
of alcohol using molasses viz. (i) Tvl. Dhanalakshmi Srinivasan Sugars and
Chemicals Limited, Perambalur District with the production capacity of 60
18

KLPD of alcohol (ii) Tvl. Dharani Sugars and Chemicals Limited, Villupuram
District with production capacity of 100 KLPD of alcohol and (iii) Tvl. Rajshree
Sugars and Chemicals Limited, Villupuram District with production capacity of
80 KLPD of alcohol.

Indian Made Foreign Spirits and Beer Manufacturing Units

There are nine Indian Made Foreign Spirits manufacturing units and three Beer
manufacturing units in Tamil Nadu supplying IMFS and Beer products
respectively to the Tamil Nadu State Marketing Corporation Limited. The
details relating to production of IMFS and Beer are furnished in Annexure II.
Taking into account the existing capacity within the State for production of
Indian Made Foreign Spirits and the projected requirement for sales within the
State, the Government have taken a policy decision not to grant privilege to new
units for the manufacture of IMFS for the present.
Manufacture of Wine
The Government have framed the Tamil Nadu Wine (Manufacture) Rules, 2006
in order to give an opportunity to those interested to establish wineries in the
State. In the year 2009-10, a licence for manufacturing wine has been issued to
a private sector unit viz. Cumbum valley Winery (P) Ltd., in Theni District. The
unit is expected to commence its
production shortly. The new winery at the Cumbum valley will be highly
beneficial to the grape cultivating farmers of Theni District.
The Privilege fee, application fee and licence fee for the preparation of
Sacramental Wine
used in Catholic Churches has been reduced to the level that prevailed prior to
1999.
19

Accordingly, from 1.9.2009, the following rates of fee are being collected.
Fee prior

Reduced fee

to 1.9.2009

w.e.f. 1.9.2009

Rs.

Rs.

i) Privilege fee

40,000/-

10,000/-

ii) Application fee

400/-

100/-

iii) Licence fee

200/-

50/-

Source: tasmac.tn.gov.in
Import of Foreign Liquor
Consequent to General Agreement on Tariffs and Trade (GATT) 1994,
restrictions on import of foreign liquor has been removed. The Government
have, therefore issued necessary amendments to Tamil Nadu Prohibition Act,
1937 (Tamil Nadu Act X of 1937) and relevant rules made thereunder to make
them compatible to World Trade Organisation agreements. With a view to levy
special privilege fee on the IMFS Products and spirits imported from foreign
countries and from outside the State, the Tamil Nadu Indian Made Foreign
Spirit (Supply by Wholesale) Rules, 1983, has been amended so as to adopt a
uniform special privilege fee.

The various rules formulated are furnished below:

20

1. Tamil Nadu Molasses Control and Regulation Rules 1958 - Prohibition &
Excise Dept
2. TN Liquor (License and Permit) Rules 1981 - Prohibition & Excise Dept
3.

The Tamil Nadu Spirituous Preparations (Control) Rules, 1984. Prohibition & Excise Dept

4. The Tamil Nadu Narcotic Drugs Rules, 1985 - Prohibition & Excise Dept
5. The Tamil Nadu Liquor Retail Vending (In Shops And Bars) Rules, 2003 Prohibition & Excise Dept
6. Tamil Nadu Distillery Rules, 1981 - Prohibition & Excise Dept
7. The Tamil Nadu Disposal of Articles (Confiscated under theTamil Nadu
Prohibition Act) Rules, 1979 - Prohibition & Excise Dept
8. Denatured Spirit - FP Rules 1959 (Updated) - Prohibition & Excise Dept
9. Tamil Nadu Indian-Made Foreign Spirits (Manufacture) Rules, 1981
10.The Medicinal and Toilet Preparations (Excise Duties) Rules, 1956
11.Tamil Nadu Rectified Spirit Rules, 1959
12.The Tamil Nadu Liquor (Transit) Rules, 1982
13.Tamil Nadu Mass Wine Rules , 1984
14. Tamil Nadu Spirituous Essences Rules 1972

21

15.Tamil Nadu Wine (Manufacture) Rules, 2006 .

16.The Tamil Nadu Brewery Rules, 1983.
17.The Tamil Nadu Liquor (Supply by Wholesale) Rules, 1983.

FORM
DETAILS OF LICENSE
The licences issued under this class are for privilege of sale of Indian
Made Foreign Spirits in retail under section 17-C of the Act or for sale of
F.L. 1

foreign liquor
Licence for the grant of privilege of
retail sale of bottled Indian
Made foreign spirits or sale of foreign

F.L. 2.

liquor.
Licence for possession of liquor by a
non-proprietory club for
Supply to members.

F.L. 3.

Licence for possession of liquor by the

Star Hotels for supply to
foreign tourists and foreigners resident
in India holding personal
permits and also citizens of India
holding personal permits for
consumption within the licensed room
of the Hotel or for removal
to their private rooms in the same hotel
in which they stay for
Consumption there.

22

F.L.3(A)

Licence for possession of Liquor by

hotel run by the Tamil Nadu
Tourism Development Corporation for
supply to persons who
actually stay in the hotel for a
minimum period of 3 hours for
Consumption in the rooms of the hotel.

F.L. 4.

Licence for possession for liquor by

the Manager, Canteen Stores
Department ( India ), Canteen Retail
and Bulk issue Depot, Fort St.
George, (Chennai) for a supply to
military contractors and officers
of the military units holding licences.

F.L.4(A)

Licence for possession and sale of

liquor to Military Units and
Military personnel and Ex-servicemen.
.

F.L. 5.

Licence for possession and issue of

liquor by the Madras Seamens
Institute / Madras Seamens Hostel to
the Officers Seamen of the

F.L. 6.

Merchant Navy
Licence for possession and use of
liquor for Scientific Industrial or
such like purposes.
23

F.L. 7.

Licence for possession and sale of

wine, grape juice or other liquor
for sacramental purposes.

F.L. 8.

Special licence for possession and

issue of liquor to International
Passengers on aboard the Aircraft of
Air-India.

F.L. 9.

Special licence for possession and

issue of liquor including bottled
liquor to International Air passengers
transiting the
Meenambakkam Civil Airport who are
required to wait at the
Airport transit lounge reserved for such
passengers before
resuming their journeys 1[ and issue of
foreign liquor to the foreign
diplomats stationed at ( Chennai )].

F.L. 10.

Special licence for possession of liquor

by an approved
restaurant and to serve liquor for
consumption in the bar of the
restaurant to the foreign tourists or
foreign residents of India or
24

Indian Citizens during their halt at the

airport.
F.L. 11.

Licence for the grant of privilege of

retail sale of foreign liquor

FORM
F.M. 1.

DETAILS OF LICENSE
Licences for liquor used for medicinal purposes.
Licence for possession and vend of
medicated wines to F.M. 1,
F.M. 2, F.M. 3 or F.M. 4 licences.

F.M. 2.

Licence for possession and sale of

brandy or medicated wines for
medicinal purposes by chemists or by
persons or firms which
employ chemists.

F.M. 3.

Licence for possession and issue of

brandy or medicinal wines for
medicinal purposes by a medical
practitioner.

F.M. 4.

Licence to medical practitioner in

charge of a hospital for
possession and use of brandy or
cashew arrack or medicated wines
for medicinal purposes in the hospital.
Source: tasmac.tn.gov.in

Duration of licence:25

Every licence granted under these rules shall be valid for the financial year
beginning from the 1st of April or the date of issue of the licence and ending
with the 31st March, immediately following unless otherwise stated in the
licence issued in a particular case.
Refusal of licence:If the licensing authority decides that the applicant is not eligible for the grant of
privilege and issue of licence or that the grant of the privilege and issue of
licence are not justified with reference to conditions and circumstances
specified in rule 19, he shall, by an order in writing, refuse to grant the privilege
and issue of the licence for reasons to be specified in the order. In that case, the
licence fee, if any, paid by the applicant, shall be refunded to him.
Renewal of licence:A licence holder desiring to renew the licence shall make an application in the
prescribed form (the same as for the original grant of the licence) atleast one
month before the date of expiry of the licence. The application may be sent to
the licensing authority direct. The provisions of rules 18 to 20 shall, as far as
may be, apply to an application for renewal of licence as if it were an
application for the original grant of a licence, where an application for renewal
of the licence has not been made within a period of one month before the expiry
as specified herein, but in no case after the expiry of the licence, the licensing
authority may admit such application, provided there are good and sufficient
reasons for the delay on payment of an additional fee of twenty five per cent of
the prescribed licence fee.

26

TAMILNADU

STATE

MARKETING

CORPORATION

LIMITED

(TASMAC)

HISTORY
TASMAC was established in 1983 by the government of M. G. Ramachandran
(MGR) for wholesale vending of alcohol in Tamil Nadu. The state has a long
history of prohibition, first implemented in 1937 by the Indian National
Congress government of C. Rajagopalachari. Between 1937 and 2001, it was
lifted briefly during 1971-74, 198187 and 1990-91. After 1983, TASMAC was
in charge of wholesale liquor sales in the state whenever prohibition was lifted.
In 2001, prohibition was lifted again and TASMAC became the wholesale
monopoly for alcohol. For retail vending, the state auctioned off licenses for
running liquor shops and bars. But this led to the formation of cartels and loss of
revenue to the state. The government tried to counter this by introducing a lot
system from the financial year 2001-02, where potential bidders bid for shops
grouped by revenue. But the lot system could not prevent cartelisation, as
bidders later withdrew in favour of others. In October 2003, the government
passed an amendment to the Tamil Nadu Prohibition Act, 1937, making
TASMAC the sole retail vendor of alcohol in the state. By 2004 all private
outlets selling alcohol were either shut down or taken over by the company.
This monopoly established by the ADMK government of J. Jayalalitha came
into effect on 29 November 2003. The DMK government of M. Karunanidhi
which took power in 2006, did not revise its predecessor's policy and TASMAC
continues to control the alcohol industry in the state.
The reorganisation of retail alcohol trade in the state has brought record
revenues for the government allowing it to increase spending on welfare
27

schemes. The revenue from alcohol sales constitutes nearly half of the states
annual tax revenues. Tamil Nadu ranks first among the states of India in alcohol
sales by volume. While consumption of alcohol has increased among the
population, deaths due to consumption of contaminated illicit liquor (common
during the prohibition era) have gone down. The monopoly trade has led to
widespread irregularities like adulteration, corruption, overpricing and black
marketing in the retail outlets. It has also led to increased complaints about
disturbances created by drunk patrons from residents in areas where the retail
outlets are situated. High retail prices (due to a higher tax rate) and absence of a
wide range of choices have led to a thriving alcohol tourism industry in the
neighbouring union territory of Pondicherry, where alcohol prices are low and
different brands are available. TASMAC has been forced to offer more choices
of brands to counter the increase in smuggling of non-available alcohol brands
into the state
FORMATION

OF

RETAIL

VENDING

DIVISION:

In order to completely eliminate the sale of contraband, spurious and non- duty
paid liquor in some licensed premises under the system of retail vending by
private persons, which can affect the public health of the liquor consuming
public and wide spread violations of Maximum Retail Price (MRP) of liquor
fixed by the Government, both of which also cause loss of revenue to the
Government and in order to curb the organized groups and cartels, who act in
groups to ensure that applications are not made for a substantially large number
of shops so as to keep them vacant and thereby to corner the retail vending trade
causing loss of revenue to the Government, it was considered necessary by the
Government to grant the exclusive privilege of retail vending of Indian Made
Foreign Spirits to the State owned public sector under taking, TASMAC.
Accordingly, the exclusive privilege of Retail Vending of IMFS was granted to
TASMAC under Sec.17 (C) (1-B) of the Tamil Nadu Prohibition Act, 1937.
28

TASMAC is doing the retail business also successfully with effect from
29.11.2003.
CAPITAL STRUCTURE
(i)

Authorised
(ii)

(100%

capital

Paidup

contributed

by

capital

Tamil

Nadu

Rs.

15.00

Crores

Rs.

15.00

Crores

State

Government

PURCHASE AND DISTRIBUTION

TASMAC procures IMFS and Beer stocks locally from six IMFS manufacturers
and three Beer manufacturers in the State. Certain IMFS, Scotch and Beer
products

are

procured

through

import

from

other

States.

Distribution of IMFS & BEER items to the licensees is being done through the
41 depots of TASMAC located throughout the State.
INVENTORY

MANAGEMENT

(Procedure being followed since 1998)

I. Placement of orders with Local Manufacturers and Import Suppliers of
IMFS/BEER.
The requirement of IMFS and Beer is worked out on the first day of every
month. The monthly depotwise requirement is worked out by adopting the
following procedure.
i) Weighted average sale per day is arrived at by dividing the total sales with
No. of working days during the last three months with weightage being given to
the recent sale.

29

ii) The monthly order for IMFS and Beer is generated based on the Weighted
average sales per day multiplied by 39 days in the case of local IMFS and 52
days in the case of import IMFS and in case of Beer the Weighted average sale
per

day

is

multiplied

by

39

days.

iii) 39 working days in 1 months and 52 working days and 2 months is taken
for calculating the order to be generated, since we need atleast a months stock
to be generated on the first of every month. The extra days is allowed for the
transhipment

of

the

stock.

iv) Stock in transit i.e. indent issued but not despatched, goods despatched but
not unloaded and the closing balance available at the Depot on the last day of
that month will be deducted from the monthly requirement arrived at as per the
working

mentioned

at

Point

No.(ii)

above.

v) The net requirement for IMFS will be rounded off to the nearest multiples of
5 and the net requirement for fast moving Beer 650ml/325ml pack will be
rounded off to the nearest multiples of 700/600 cases. In respect of slow moving
Beer brands the net requirement will be rounded off to the nearest multiples of
50

cases.

II.

ISSUE

OF

INDENTS

On 1st of every month the order is placed with all the local manufacturers and
import suppliers and indent is regulated in order to have 15 days stock of a
particular item in the depots including stock in transit. This ensures that the
brand

does

not

go

out

of

stock

at

any

point

of

time.

Day to day indents are issued based on the previous day sale, closing balance of
30

that day, demand of the fast moving items etc., which is reflected in the daily
statement showing depots with Nil stock and low stock (inclusive of
cumulative stock in Transit) of fast moving items. This statement shows the
depots which have NIL stock, 1-3 days stock, 4-7 days stock, 8-10 days stock,
11-14 days stock and 15-21 days stock for particular brand and for a particular
pack size. Based on the statements, indents are being issued to the suppliers on a
daily basis. If a particular brand and pack size is in exceptional demand in the
current month and there is a likelihood of stock out situation, then additional
order for that particular item is placed and indents issued thereafter.
No preferential treatment is given to any supplier and the systems mentioned
above (which has been computerized) is strictly followed since 1998. After
take-over of retail vending by TASMAC also the same procedure is being
followed

without

any

change.

After the indents are issued the daily despatches from the suppliers is also being
monitored

by

31

TASMAC.

SALES AND REVENUE COMPARISON

KSBC
Purchases are made on replacement/replenishment basis by the Corporation.
Purchase orders placed on the basis of average monthly sale of the respective
supplier. The average monthly sales are reviewed every month and an ROQ
based on the requirement is fixed. Special orders are also placed on trade
discount basis depending upon the requirement. Details of purchases affected
till date is given below.

Source: ksbc.kerala.gov.in
Sales are effected from the Warehouses and FL-1 Shops. Licencees viz
Consumerfed and Bars authorized to Purchase approach the Corporations
Warehouses for purchases. The amount payable is first remitted into the
respective bank accounts of the Corporation and only after receipt of the
remitted challans for the value thereof the goods are released to the purchasers.
For the requirements of the Corporations FL-1 Shops goods are just transferred.
32

From the FL-1 shops, goods are sold in bottles to consumers direct on cash
basis.Details

of

sales

made

till

date

is

given

below.

Source: ksbc.kerala.gov.in
CONTRIBUTION

TO

STATE

EXCHEQUER

The following were the amounts contributed to the State Exchequer during
previous seventeen completed years by way of Sales Tax, Excise Duty, Vending
Fee, and License Fee etc.

YEAR
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90

CONTRIBUTION
EXCHEQUER
25.63
30.86
40.06
40.74
57.35
78.33
33

TO

STATE

1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
Source: ksbc.kerala.gov.in

92.07
112.59
133.00
179.72
215.58
315.51
611.19
753.48
847.56
903.56
1025.93
1310.17
1468.16
1622.30
1824.04
2055.71
2424.49
2914.10
3621.15
4259.80

FINANCIAL

RESULTS

The profit made before and after payment of Vending Fee till date is indicated
below. Figures in Crores

34

YEAR
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10

Profit before Vending Fee

Vending

Profit

2.51
3.15
3.66
4.78
10.35
8.70
11.46
13.95
12.99
15.77
7.01
10.21
11.38
17.52
15.40
8.43
9.83
19.96
11.10
19.09
51.85
122.82
173.68
179.72
285.91

Fee
2.09
3.04
4.09
4.01
0.04
8.42
10.28
12.15
12.26
14.88
5.45
9.08
7.98
9.81
10.60
4.86
5.44
10.02
4.20
9.40
40.15
71.24
106.44
120.48
140.86

Vending Fee
0.48
0.11
0.43
0.78
1.31
0.28
1.18
1.80
0.73
0.89
1.56
1.13
3.00
7.71
3.80
3.57
4.39
9.94
6.90
9.69
11.70
51.58
67.24
59.24
145.05 ( pre-

164.61

audited)
234.78(

399.39

audited)
Source: ksbc.kerala.gov.in

DIVIDEND PARTICULARS
The dividend paid to the government from 1990-91 is indicated below.
35

After

pre-

YEAR
DIVIDEND (%)
1990-91
20%
1991-92
20%
1992-93
20%
1993-94
0%
1994-95
30%
1995-96
40%
1996-97
100%
1997-98
100%
1998-99
100%
1999-00
100%
2000-01
200%
2001-02
300%
2002-03
400%
2003-04
400%
2004-05
400%
2005-06
400%
2006-07
400%
2007-08
400%
2008-09
Declaration awaited
2009-10
Declaration awaited
Source: ksbc.kerala.gov.in

DIVIDEND AMOUNT
0.21
0.21
0.21
0.31
0.31
0.41
1.03
1.03
1.03
1.03
2.06
3.09
4.12
4.12
4.12
4.12
4.12
4.12
Declaration awaited
Declaration awaited

DUTIES AND TAXES ON LIQUOR w.e.f 01.04.2005

EXCISE DUTY ON IMFL
Rs.235 and 14.5% of purchase cost / case / PL subject to minimum of
above

but Rs.34.5 / PL ( Rs.232.88 / case)

below Rs. 250

Rs.250 and 15.5% of purchase cost / case / PL subject to minimum of Rs.40
above

but / PL ( Rs.270 / case)

below Rs. 300

Rs.300 and 16% of purchase cost / case / PL subject to minimum of Rs.53/
above

but PL ( Rs.357.7 / case)

36

belowRs.400
Rs.400 and 16% of purchase cost / case / PL subject to minimum of Rs.66 /
above

but PL ( Rs.445.50/ case)

belowRs.500
Rs.500 and 16% of purchase cost / case / PL subject to minimum of Rs.80 /
above

but PL ( Rs.540 / case)

belowRs.1000
Rs.1000 and 16% of purchase cost / case / PL subject to minimum of
above
Excise
on Beer

Rs.165 / PL ( Rs.1113.75 / case)

Duty Rs. 3 per bulk litre 1
(Rs.

23.40

per

Within the state supply Paid by

Brewery

case)
2

Outside state supply Paid in

advance by KSBC
IMFL Import Rs. 5 per proof Paid in advance by KSBC
Fee

litre (Rs. 33.75 per

case)
Beer Import Rs. 2
Fee

per

litre

bulk Paid in advance by KSBC

(Rs.

15.60 per case)

SALES TAX RATE
IMFL
100%
Beer
50%
Wine
50%
Cess on Sales 1%

Paid by KSBC
Paid by KSBC
Paid by KSBC
Paid by KSBC

Tax
Surcharge on 5%

Paid by KSBC

Sales Tax
TOT
on 5%

Paid by KSBC

Gross Sales
Cess on TOT 1%
Source: ksbc.kerala.gov.in

Paid by KSBC

37

CONTRIBUTION TO STATE EXCHEQUER AFTER TAKEOVER OF

RETAIL

BUSINESS

The following were the amounts contributed to the State Exchequer during
previous four completed years by way of Sales Tax, Excise Duty, Vending Fee,
and License Fee etc. Figures in Crores
AMOUNT

YEAR

CONTRIBUTED
1313.64
1455.66
1622.09
1824.44
2055.71

2001-02
2002-03
2003-04
2004-05
2005-06
Source: ksbc.kerala.gov.in
Internal

Audit

and

Vigilance

Department

The Internal Audit of the Corporation is based at Head Office and has a staff
strength of 82 comprising of a Head Office Audit Team and 18 Warehouse Audit
teams. In addition to frequent inspections, the Audit team and Vigilance teams
also conducts enquires into customer and the complaints. The Audit teams
annually conduct about 3000 inspections.
TASMAC

Before take over of Retail Vending by TASMAC, the sale volume of IMFS was
148.99 lakh cases. The sale volume has increased to 229.22 lakhs during the
year 2005-06. The additional sale volume was 80.23 lakh cases. The growth rate
was

53.85%.

Before take over of Retail Vending by TASMAC, the turnover of TASMAC was
Rs.3499.75 Crores. The turnover has increased to Rs.7335 Crores during the
38

year 2005-06. The additional turnover was Rs.3835.25 Crores and the growth
rate

was

109.59%.

REVENUE TO GOVERNMENT:
Before take of Retail Vending by TASMAC, the Government Revenue through
TASMAC was Rs.2828.09 Crores. It has increased to Rs.6086.95 Crores during
the year 2005-06. The additional Government Revenue during 2005-06 was
Rs.3258.86 Crores and the growth rate was 115.23%.
DIVIDEND DECLARED :
Apart from remitting various Taxes and Duties to the Government, TASMAC is
declaring dividend every year and remits the amount to the Exchequer. The
details regarding rate and the amount of dividend declared are given below:
YEAR

AMOUNT

(Rupees in lakhs)
1999-2000
5
35.00
2000-2001
5
35.00
2001-2002
5
35.00
2002-2003
5
35.00
2003-2004
5
35.00
Source: tasmac.tn.gov.in

DUTIES AND TAXES:

EXCISE DUTY:
ITEM
IMFS
ORDINARY
MEDIUM

RATE

UNIT

Rs.93.24
& Rs.113.24

per Proof Litre

per Proof Litre
39

PREMIUM
SCOTCH WHISKY
Rs.113.24
BEER
Rs.4.36
DRAUGHT BEER
Rs.13.10
Source: tasmac.tn.gov.in

per Proof Litre

per Bulk Litre
per Bulk Litre

WHOLESALER'S VEND FEE:

IMFS Both Local & Import
BEER
Draught Beer
Source: tasmac.tn.gov.in

Rs.142/- per case

Rs.36/- per case
Rs.4.61 per Bulk Litre.

ADDITIONAL VEND FEE/SPECIAL PREVILEGE FEE:

IMFS & VODKA
Rs.46.35
BEER
Rs.16.19
WINE & CIDER
Rs.1.00
Source: tasmac.tn.gov.in

per Bulk Litre

per Bulk Litre
per Bulk Litre

IMPORT LICENCE FEE:

IMFS:
ORDINARY
MEDIUM
PREMIUM
BEER
Source: tasmac.tn.gov.in
SALES TAX:

Rs.221/- per case

Rs.271/- per case
Rs.420/- per case
Rs.73/- per case

Local Manufacturers (I sale) - 55%

TASMAC

(II Sale) -35%

Wine (by TASMAC)

-55%

Scotch (by TASMAC)

-70%

CLASSIFICATION

OF

IMFS

PRODUCTS:

IMFS products are classified as (1) Ordinary Brands, (2) Medium Brands and
40

(3)

Premium

Brands.

ORDINARY

BRANDS:

'Ordinary Brands' means IMFS products in different pack sizes with

manufacturers'

price

not

exceeding

Rs.429/-

per

MEDIUM

case.

BRANDS:

'Medium Brands' means IMFS products in different pack sizes with

manufacturers'

price

between

Rs.430/-

and

PREMIUM

Rs.504/-

per

case.

BRANDS:

'Premium Brands' means IMFS products in different pack sizes with

manufacturers' price (*)of Rs.505/- and above per case.
(*) Price for 180ml. pack size and in the absence of 180ml. pack size, price for 375ml.
pack size and in the absence of both 180ml. and 375ml. pack sizes, price for 750ml. pack
size.
Annual Revenue of TASMAC
Fiscal Year

Revenue in Crores

2002 03

2,828.09

2003 04

3,639

28.67%

2004 05

4,872

33.88%

2005 06

6,086.95

24.94%

2006 07

7,300

19.93%

2007 08

8,822

20.85%

2008 09

10,601.5

20.17%
41

% Change

2009 10

12,491

17.82%

2010 11

14,965

19.80%

BASED ON THE ABOVE INFORMATION

Source: primary data

From the chart we can incur that the volume of sales of liquor in TamilNadu is
relatively higher than that in Kerala. TamilNadu shows double the amount of
sales than Kerala.

PRICING

42

THE

PRICING

OF

INDIAN

MADE

FOREIGN

LIQUOR

AND BEER IS MADE AS UNDER

Warehouse Selling Price
Purchase Price + Excise Duty + 36% Warehouse Margin + Labelling Charges
Rs.11 + Sales Tax ( 100% for IMFL & 50% for BEER) + Cess 1% of Sales Tax
Shops Selling Price
Purchase Price + Excise Duty + 36% Warehouse Margin + 20% Shop Margin +
Labelling Charges Rs.11 + Sales Tax ( 100% for IMFL & 50% for BEER) +
Cess 1% of Sales Tax

43