COVID-19 hits liquor economy: Centre sacrifices Rs 700 cr a day; here's how states lost

New Delhi: With the extension of lockdown 3.0 to contain coronavirus COVID-19, the Ministry of Home Affairs (MHA) issued fresh guidelines allowing government-run liquor shops to open with social distancing norms. The police in different states faced a difficult situation to control the unruly crowd. 

According to reports, about 150 government-run liquor shops have been allowed to open from 9 am to 6.30 pm in the national capital in accordance with the latest lockdown relaxations. 

Let us have look at the economic aspect of liquor for different states, the reason they asked the Centre to allow these shops to open amid ongoing COVID-19 lockdown.

The ban on liquor sales across the board is hitting the government to the tune of Rs 700 crore a day in terms of loss of revenue, according to industry representatives. The central government had prohibited the sale of liquor in the wake of COVID-19 lockdown announced on March 24, causing a revenue loss of Rs 30,000 crore for states in the past month and a half.

In the financial year 2019-20, different states budgeted for Rs 1.70 lakh crore through a tax on the sale of liquor. The taxes from liquor sales accounted for 15-25% of the state's own tax revenue.

In states like Uttar Pradesh, Karnataka and Uttarakhand, tax from liquor sale accounted for over 20% of their tax revenue, while the income of state excise in West Bengal, Chhattisgarh, Himachal Pradesh, Punjab, and Telangana comprised 15-20% of the states' tax revenue.

However, the excise tax on liquor in Kerala, Maharashtra, and Tamil Nadu accounted for less than 10% of the state total collection of tax revenue. 

The overall proportion of taxes from liquor sale in states' total tax revenue come to single-digit primarily because bigger states like Maharashtra and Tamil Nadu get lower tax collection from the sale of liquor while Gujarat and Bihar earn no revenue due to a ban on liquor in these states.

Delhi, a Union Territory with higher than national per capita income, earns over Rs 5,000 crore annually from liquor sales. Karnataka too earned Rs 21,400 crore from liquor sales in 2019.