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Business News/ Politics / Policy/  Supreme Court upholds Kerala govt’s liquor ban

Supreme Court upholds Kerala govt’s liquor ban

Court says move is in public interest, given the extent of alcohol consumption in the state

Last year, the Kerala government had introduced a policy which only allowed five star hotels to have bars. Eventually, about 700 bars were shut down. Photo: Mint Premium
Last year, the Kerala government had introduced a policy which only allowed five star hotels to have bars. Eventually, about 700 bars were shut down. Photo: Mint

The Supreme Court on Tuesday upheld a ban imposed by the Kerala government last year on bars that are not attached to five-star hotels serving or selling liquor, and ruled that the state’s policy was not arbitrary or discriminatory.

The state government, in an order issued on 22 August 2014, declared that bar licences would be granted to only five-star hotels. The order said Kerala State Beverages Corporation outlets would be phased out and Sundays would be made dry days, meaning alcohol would not be sold.

The Oommen Chandy-led Congress government aims to usher in complete prohibition in Kerala in the next 10 years.

Dismissing appeals filed by bar owners’ associations and four-star hotels, a bench comprising justices Vikramajit Sen and Shiva Kirti Singh upheld a 31 March verdict of the Kerala high court.

The court ruled that it was not arbitrary or discriminatory to restrict bar licences only to five-star hotels. It said that it was in public interest, given the extent of alcohol consumption in the state, to introduce restrictions on sale of liquor in public places.

“The consumption of tobacco as well as liquor is now undeniably deleterious to the health of humankind. Advertising either of these intoxicants has been banned in most parts of the world, the avowed purpose being to insulate persons who may not have partaken of this habit from being seduced to start," the judgement said. “Banning public consumption of alcohol, therefore, in our considered opinion, cannot but be seen as a positive step towards bringing down the consumption of alcohol, or as preparatory to prohibition."

The court also said that granting licences to wine and beer shops was not in consonance with the government’s policy to reduce public consumption of alcohol. The court observed that the government’s assessment that beverages with lower alcohol content were less harmful could be misplaced.

The court assembled especially on Tuesday to deliver six verdicts, including the one on the Kerala liquor ban, as Justice Sen retires on Wednesday.

The apex court’s judgement sets a precedent for a state like Bihar which has decided to ban the sale and consumption of liquor in phases beginning on 1 April 2016.

Country-made liquor will be banned in the first phase, followed by Indian-made foreign liquor (IMFL) six months on.

Several four-star hotels and bar owners’ associations had appealed against a two-judge bench of the Kerala high court upholding the state government’s liquor policy.

Last year, the government had introduced a policy which only allowed five-star hotels to operate bars. In the wake of the order, about 700 bars were shut down across Kerala.

Four-star hotels had claimed that there was no reason to discriminate between five-star and four-star hotels as there was very little distinction between them.

The Kerala government, however, had argued that there was no conflict in banning liquor sales as it was a privilege granted to the government.

Liquor stocks fell by up to 3.2% after the Supreme Court order. Shares of Empee Distilleries Ltd slipped 3.3%, those of Pincon Spirit Ltd lost 3.05% and Tilaknagar Industries Ltd fell by 2.75% on the BSE. Shares of United Spirits dipped by 2.69% and those of United Breweries Ltd by 0.71%.

However, analysts who track the liquor sector made light of the order’s likely impact and said companies manufacturing IMFL had already reduced their exposure to the state over the past year and a half. The state accounts for less than 10% of their volumes, they added. Also, the state is a big rum and brandy market, which is a low-investment segment, they pointed out.

A top executive at a large domestic liquor company said most large brandy makers will be impacted by the ban, with less of an impact on whisky makers. “Kerala is a large brandy market, so more local and some extremely well-entrenched national companies are likely to see a challenging environment," he said on condition of anonymity.

Kerala has always been one of India’s most regulated liquor markets, he said, adding, “so companies have gradually lowered exposures. Also, it is a low-margin market".

The judgement is likely to impact the likes of Tilaknagar Industries significantly. Its Mansion House brandy enjoys a 78% market share in Kerala.

But Amit Dahanukar, chairman and managing director, Tilaknagar Industries, put on a brave face. “The Supreme Court decision will have a small impact on our business," he said.

“Over the past year, we’ve significantly cut back our sales in Kerala. Since the government anyway hasn’t allowed us to raise prices, we’ve stopped selling a lot of low-margin brands in Kerala. Now the state accounts for only 10-15% of our sales, from 20-25% earlier. And most of the sales come from liquor stores, not from bars," he said.

“Prohibition and bans are best avoided in a free and maturing society. Kerala has a high rate of literacy... driving social change through persuasive communication would have been better," he added.

Suneera Tandon and Mihir Dalal in Bengaluru contributed to this story.

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Published: 29 Dec 2015, 11:17 AM IST
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