National Council of Applied Economic Research
Opinion: Sanjib Pohit Anupma Mehta Samarth Gupta and Soumi Roy Chowdhury
The latest data on alcohol consumption in India is bound to cause a mental hangover unless the seriousness of the addiction at the national level is viewed with a clear rather than a befuddled mind.
A report released in 2019 by the Ministry of Social Justice and Empowerment titled “Magnitude of Substance Abuse in India” asserts that alcohol is the most widely consumed psychoactive substance in India among all population groups though adult men are the largest consumers and also the worst affected by alcohol use disorders (AUDs).
In terms of absolute numbers the report finds that about 16 crore persons in the age group of 10-75 years regularly consume alcohol in the country.
Rising Consumption of Alcohol
Further a Drinks Market Analysis undertaken in 2020 by the London-based International Wines and Spirits Record (IWSR) widely seen as a significant source of data on the global alcoholic beverages market suggests that India is the largest consumer of whisky in the world about three times higher than the US which is the second largest consumer.
The IWSR analysis also documents that when the global consumption of liquor dipped in 2018 India was an outlier accounting for a 7 per cent upward trend in the global whisky market.
The fact that alcohol consumption is emerging as a serious public health challenge in the country is also ratified by an earlier Global Status Report on Alcohol and Health released by the World Health Organization (WHO) in 2018 which revealed that the per capita alcohol consumption in India had doubled between 2005 and 2016.
In this context a recent WHO-sponsored study undertaken by the National Council of Applied Economic Research (NCAER) which assesses the implications of taxation on alcohol to determine its affordability and price elasticity patterns in India and their role in curbing alcohol consumption assumes critical significance from a policy perspective.
Issue of Alcohol Taxation
In order to delve deeper into the issue of both alcohol consumption and the market dynamics of alcohol pricing and sale the NCAER study estimated the overall tax burden and elasticity of alcohol products over the last decade in seven States representing various regions across India viz. Delhi Madhya Pradesh Sikkim Maharashtra Bihar Karnataka and Himachal Pradesh.
The analysis emanating from the NCAER report was based on a review of the State-wise price mechanisms taxation structures and sales and consumption trends associated with different types of alcohol products as well as the ramifications on revenue generation due to a State-wise increase in taxation on alcohol over the last ten years.
The complex issue of taxation on alcohol is however complicated further by the fact that alcohol policy in India is a State subject. Every State in the Union thus has absolute control of legislation excise rates and the production distribution and sale of alcohol products. Moreover there is no national database for systematically collating and compiling this information as each State levies different rates of excise duty and customs duty (wherever applicable) on different types of alcohol products.
Although selling alcohol in India is mired in ambivalence and proxy marketing paradoxically many States earn high revenues from liquor sales.
The research wing of the analytical and ratings company CRISIL for instance finds that in the five southern States of Andhra Pradesh Telangana Tamil Nadu Karnataka and Kerala more than 10 per cent of the tax revenue comes from taxes on liquor sales.
Further six other large States Punjab Rajasthan Uttar Pradesh Madhya Pradesh West Bengal and Maharashtra also account for 5-10 per cent of their revenues from liquor sales. And yet the promise of prohibition seen as a potential vote-winning strategy is regularly brandished as a poll pledge across all States.
What then would be a prudent nation-wide policy for both controlling alcohol consumption and rationalising alcohol taxation and production across the country?
While it is important to keep an eye on the economy one should not lose sight of the health and social dimensions of alcohol consumption. The Global Burden of Disease Study 2019 conducted by the US Institute for Health Metrics and Evaluation estimated that excessive consumption of alcohol was responsible for 3 per cent of all deaths in India.
The concomitant study in 2017 had found that alcohol was the cause for more than 580000 deaths in India with three leading attributable reasons being pulmonary tuberculosis affliction road injuries and self-harm.
Need for Innovative Policies
Another shocking piece of data emerging from the NCAER study is that the number of heavy drinkers (or people who drink alcohol everyday) among consumers aged less than 18 years rose from 1.2 per cent in 2005-06 to 13.9 per cent in 2015-16.
All States therefore need to be on the same page while enforcing the minimum legal age for drinking. A caveat here would be the need for certain State-specific intervention packages in keeping with variations in the kind of alcohol consumed across the States.
For example as per NCAER research nearly 50 per cent of the alcohol consumers in Madhya Pradesh were found to consume only toddy whereas nearly 47 per cent of the alcohol consumers in Sikkim consumed only beer and a similar proportion of alcohol consumers in Delhi consumed only Indian-made Foreign Liquor (IMFL) or hard liquor.
This obviously necessitates out-of-the-box thinking on ways to reduce consumption as well as to control access to illicit liquor and cheaper and unrefined variants like arrack especially for the marginalised sections of society.
The association between alcohol consumption patterns and the key socio-demographic characteristics in the States under study is substantiated by the finding that the poor less educated and rural populations show a higher propensity of consuming it irrespective of the State.
Both the Central and State governments therefore face a policy dilemma in restraining alcohol consumption significantly enough to arrest its deleterious impact.
One way forward could be the imposition of an incremental tax as proposed in the NCAER study which could help reduce alcohol consumption in India by 10 per cent by the year 2025.
What is also needed is the implementation of evidence-based policy and sensitisation campaigns by States to educate their populations about the consequences of uncontrolled alcohol consumption and the social ills arising from it.
Sanjib Pohit is Professor Anupma Mehta is Editor and Samarth Gupta and Soumi Roy Chowdhury are former Associate Fellows at NCAER. Views are personal.