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Ban cost: Rs 5,400cr, 35,000 jobs gone

Total prohibition has dealt the state's coffers Rs 5,400 crore in revenue losses from excise and value added tax (VAT), besides stripping around 35,000 people of their livelihood at the beginning of 2016-17.

By Dev Raj in Patna
  • Published 7.04.16

Patna, April 6: Total prohibition has dealt the state's coffers Rs 5,400 crore in revenue losses from excise and value added tax (VAT), besides stripping around 35,000 people of their livelihood at the beginning of 2016-17.

This has triggered a mood of impending economic gloom over Bihar, forcing different government department officials to look for alternative revenue resources.

A senior finance ministry official explained to The Telegraph, on the condition of anonymity, that the budget estimates of excise revenue during the 2015-16 fiscal, before the liquor ban, was around Rs 4,000 crore. "This figure may exceed once the final report from the auditor general for 2015-16 comes," the official said. "This will be treated as loss in the current fiscal, 2016-17. If we factor in inflationary forces on prices and corresponding increase in taxes, the figure could cross Rs 4,400 crore. It is a huge figure, considering that it would be around 19 per cent of the state's total revenue from its own sources. Financial prudence suggests the state compensate for revenue loss by other ways and means, including imposition of cess, increasing the level of taxes."

The excise department's budgetary estimate of revenue from sale of foreign liquor in 2016-17 was Rs 2,100 crore, as people in Bihar were expected to consume 9.2 crore litres of beer and 3.74 crore London Proof Litre of foreign liquor.

But with total prohibition in force now, there is no chance of meeting the revenue target.

However, this would show up as revenue loss during the next financial year.

"We are going to suffer a revenue loss of around Rs 1,000 crore from VAT imposed on liquor for sure," commercial taxes department principal secretary Sujata Chaturvedi said. "This amount cannot be recouped. But, tax collection is a continuous process and we will keep looking for other avenues for it." So the total loss is Rs 5,400 crore.

Commercial taxes and energy minister Bijendra Prasad Yadav told The Telegraph the state government was fully geared to meet the revenue loss. "We increased VAT on over 600 items and the result was that Bihar witnessed over 26 per cent growth in VAT collection, the highest in the country," Bijendra said. "We collected over Rs 17,300 crore from it. We will look for similar options to offset revenue loss."

Though the state government imposed and increased VAT on 600 items - including 5 per cent on saris priced over Rs 2,000 and textiles costing Rs 500 per metre or above and 13.5 per cent VAT on branded, packaged snacks like samosas, potato chips, peanuts and dry fruits - these steps are expected to rake in just around Rs 500 crore.

Economists point out that the state government is already lagging behind because of the hike in teachers' salaries, which is to the tune of Rs 3,000 crore. They also predict a diminishing business activityto the tune of Rs 10,000 crore. "The government might be forced to slow down recruitments in colleges and the health department," said a noted economist who did not wish to be named. "We will be back to the RJD age when virtually very recruitment was stalled and there were over 2 lakh vacancies in the government."

The loss to the state exchequer pales when we consider the number of jobs lost and auxiliary impact on the state's economy. Around 35,000 persons - among them owners of 5,500 private liquor shops and four persons employed at each to assist sales and service - have lost their livelihood.

Foreign liquor retailer's association president Nawal Kishore Singh, who ran two shops in Patna, said: "I paid salary to my staff of eight on March 31, the day I closed my shops, and asked them to look for other jobs. They left with tears in their eyes and fears about their future. I was simply helpless."

The same happened to 119 liquor bars that shut down operations on April 5. Each bar employed 12-15 persons to serve liquor, cook snacks and man the cash counter and gates.

Similarly, 17 country liquor manufacturers and bottlers, that employed 250-300 persons each, rendered them jobless the moment they shut down on the last day of the previous financial year. Around 4,000 employees recruited to run the proposed government liquor shops are likely to lose their jobs without working for even a day.

"Why has the state government not created new opportunities for those in the liquor sector who lost their jobs," asked economist and former Patna University professor N.K. Chaudhary. "The government should give them preferential treatment by way of bank loans to help them start their own small ventures."

Chaudhary also suggested that those who lost their jobs could be employed in the sugar industry if the state government revives it, as they would be useful in the molasses divisions of sugar mills, where ethanol is produced.

The state government has in fact offered liquor shop owners opportunities to open Sudha milk parlours if they wished to, but so far only a little over 300 have applied for it.

Some starred hotels, like Maurya, have decided not to retrench its bar staff. "We have decided to convert our alcohol bar into a non-alcohol bar. We would serve fruit and vegetable juices and soups there," Maurya's general manager B.D. Singh said.

Those selling snacks around liquor shops have also been hit. A large number of liquor buyers used to buy side dishes from them. A conservative estimate suggests they would number over 11,000.