Kerala CM Satheesan defends low-alcohol tax, says LDF govt started process

Kerala Chief Minister V.D. Satheesan on Wednesday sought to defuse the controversy over the budget proposal to reduce taxes on low-alcohol-content beverages, clarifying that the government had only fixed tax rates and that a final decision on whether such products would be sold in the state would be taken only after discussions within the UDF.

“If the political decision is to permit sales, the tax rates already notified will apply. If the political decision is not to permit sales, the beverages will not be sold,” Satheeshan said during his reply to the budget discussion in the assembly.

The controversy stems from the budget's proposal to introduce lower tax slabs for low-strength alcoholic beverages with an alcohol content of 0.5 to 20 per cent, excluding beer and wine. The move departs sharply from Kerala's existing regime, under which Indian Made Foreign Liquor (IMFL) attracts a uniform tax of 251 per cent. The budget proposes a tax rate of 120 per cent for beverages with 0.5-10 per cent alcohol content and 175 per cent for those with alcohol content above 10 per cent and up to 20 per cent.

The Opposition had, on Tuesday, sought an adjournment motion on the issue. Speaking on the motion, Opposition Leader Pinarayi Vijayan alleged that the tax reduction proposal was tainted by corruption and designed to generate windfall profits for liquor giant Bacardi.

The CPI(M) also attempted to portray the issue as evidence of divisions within the Cabinet, the Congress, and even the UDF. One of the slogans raised by Opposition members before their walkout suggested that the Congress's influential ‘KC group’ had been kept in the dark. There were also rumours that Excise Minister M. Liju was unaware of the proposed tax slabs until they appeared in the budget.

Addressing these allegations, Satheeshan asserted that there was no disagreement between departments over the decision. Taking a swipe at the previous government, he said that unlike in the past, files were not being taken to party headquarters for approval.

“Just as files were once allegedly taken to the AKG Centre, they are not now being taken to the KPCC office. No Congress minister will do that,” he said, adding that tax-related files would never be routed through a party office under his government.

As expected, the CM's defence rested largely on the argument that the groundwork for the policy had been laid by the previous LDF government.

He noted that M.V. Govindan, who served as excise minister in the second Pinarayi Vijayan government, had directed officials to frame a definition for low-alcohol beverages, within six months of assuming office. According to Satheesan, the first discussions with Bacardi also took place under the LDF administration. He further claimed that the policy of permitting low-alcohol beverages in Kerala originated from the previous government, which amended the liquor policy for that purpose.

“At Bacardi's request, the previous government had even completed the procedures for fixing a tax rate. It was not implemented only because elections were approaching,” claimed the CM, adding that the present government had fixed a higher rate after studying the tax structure in other states.

Satheesan also rejected allegations that the measure amounted to a favour for liquor companies. He pointed out that the LDF government had imposed only a 78 per cent tax on foreign-made foreign liquor with an alcohol content of 40-60 per cent in 2018-19, a rate significantly lower than the taxes imposed on IMFL in Kerala. “Did they fix a 78 per cent tax after taking money from Chivas Regal or Johnnie Walker?” he asked.

Satheesan also pushed back against the Opposition's claim that the proposal undermined anti-substance-abuse efforts. “When Pinarayi Vijayan became chief minister in 2016, Kerala had only 28 bars,” he said. “Today, there are more than 900.”

Mocking the Left's criticism, he added: “Those who flooded the state with alcohol are now lecturing us that liquor is poison.”