From prohibition to monopoly: tracing liquor policy and emergence of  TASMAC

New venture: Unemployed youths gathered at a community hall in Chennai on December 27, 2003, to take part in the recruitment of supervisors and salemen
for TASMAC, which a month earlier started retail liquor vending.
| Photo Credit: The Hindu Archives

Tamil Nadu did not have a consistent policy with respect to liquor sales after Independence until the early 2000s. The successive governments, led by the DMK and the AIADMK, oscillated from one extreme to the other. In 1937, prohibition was introduced in Salem district by C. Rajagopalachari, Chief Minister of the Madras Presidency. Later, it was extended to other districts, and prohibition was in force until 1971. The DMK government, headed by M. Karunanidhi, suspended it in 1971 and allowed the sale of arrack and toddy. However, the sale was stopped in 1974. After this, two hooch tragedies occurred, in 1975 and 1976.

In 1981, the AIADMK government, headed by M.G. Ramachandran (MGR), reintroduced the sale of arrack and toddy. In 1987, the sale of arrack and toddy was banned again. In 1988 and 1990, illicit liquor claimed many lives in Tamil Nadu. In 1990, when the DMK was in power, the sale of arrack and toddy was revived, and it continued up to July 16, 1991. After the AIADMK came to power in 1991, Chief Minister Jayalalithaa announced a ban on the sale of arrack and toddy. In the period following the change in policy, many deaths due to the consumption of illicit liquor were reported. According to a government official, the death of a large number of people since the sale of arrack and toddy was banned in 1991 “indicates a need for selling safe liquor at an affordable price for the poor,” said a report in Frontline, a sister publication of The Hindu.

Increasing revenue

The MGR government decided in 1983 to take over the wholesale trade in arrack and Indian Made Foreign Spirits (IMFS) with effect from June 1, 1983. A report in The Hindu on May 28, 1983 said an ordinance to this effect was promulgated by Governor Sundar Lal Khurana. A public sector corporation, known as the Tamil Nadu State Marketing Corporation (TASMAC) Limited, was formed to undertake the supply of arrack and IMFS to the retailers.

Quoting the explanatory statement added to the ordinance, the report said the question of the government taking over from the private sector the manufacture and wholesale supply of arrack and IMFS had been under the consideration of the government for some time. The Commissioner for Prohibition and Excise had also suggested takeover of the wholesale trade with a view to augmenting the revenue.

Under the provisions of the ordinance that amended the Tamil Nadu Prohibition Act, 1937, the validity of all the private sector wholesale licences with respect to arrack and IMFS was to expire on May 31, 1983. The new corporation, with a share capital of ₹5 crore, would open as many branches as necessary, at least one branch in each district, the report added.

Lot system

Malpractices were reported in retail vending of liquor. To check this, the government in 2001-02 introduced the lots system. Under this system that replaced the auction, applicants for shops were identified on the basis of lots after they agreed to pay an amount fixed for each shop on the basis of potential revenue. Despite the introduction of the lots, the cartels ensured that a considerable number of shops remained unauctioned. In 2002-03, only 5,300 of the 7,000 notified outlets could be auctioned due to the cartelisation, The Hindu reported.

“The intention of the groups was to control the retail market and cause a loss of revenue to the State government. The fact that a number of persons withdrew after getting allotment of shops and sought refund indicated that cartelisation had not been eliminated,” said a report in this newspaper quoting a government press release.

Merit-based selection

To prevent the sale of spurious and contraband liquor and taking note of the adverse effects of cartelisation and cornering of shops, as well as other irregularities such as violation of the maximum retail price fixed by the State, the government announced a merit-based system for selecting applicants for the excise year 2003-04 for grant of privilege to run retail shops.

This was to be done by constituting district-level selection committees consisting of two retired judicial officers, not below the rank of district munsif. But far from breaking cartels, the system resulted in reducing the number of applicants, though many had bought application forms, the report said.

The government realised the need to take firm steps to put down the cartels, which had seriously affected the retail trade of IMFS. “Because of malpractices by the cartels, the State lost revenue. Despite the State-owned TASMAC handling the wholesale trade, private retailers of IMFS have been indulging in malpractices. There have also been violations of the maximum retail price,” a government release said.

Serious health hazards

Accusing the retailers of acting against the interest of consumers, the government pointed out in the release that unfair trade practices had posed serious public health hazards. The government was convinced that the only way to break the cartels was to let the State-owned TASMAC handle the retail trade. Another report in The Hindu dated January 27, 2003, quoting an official press release, said: “The TASMAC and its agency, namely cooperatives, alone will hereafter undertake retail trade. The government has, therefore, promulgated an Ordinance, amending the Tamil Nadu Prohibition Act, 1937, to achieve the above purpose.” With effect from November 29, 2003, the TASMAC started doing retail liquor vending too. This system is in vogue to this day.