Expensive Products, Quality Issues: The Economics of TN’s TASMAC Outlets

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Activists skeptical of losses reported by TASMAC, pointing to lack of transparency in its accounts; others wonder about the composition of its liqueurs

Alcoholic beverages should fall under the Food Safety and Standards Act, campaigners say. File photo shows the queue outside a TASMAC store in Tamil Nadu.

The recent decision by the Tamil Nadu government to raise the prices of liquor sold in state-owned TASMAC stores from ₹10 to ₹60 has caused repercussions across the state. This increase in the cost of foreign liquor made in India (IMFL) and beer brands comes after two years – the previous price increase was made in May 2020.

The liquor price hike comes amid reports that Tamil Nadu State Marketing Corporation Limited (TASMAC), which operates over 5,000 outlets across the state, has lost revenue to the tune of 90 crore ₹ during the pandemic. On March 25, 2020, TASMAC stores were closed and the closure was extended until May 15, 2020.

As the Tamil Nadu government presents the budget for 2022-23 on Friday, March 18, rising prices are gaining momentum as TASMAC sales account for the lion’s share of state revenue.

“Lack of revenue transparency”

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RTI activists, however, are skeptical of the losses suffered by TASMAC, considered the cash cow of the state, due to the complete lack of transparency on the actual revenues generated by the company. TASMAC officially sells alcohol worth ₹110-120 crore per day. In response to an RTI query filed by activist M Kasimayan, TASMAC authorities had said that the company suffered a loss of ₹244.82 crore between FY11 and FY20.

In another RTI petition, filed by activist S Sivagnanam, TASMAC said it suffered a loss of ₹300 crore in just six years, between FY10 and FY21. Kasimayan said The Federal that there are discrepancies in the figures shared by TASMAC, and it becomes difficult to assess its real income.

“The taxes paid by the breweries go directly to the government. However, profits made through retail sales do not properly reach the public treasury. At most outlets, employees sell the alcohol at a cost above the MRP (maximum retail price). There is no transparency in the accounts,” Kasimayan said.

When Alcohol Funds Livelihood Programs

Few may believe TASMAC is making losses, but tax experts say the government has no choice but to raise alcohol prices. The total state revenue is estimated at ₹2,02,496 crore, per budget 2021-22. Of the total, his own tax revenue (excluding GST) is estimated at ₹1,26,644 crore. Of this amount, TASMAC alone accounts for a large chunk – ₹62,568 crore in the form of excise duty and value added tax (VAT).

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Explaining the reason for the surge in prices, G Saimukundhan, Visiting Professor, National Direct Tax Academy, Nagpur, said The Federal“Today we only have VAT on gasoline and alcohol and state excise taxes are only imposed on alcohol. A significant portion of state revenue comes from state excise duty and VAT.So currently, to increase revenue, the government is looking to TASMAC, over which it has full control.

It is true that a welfare government should not indulge in this kind of business, he observed, adding: “However, the revenue created by TASMAC is that which helps the state to set up various programs social protection and subsidies. Moreover, in order to keep control of the state debt, it is absolutely necessary that this government run this society at all costs.

Also, if alcohol is not legally available, people tend to source it from neighboring states, and smuggling may also increase. There is also the threat of fake alcohol which can turn fatal. To avoid all of this, it makes sense for the state to take control of alcohol sales, he added.

No clarity on the composition of TASMAC liqueur

But P Chellapandian, founder of the Liquor Consumers Awareness Movement, does not trust the quality of the liquor varieties sold at TASMAC outlets and is unhappy with the price hike.

“Until the launch of TASMAC in 2003, alcohol consumers had only two options, such as toddy or local spirits (known as arrack). When TASMAC was launched, it introduced 47 varieties of alcohol, which have now increased to 250 varieties. We do not know the composition of these. The government mistakenly believes that by increasing the price it can reduce the number of alcohol consumers. But this does not “It’s not. It has legally made 4 million people addicted to alcohol,” he said.

According to Chellapandian, in 2006, the then UPA government in the Center introduced the Food Safety and Standards Act, and alcoholic beverages should logically have come under its control.

For example, he should have followed the rules and regulations of the law like statutory warnings, listing the contents of beverages, not selling the product above its MRP, etc. “But none of these rules are followed by TASMAC,” he lamented.

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Sell ​​alcohol above MRP

One of the main allegations regarding TASMAC outlets is that employees sell alcohol above MRP rates. R Rangarajan, a professor in the Department of Commerce at Madras University, who conducted a study on the work-life balance of TASMAC employees in 2018, said employees are stressed due to long hours. They are also often temporary workers.

“Unfortunately, with the exception of TASMAC executives, many work as contract employees in the company. This is the main reason why the employees sell the products above the MRP rate,” he pointed out.

A TASMAC official, however, claimed that the company fines and transfers employees who engage in this fraudulent activity. “Each outlet displays the flying team numbers prominently. If consumers encounter employees selling the products above MRP rates, they can complain through this number,” he said.

TASMAC is facing another challenge lately. In February 2022, the Madras High Court ordered the closure of bars attached to TASMAC outlets within six months. The order was issued by Justice C Saravanan while denying a batch of petitions filed by the Tamil Nadu TASMAC Bar Owners Association, which wanted an extension of the bidding period following the losses triggered by COVID.

“The court has intervened unnecessarily in the workings of the government. This is a dispute between two groups running a bar. During the hearing of this case, the judge ordered that TASMAC not have the power to run bars,” said an official from the TASMAC employee welfare association.

The judge had said that Sub-Clause (1-A) and Section 17 C (1-B) of the Prohibition of Tamil Nadu Act 1937 “simply authorizes TASMAC to engage in the wholesale and retail business of ‘alcohol’ and TASMAC has no authority to encourage the consumption of alcohol and intoxicating beverages in public places or so-called bars.

TASMAC, however, appealed the order, saying it is governed by the Tamil Nadu Liquor Retail (Shops and Bars) Rules 2003 and can run bars near the liquor outlets.

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