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Liquor, not IT, saves Andhra the blushes

George Iype in Hyderabad

Andhra Pradesh Chief Minister N Chandrababu Naidu may be basking in the praise lavished upon him by United States President Bill Clinton in 'Cyberabad' last week. But it is not the accruals from information technology that has saved his state from going broke in the last three years. The credit for that goes to the growing revenue from liquor sales.

Ever since Chandrababu Naidu lifted prohibition in 1997, tax revenue from liquor sales in Andhra Pradesh has been the highest among the four South Indian states.

While women's groups now scoff at the state economy as "liquor-driven", officials in the Andhra Pradesh government claim that Naidu has only proved that the prohibition imposed by his father-in-law, the late Chief Minister N T Rama Rao, was a financial disaster.

According to figures from the state's excise department, Andhra Pradesh tops in liquor sales in South India. For instance, in the last 10 months, more than 110 million cases of beer were sold in the state. The finance ministry expects the liquor industry to record an unprecedented turnover of nearly Rs 160 billion and pay a whopping Rs 22 billion as tax in fiscal 1999-2000.

Spurred by the heady tax collection from liquor sales, the government is now planning to lift the ban on liquor licences for restaurants, which the chief minister had been holding back for fear of a backlash from women voters and feminist groups.

"The speed with which Naidu is going ahead adding up more liquor shops proves that it is not information technology but liquor barons who are ruling the state," Swapna Sulekha, who heads the Hyderabad-based Women's Group for Empowerment, said.

According to WGE, in three years, Naidu has given permission to set up nearly 31,000 liquor vends across the state. "Soon, Andhra Pradesh will be the only state in the country to have at least two liquor shops in every village," said Sulekha, who is trying to organise various women's groups across the state to launch a mass campaign against this policy.

Andhra Pradesh remained dry for more than three years after actor-turned-politician Rama Rao implemented the prohibition policy in 1994. As an election plank, prohibition made Rama Rao a hero among the women whose husbands otherwise blew up most of their meagre earnings at countryside bars.

Soon after he became chief minister, Naidu conducted a survey that found that prohibition had not stopped liquor supply, but merely accelerated demand for varying illicit products. Armed with these results, Naidu begun dismantling prohibition step by step, mainly for two reasons.

First, Naidu knew that lifting prohibition was one way to put the nearly bankrupt state's finances in order. Second, distillers, liquor barons and hoteliers were exerting immense pressure on the chief minister to abandon prohibition.

In 1994, when NTR took over the state's reins, the exchequer had a surplus of Rs 4.54 billion. But by 1997, the state was facing a huge deficit of more than Rs 80 billion. Added to this were borrowings from international financial institutions, which amounted to nearly Rs 225 billion.

But state government officials argue that the main reason why Naidu decided to lift prohibition was his own passion for information technology. "Not many foreign investors, especially from the infotech sector, would have opted for Hyderabad if prohibition was in place. So the chief minister relaxed and finally dismantled the Rama Rao legacy," said a senior official. "If Andhra Pradesh is an investment destination today, one reason is that Naidu showed the boldness to lift prohibition," he claimed.

Officials say abandoning prohibition had twin effects. First, coupled with the new industrial and information technology policies, it resulted in hordes of companies coming over to the state. Second, revenue collection from liquor sales helped Naidu put the state's precarious financial position in order.

An excise department official said the main reason for this year's steep increase in revenue collection from liquor sales is the 25 per cent increase in sales tax on foreign-made liquor.

Officials say that when Naidu's populist measures like subsidised power and cheap rice will leave the state exchequer poorer by Rs 24 billion and Rs 13 billion, respectively, this year, the increased revenue from liquor sales is a ray of hope.

Women's groups and prohibition activists have been campaigning to push Naidu to taking the state back to its liquor-free days. But his election strategy last year won him back the chief ministerial chair as he concentrated on his populist policies and the promise of ushering in a "swarna (golden) Andhra Pradesh" through economic reforms.

But the state government's decision to sanction more bars in hotels and restaurants has forced the women's groups to re-launch their anti-liquor campaign. Two dozen such organisations and hordes of prohibition activists will assemble in Hyderabad early next month to demand reimposition of prohibition.

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Andhra Pradesh