'If this is the way a Dy. CM is treated what is the hope for any ordinary Indian opposed to the BJP'?

 

Hype, Hypocrisy And Hooch

R K Misra in Outlook India

Gujarat and its 'model' have been the toast of the Indian season ever since its Chief Minister, Narendra Modi became the Prime Minister in 2014.This includes its liquor prohibition policy which has adherents like Bihar now where Nitish Kumar came to power after knocking the wind out of Modi's sails!

Billowing in the political clouds ever since, are propounded perceptions of a 'dry' India. Kumar could do with a closer look at adversary Modi's 'model' state before giving wings to his national vision.

Proud and boastful of the fact that it has been the only state in the country which was born 'dry' and continues to remain so till date, Gujarat's much hyped liquor 'totalitarianism' took a humpty-dumpty like fall last week when over 20 people died after consuming hooch near Surat. What has now become a standard drill after decades of practice, is in place. Newly anointed Chief Minister Vijay Rupani is making all the right noises. Top cops and district heads-transferred, smaller fry suspended. The anti-terrorist squad (ATS) chief took charge of investigations. A three-man top cop panel headed by additional director general of police (ADGP), looked into the matter and submitted its report to the state home department head. Within 24 hours over a thousand country liquor cases registered. Carton loads are being seized at entry checkpoints into the state. A full blooded search for the culprit methanol is under way. Blah, blah, blah and the farce goes on.

Consumption or possession of liquor without a valid permit is a non-bailable offence in the state. A person arrested on either count has to be produced in court to be bailed out. And yet it oozes Bacchus brew from every nook and cranny of its ample frame.

Booze, as the upwardly mobile call it, is lucrative business and according to conservative estimates, a Rs 30,000 crore annual turnover, pure black money spewing industry. While Prime Minister Modi may have pulled out all the stops to unearth Indian black money stashed abroad, his decade and a quarter year stint as chief minister of the state, failed to dent the business. In fact, to be fair to him, no chief minister who held office in the state was ever able to stem the flow.

The business has three components. At the bottom of the pyramid is the poor man's drink--hooch, lattha or moonshine. Then follows the desi or country liquor which is the preferred drink of rural Gujarat followed by brewery liquor at the apex (rum, whisky, gin, vodka etc). Hooch is the preferred drink of the urban labour class while 'desi' distilled, largely for captive consumption in villages, ranks safer and a notch higher. The fruit liquor 'mahua' ranks in this category. With a consumer base of the middle and affluent class in cities and towns, Indian Made Foreign Liquor (IMFL) as brewery made liquor is called in official parlance, holds sway. Country liquor is a cottage industry but brewery liquor flows into the state from MP, Rajasthan, Maharashtra even Punjab and Haryana.

Let's take the case of Gujarat's biggest city Ahmedabad. A network of about 1000 bootleggers sell anywhere between 1.5 to2 lakh litres of moonshine per day. Women outnumber men in this business. This is besides the IMFL business where the brand of your choice is home delivered to you. The trade is tech-savvy and 'whats app' and other suchn mobile applications come in handy. Surat is reported to guzzle 50,000 litres per day and almost 70 per cent of the 18,000 villages in the state brew their own country liquor. All major cities report high consumption and rural areas are no exception. There are 61,000 health permit holders in the state and worth of the average daily consumption of alcohol to permit holders is put at around Rs 75 lakhs.

No bootlegger can operate in Gujarat without police connivance. At every 'point' of the operation, negotiations have to be done with the cop for a certain amount of money and this goes right up to the top and from there to the political top brass. The cops may be sloppy in policing but would be the envy of management experts in planning and distribution of ill-gotten spoils.

Thus it is the huge amount of unadulterated black money greasing the administrative-political system in Gujarat that ensures a high decibel sound and light show only for the benefit of the masses with little or no follow-up action. Take the case of the 2009 hooch tragedy in Ahmedabad where 150 people lost their lives. Modi, then the chief minister, made all the appropriate noises. A Commission of Inquiry was instituted with former High Court judge K M Mehta as the chairman. The panel submitted its report in 2011 and there has been pin drop silence thereafter. The Gujarat Vidhan Sabha was quick to amend the pertinent act provisioning for even death penalty for those convicted in spurious liquor cases. The Bill was cleared by the then Governor Dr Kamala Beniwal. Not a single person has got life imprisonment thereafter, let alone terminal punishment.

The whole business of prohibition in Gujarat is a big charade in which everyone is happy and the only ones who stand to lose out are the people. Gujarat is soggy wet so those who want to drink, get enough of it but for a price. The cop is happy, he gets his cut and the politician in power more so because he gets a fair share as well besides the rip off from transfers and postings by playing favourites. Right from the sub-inspector to the DGP, the transfers are all at the behest of the Home department and the politicians who preside over it. The bootlegger is happy because he still manages to make money for himself despite all the pricks and cuts. It is only the honest tax payer who gets fobbed because the state loses a huge amount of money in excise and allied duties. Never mind this common man, he was in any case, born to bear the burden of the cross. Moonshine for the earthy, sunshine for the dirty.

Prohibition, Discrimination in Kerala's alcohol policy

Suhrith Parthasarathy in The Hindu

Regardless of what our respective moral positions on policies of prohibition might be, and regardless of the potential efficacy of such programmes, the judgment on the validity of Kerala’s liquor policy militates against the fundamental promise of equal concern and treatment under the Constitution.

As virtually its last significant act of 2015, on December 29, the Supreme Court of India delivered its judgment on the validity of Kerala’s newest liquor policy, which seeks to prohibit the sale and service of alcohol in all public places, save bars and restaurants in five-star hotels. Regardless of what our respective moral positions on policies of prohibition might be, and regardless of the potential efficacy of such programmes, the new law, as is only plainly evident, militates against the fundamental promise of equal concern and treatment under the Constitution. In placing five-star hotels on a pedestal, the law takes a classist position, and commits a patent discrimination that is really an affront to the underlying principles of our democracy. Regrettably, though, the Supreme Court’s judgment, in The Kerala Bar Hotels Association v. State of Kerala, eschews even the most basic doctrines of constitutionalism, and, in so doing, allows the state to perpetrate a politics of hypocrisy.

Kicking off the excise policy

Since 2007, the Kerala government has sought to tighten its Abkari (excise) policy with a view to making liquor less freely available in the State, ostensibly in the interest of public health. At first, the State sought to amend the policy by permitting new bar licences to be granted only to those hotels that were accorded a rating of three stars or more by the Central government’s Ministry of Tourism. In 2011, these rules were further changed. This time, all hotels that had a rating of anything below four stars were disentitled from having a licence issued to serve alcoholic beverages on their premises. However, those hotels with existing licences were accorded an amnesty, which permitted them to have their licences renewed even if they did not possess a four-star mark.

The Supreme Court held, in a convoluted judgment, in March 2014, that the deletion of three-star hotels from the category of hotels eligible for a liquor licence was, in fact, constitutionally valid. The court provided a rather bizarre rationale for what appeared to be a palpable act of favouritism. Even hotels without a bar licence, it said, were entitled to three-star statuses under the Ministry of Tourism’s rules and regulations.

In August 2014, the Kerala government sought to further intensify its Abkari policy, by making its most drastic change yet, in purportedly trying to enforce complete prohibition. Only hotels classed as five star and above, by the Union government’s Ministry of Tourism, the new policy commanded, would be entitled to maintain a bar licence. To give effect to this rule, the Abkari Act, a pre-constitutional enactment that was extended in 1967 to Kerala, was duly amended, and the State’s excise commissioners issued notices to all hotels of four stars and below, which served liquor, intimating them of the annulment of their respective bar licences.

The new policy was immediately challenged in a series of petitions filed in the Kerala High Court by hotels of various different denominations. In May last year, after a division bench of the High Court had ruled in favour of the State, the hotels filed appeals before the Supreme Court. They raised two primary grounds of challenge, both predicated on fundamental rights guaranteed under Part III of India’s Constitution.

Fundamental rights

First, the hotels submitted that in cancelling their bar licences, and in prohibiting them from serving and selling liquor on their premises, the State had infracted their right, under Article 19(1)(g), to practise any profession, or to carry on any occupation, trade or business. Second, they pleaded, in separately categorising hotels of five stars or more, and in permitting those hotels alone to serve liquor in public, the new Abkari policy had made an unreasonable classification, by treating persons on an equal standing unequally, and therefore violated Article 14 of the Constitution.

The first argument was admittedly going to be a difficult one to maintain. The liberty to freely carry on any trade or business is subject to reasonable restrictions that may be imposed by the state in the interest of the general public. The Constitution itself, in Article 47, requires States to make an endeavour towards improving public health, including by bringing about prohibition of the consumption of liquor. Therefore, quite naturally, any policy in purported furtherance of such goals would almost always be viewed as a legitimate limitation on any freedom to do business. In fact, in 1994, a constitution bench of the Supreme Court, in Khoday Distilleries Ltd. v. State of Karnataka, explicitly questioned whether any right to trade in alcoholic beverages even flowed from our Constitution.

“The State can prohibit completely the trade or business in potable liquor since liquor as beverage is res extra commercium,” wrote Justice P.B. Sawant. “The State may also create a monopoly in itself for trade or business in such liquor. The State can further place restrictions and limitations on such trade or business which may be in nature different from those on trade or business in articles res commercium.” Therefore, the court, in The Kerala Bar Hotels Association case, perhaps, had little choice but to hold the Abkari policy as being in conformity with the right under Article 19(1)(g).

Such a holding, though, ought not to have precluded the court from scrutinising the liquor policy with further rigour. The mere fact that a commodity is res extra commercium — a thing outside commerce — does not give the state absolute power to make laws on the subject in violation of the guarantee of equal treatment. While a law might represent a valid constraint on the freedom to trade, it nonetheless must confirm to other constitutional commands, including Article 14, which assures us that the state shall not deny to any person equality before the law or the equal protection of the laws within the territory of India.

The point of classification

Equality, as the legal philosopher Ronald Dworkin once wrote, is a contested concept. But it is however, in its abstract form, a solemn constitutional pledge that underpins our democracy. The Supreme Court, in some of its earliest decisions, interpreted Article 14 as forbidding altogether any law that seeks to make distinctions based on class, except where reasonable classifications are made in a manner that does no violence to the provision’s core promise. The court also crystallised a basic two-prong test to determine what constitutes such a classification: there must be, it held, an intelligible differentia, which distinguishes persons or things that are grouped together from others left out of the group, and this differentia must have a rational relation to the object sought to be achieved by the law in question.

Hence, in determining whether Kerala’s Abkari policy violated the right to equality, the question was rather simple: has the State made a reasonable classification in consonance with Article 14 by permitting only five-star hotels and above to serve liquor? When we apply the test previously laid down by the Supreme Court, there is little doubt that the distinction that the policy makes between hotels on the basis of their relative offering of luxuries constitutes a discernible intelligible differentia between two classes of things. But a proper defence of the law also requires the government to additionally show us how this classification of five-star hotels as a separate category bears a sensible nexus with the object of the law at hand. The changes in the liquor policy were ostensibly brought through with the view of promoting prohibition, and thereby improving the standard of public health in the State. Now, ask yourself this: how can this special treatment of five-star hotels possibly help the Kerala government in achieving these objectives?

The Supreme Court, as it happened, made no concerted effort to answer this question. This could be because, however hard we might want to try, it’s difficult to find any cogent connection between classifying five-star hotels separately and the aim of achieving prohibition. The court, therefore simply said, “There can be no gainsaying that the prices/tariff of alcohol in Five Star hotels is usually prohibitively high, which acts as a deterrent to individuals going in for binge or even casual drinking. There is also little scope for cavil that the guests in Five Star hotels are of a mature age; they do not visit these hotels with the sole purpose of consuming alcohol.” Given the palpable inadequacies of such a justification — and also given its validation of a manifestly classist position — the court also used the State government’s excuse of tourism as a further ruse to defend the law. But when a policy exists to promote the prohibition of the consumption of liquor, it’s specious to use an extraneous consideration, in this case, tourism, to defend a classification made in the law, regardless of how intelligible such a classification might be.

Prohibition often has a polarising effect on the polity. But the criticisms of the ineffectuality of such policies apart, Kerala’s new law ought to have been seen for what it is: paternalism, at its best, and, at its worst, an extension of an ingrained form of classism that is demonstrably opposed to the guarantee of equality under our Constitution. The judgment in The Kerala Bar Hotels Association case is therefore deeply unsatisfactory, and requires reconsideration.

Needed: An exit policy for bad businessmen

S A Aiyer

Vijay Mallya has not paid employees of Kingfisher Airlines for months, and has defaulted on thousands of crores due to suppliers and creditors. Yet he has just donated three kilos of gold, worth almost one crore, to the Tirupathi temple. In August, he offered 80-kilo gold plated doors to the Kukke Subramanya temple in Karnataka. Possibly he believes that the gods can be bought off in ways that employees and creditors cannot.

How can a man who owes enormous sums to employees and creditors be free to throw gold around like small change? If there were any justice, surely the gold and golden doors should be seized from the temples and handed over to the employees and creditors. Surely they should have first right to Mallya’s assets.

After two decades of economic reform , we have not yet evolved rules that facilitate the exit of poor managements before they ruin a company beyond redemption. Kingfisher Airlines has been ground to the dust by Mallya, a liquor baron who should never have entered this space.

A free-market economy is not just a device giving owners the freedom to sack employees. It is one where creditors and employees have the right to seize a company defaulting on dues, and sack the management. The managing shareholder or promoter is only one of many stakeholders. If he cannot meet his obligations to other stakeholders , they should oust him in a true free market economy. In India, alas, our unreformed regulations and procedures leave promoters in control no matter how big a mess they make.

In the US, creditors can quickly seize a company that defaults on dues, and reorganize or sell it to a new owner . The owner can get temporary protection from creditors through Chapter 11 proceedings. In this, a judge determines whether the company is so far gone that it must be liquidated, or whether it can be saved through mutual sacrifices by creditors, employees and owners. In the process, the judge can change the owner. So, often workers survive bankruptcy proceedings , but the owner does not. That is what we should aim for in India too: an exit policy for incompetent, defaulting owners.

Kingfisher Airlines never made a profit, not even in the boom years when its rival airlines were profitable. Creditors should have moved in years ago when it became clear that the skills of a liquor baron were irrelevant for an airline. But in India creditors cannot quickly seize a company, least of all when the owner has political clout (as in Mallya’s case).

In the old licence permit raj, banks and financial institutions had to support existing managements and keep rescuing them. This has not changed despite the 1991 reforms. Banks have to keep throwing good money after bad.

Today Kingfisher is so worthless that it no longer makes sense to seize it and find a buyer. SBI Chairman Pratip Chaudhuri estimates that rehabilitating Kingfisher will cost a billion dollars. Nobody will do so — a new airline can be started for maybe just $100 million. Kingfisher has just lost its flying licence. Mallya’s hopes of being rescued by Etihad Airways of Abu Dhabi look like pure fantasy.

Even if it makes no sense to seize the airline today, why not seize his liquor business? Why not seize his prize luxury possessions, ranging from paintings to yachts or jets? Why not take over his cricket team, Royal Challengers ? Why not take over his football team Mohun Bagan, and his Formula 1 racing team Force India? Why is he allowed to keep all these, along with gold that he donates to temples, when he says he doesn’t have enough to pay employees or suppliers? He has given personal guarantees to banks: why are these not being enforced?

Mallya can be congratulated on one thing. Service was top-class in Kingfisher , and the airline gained a good reputation for quality. Had the airline been seized early on, it could definitely have been sold to a new owner. However , its reputation has steadily fallen with its continuing financial crisis, leading to cancelled flights and official grounding.

I constantly hear that India has gone in for neo-liberal policies. That’s pure rubbish. Neo-liberalism would have given employees and creditors the right to quickly seize and sell a company that cannot meet its obligations. The problem is not liberalism but the continuing old illiberalism that keeps promoters in charge, forcing other stakeholders to take a hit. Temples and religious trusts can keep enormous donations from defaulters instead of handing them over to others who, in all justice, should have the first right to such money or gold. This area desperately needs reform.