India’s northern Bihar state outlaws alcohol

India’s northern Bihar state on Wednesday imposed prohibition on its 99m people, fulfilling an election promise that had boosted the popularity of Nitish Kumar, chief minister, among women voters in state polls last year.

With its decision, Bihar has become the second Indian state to impose restrictions on alcohol sales in the past two years, amid growing public anger over alcohol abuse, especially among the poor and working classes.

In 2014, the beachfront state of Kerala, whose economy is dependent on tourism, banned the sale of alcohol, except from five-star hotels and a few hundred state-owned liquor shops. Kerala said these measures were preparation for the imposition of prohibition within 10 years.

Mr Kumar promised to enforce prohibition during last year’s Bihar state elections, when he was facing a tough challenge from Prime Minister Narendra Modi’s Bharatiya Janata party.

Initially, Mr Kumar decided prohibition would be phased in gradually, starting with a ban on locally made traditional spirits on April 1. But his administration surprised the liquor industry when it decided to ban the sale and consumption of all types of alcohol immediately.

The decision means Bihar will forgo about $606m in excise revenues from alcohol sales, accounting for about 15 per cent of all state revenues. The army, however, will be exempt from the ban, and Bihar will still permit the manufacture of alcohol in the state.

The clampdown on alcohol sales comes as international spirits groups, such as Diageo, Pernod Ricard and Beam Suntory, have been making big investments to gain a foothold in what they see as a potentially vast market.

Diageo recently spent £1.8bn to take a controlling stake in United Spirits, India’s largest liquor company, while Pernod Ricard has 25 Indian bottling plants, two grain alcohol distilleries and a winery.

India’s spirits consumption is just 4.5 litres per capita, according to the World Health Organisation, which is far lower than many other parts of the world. But consumption has risen 55 per cent over the past two decades, according to a separate OECD study.

Analysts warn that growing popular support for restrictions on alcohol sales — especially among women whose husbands abuse cheap, locally made “country liquor” products — could threaten buoyant growth projections of India’s liquor consumption.

“All the political parties see this as a big opportunity where they can go ahead and promise prohibition and it will win them huge votes among women,” says a spirits industry analyst, who asked to remain anonymous. “It looks like a clear winner in states where income levels aren’t great, and alcohol abuse is a big issue. It’s a concerning trend.”

India’s experiments with prohibition have a chequered history. They have failed to curb alcohol consumption — which was facilitated by bootleggers who smuggled booze in from neighbouring states — and starved state coffers of a rich source of revenue.

Gujarat imposed prohibition in 1958 to honour Mahatma Gandhi, who was both a teetotaller and advocate of national prohibition. Nevertheless, alcohol is easily available in Gujarat, including toxic country liquor brewed for the poor that sometimes claims lives.

In the 1990s, Haryana and Andhra Pradesh both imposed prohibition after mass anti-liquor campaigns, but then reversed the policy after just a few years as state coffers felt the pinch. Several small north-eastern states have also reversed years of prohibition, conceding it had failed to work.