'LDF shelved Bacardi's proposal in public interest in 2023': Pinarayi contradicts ex-Finance Minister on low-alcoholic liquor

While the CPM targets the UDF government over lack of consensus on the proposed liquor tax concessions, Opposition leader Pinarayi Vijayan's latest claims on the issue have exposed similar fault lines within the LDF's own narrative.

In an article published in the CPM mouthpiece 'Deshabhimani' on Wednesday, Pinarayi claims that the files regarding low-alcoholic beverage were shelved by the LDF government in 2023, citing public interest. This, however, directly contradicts former finance minister K N Balagopal's earlier statement in the assembly that the proposal was under the government's consideration in 2024.

The controversy stems from Chief Minister V D Satheesan's Budget proposal to introduce two tax slabs for a new category of low-alcohol beverages: 120 per cent for beverages with an alcohol content of 0.5% to 10% and 175 per cent for those containing 10% to 20% alcohol. The move has drawn widespread criticism from within the UDF and the Opposition. In defending the proposal, Satheesan said the previous LDF government had already approved the low-alcohol beverage category, but the tax structure could not be finalised before the elections were announced, thereby drawing the LDF into the controversy as well.

Pinarayi said in the article that the Bacardi proposal that reached the previous LDF government was set aside in 2023 in public interest. However, records from the period appear to contradict that claim.

The proposal was set in motion after Joji J Kakkattil, Senior Manager of Bacardi India Private Limited, wrote to then Excise Minister M V Govindan on September 17, 2021, requesting the creation of a "low-alcoholic beverage" category to facilitate the availability of such products in the state.

The Excise Commissioner had informed the government that the applications received did not conform to its stated objective of encouraging the production of alcohol from fruits and agricultural produce. Despite this, M V Govindan, who served as Excise Minister during the initial phase of the second Pinarayi Vijayan government, directed officials to prepare a report defining low-alcohol beverages by taking into account the applications submitted by Bacardi and SDF Industries.

Govindan subsequently forwarded the letter to the Secretary of the Taxes Department, directing the official to prepare a proposal and submit recommendations. 

Later, in 2022-23, the LDF government introduced an amendment to enable the sale of liquor with an alcohol content between 0.5% vv and 20% vv.

About a year later, in 2024, then Finance Minister K N Balagopal, in a written reply in the Assembly, said that Bacardi had submitted a request regarding the sale of low-alcoholic beverages and the formulation of a tax structure for the category. He further stated that the State GST Commissioner had been directed to prepare a report on the proposed tax rate and that the report was under the government's consideration. 

Pinarayi's earlier criticism had focused on the UDF government's decision to include the proposed liquor tax concessions in the Kerala Finance Bill before obtaining the coalition's approval.

He argued that once the Assembly passed the Bill, the tax concessions would become law, leaving the UDF with no legal means to prevent their implementation. 

Questioning the rationale behind holding discussions after the proposal had already been incorporated into the Finance Bill, Pinarayi described the exercise as a "charade" intended to accommodate the unwarranted demands of liquor companies.

He also highlighted what he described as inconsistencies in the government's stand, pointing to the chief minister's assertion that the budget proposals reflected the UDF's policy position while simultaneously maintaining that the coalition had not taken a final decision on the liquor tax concessions. Pinarayi further accused Satheesan of acting unilaterally without consulting UDF constituents or even his own ministers.