Who is subsidizing a black market in poison?

Reading about the methanol-related deaths of at least 143 /people in India, my first reaction was to wonder “why in the world would anyone buy such poison?”

The answer is that they cannot afford the good stuff sold in government-run liquor stores. So, callused criminal entrepreneurs brew up poisonous rotgut, which contains methanol. The predictable result is death:

Illegal liquor operations flourish in the slums of urban India and among the rural poor who can’t afford the alcohol at state-sanctioned shops. The hooch, often mixed with cheap chemicals to increase potency and profit, causes illness and death sometimes — and occasionally mass carnage.

Many of the victims — day laborers, street hawkers, rickshaw drivers — had gathered along a road near a railway station after work to drink the illicit booze they bought for 10 rupees (20 cents) a half liter, less than a third the price of legal alcohol, district magistrate Naraya Swarup Nigam said.

They later began vomiting, suffering piercing headaches and frothing at the mouth, he said.

Angry villagers later ransacked booze shops around the village of Sangrampur, about 30 kilometers (20 miles) south of Kolkata, the city formerly known as Calcutta.

Police arrested 10 people in connection with making and distributing the methanol-tainted booze and demolished 10 illicit liquor dens in the area, said Luxmi Narayan Meena, district superintendent of police.

It is understandable that the mobs would ransack the places that sell poisonous alcohol. It should be — and I am sure it is — illegal to pass off poisonous wood alcohol as as grain alcohol. But why would there be a booming black market for such deadly stuff in the first place? Americans would never buy it, so why do Indians?

It isn’t as if ordinary grain alcohol is an exotic substance. Why would it be beyond the means of India’s lower working class?

Because the government wants it to be beyond their means, that’s why. Promoting prohibition is India’s official state policy:

Prohibition is incorporated in the Constitution of India among the directive principles of state policy. Article 47 says: “The state shall regard the raising of the level of nutrition and standard of living of its people as among its primary duties and in particular, the state shall endeavour to bring about prohibition of the use except for medicinal purposes of intoxicating drinks and of drugs which are injurious to health.”

While there is complete prohibition in the state of Gujurat and other areas,  alcohol taxes represent a major chunk of government revenues.

Alcohol is a significant contributor to government revenues in many states. In most states this accounts for over 10 per cent of total state tax revenues, whilst in the Punjab this accounts for over one third.

Dr. J.V.M. Sarma has an economic analysis of the government’s alcohol excise tax policy, which he says causes “smuggling and adulteration” (precisely the type of activities which killed the 143 in today’s news) and concludes the tax policy is “unsutainable”:

Often the high rates result in smuggling and adulteration. Thus there is need for rationalization of excise duties across states.Excessive consumption of liquor has been a major source of concern for the society as itadversely affects the incomes and the welfare of a significant number of families. Nevertheless,excise duty on the sale of alcoholic liquors has been an important source of tax revenue forStates and its supply and distribution contributes to employment. Thus, the policy on liquor iscaught between the desire to discourage the production and consumption of liquor on one sideand the anxiety to raise revenue on the other side. This has naturally given rise to a policy that isinternally inconsistent and therefore unsustainable.

So, while the mobs are right to ransack the rotgut purveyors, they might want to think about the forces that have given rise to a booming underground economic opportunity.