The chief of the Special Investigation Team probing the liquor scam, K Srinivas Reddy, is at sea. Literally because he is now IG of the Coastal Security Wing. For all practical purposes, worse than a loopline posting, where the 1994 batch IPS officer can spend all day sitting by the seashore. His political detractors who have pushed him there would undoubtedly be on a high. Because now they can get back to business. Bottoms Up !

Everyone knows Reddy has been made the sacrificial lamb. Sacrificed at the altar of the truce called between chief minister Kiran Kumar Reddy and PCC chief Botsa Satyanarayana. It is the worst kept secret in political circles that Kiran got the Anti-Corruption Bureau after the liquor syndicate in Andhra Pradesh, with a view to clip the financial and political wings of Botsa, whose family’s writ runs in the liquor business in Vizianagaram and Visakhapatnam. The heat was further turned on, with the intervention of the High court and a no-nonsense officer like Srinivas Reddy heading the SIT. Botsa’s men were on the run.

Stepped in Congress general secretary Ghulam Nabi Azad, to give azaadi to Botsa from the torture. Kiran was asked to promote Srinivas Reddy and use that ruse to shunt out the over zealous officer. His own political survival at stake, Kiran caved in without putting up a fight. The twin hope now is that the High court monitoring the case may intervene and two, Reddy’s successor, B Shivdhar Reddy (they are batchmates) is also an upright officer.

But what is it about the liquor business that makes it such a heady cocktail of money, power and politics?

Rewind to 2005 when the Y S Rajasekhara Reddy government decided to auction liquor licenses in Andhra Pradesh. The need for more revenue to generate funds for the freebie schemes and irrigation projects meant the excise department became the cynosure of all attention in the Andhra Pradesh government. Today 12 per cent of the state’s revenue comes from sale of alcohol and in 2012-13, the government expects to earn Rs 16000 crores by giving the customer a `kick’.

Now how does the network operate. Here’s how.

1. Auctions are held every two years and 6596 shops have been auctioned till date. This is one territory that has not seen a slowdown for the government. Earnings from license fee for the shops alone has gone up four times from 2005-06 to 2011-12. From Rs 813 crore to Rs 3495 crore.

During the last auction, the government collected an average license fee of Rs 70 lakh per liquor shop which means a shop has to earn a profit after tax of at least Rs 20000 a day towards license fee. A liquor shop in Guntur district was auctioned for the highest amount of Rs 5.18 crores, so it has to earn at least Rs 1.5 lakh a day towards license fee alone.

2. The auction process over, now the government and the shop owners are on the same page. Both have to maximise sales to earn more revenue. The taxes in Andhra Pradesh are the highest in the country – Roughly 75-80 per cent of the money paid for a bottle goes to the state government exchequer. So the excise department actively helps the licensees sell Bacchus to the state.

3. If 80 per cent of what he gets on a bottle goes to the government, how does the shop owner make money? On an average, every liquor shop caters to the population in about 20-25 villages. Even as the excise department turns a blind eye, the licensee conducts mini auctions to open liquor belt shops in each village, to increase sales. In many villages, where demand is high, he even allows people to set up 5-6 belt shops. No wonder, every village in Andhra Pradesh after dusk is high on booze. The government could not care less because every drunkard is shelling out his hard earned money into its exchequer. And so that it does not pinch the government’s conscience, it also publicises the Arogyasri medical insurance scheme and also talks about spending money on spreading awareness about the harmful effects of liquor.

4. Another violation is selling over the MRP. If a particular brand for instance sells at 100 rupees a bottle, the shopkeeper will sell it to the customer for 140 rupees. The forty rupees is what the government does not earn anything on. This MRP violation money, according to excise officials, runs into an 6000 crore rupees in a year. And it is from this booty, that the liquor syndicate takes care of everyone – politicians, excise officials, police officers, bureaucrats, journalists.

5. Loose sale of liquor is overlooked, because for the greedy government, it means lifting of more stocks. Consuming alcohol sitting inside a shop and keeping wine shops open beyond stipulated hours are other common violations.

An IPS officer who worked in the excise department says politicians get into the liquor business because with elections becoming very expensive, the liquor business comes in handy to generate funds, and two, keep everyone in good humour. There are some politicians who prefer not to get their hands dirty and opt for a monthly instalment scheme with the liquor syndicate instead.

“If you take a look at the profile of the persons buying the licenses, most of them are fronts for the main politicians of the area. Many of them are poor people or even farm labour who just lend their name for a price. Most of the shops are benami. For the politicians or their relatives who fund the shop owners, it is a safe avenue for easy rotation of money. Everyone is paid a bribe which is why all the licensees maintain accounts,” he says. It is these dairies that are creating a political storm in Andhra Pradesh.

In fact, as soon as the auction process is over, all the licensees in a particular district hold a meeting where everyone decides on the `above MRP price’ of each brand. In most cases, the local excise inspector chairs the meetings. An indication of how circumcised the entire machinery is.

No wonder, wine shop owners wield enormous clout in Andhra Pradesh. Occasionally, there are police chiefs in the districts who are non-corrupt and crack down on excise violations. In all such cases, political clout of the shop owners ensures a phone call is made from the powers-that-be in Hyderabad to go easy. In police circles, the excise department is referred to as the “kampu” department, which means `the department that stinks’. An IPS officer posted there, in sheer frustration, wrote to the excise commissioner to shut down the department’s enforcement wing because it wasn’t allowed to do anything anyway.

Those who know how the auction system works, also point to cartels that corner all the bids. Helpful excise and district officials even rig the auction process by filling up the `right’ bid amount for the `right’ candidate.

In the backdrop of this kind of a situation, it is not surprising that Botsa scored over Kiran. But it would be unfair to paint only Botsa as the villain of the piece. If corruption in the liquor scam is to be a yardstick, half of Kiran’s ministry would have to be sent home. According to a conservative estimate, three in every four MLAs are the kings of good times. Which is why the opposition tirade against the government is at best only for the cameras. Because even Chandrababu Naidu knows that many of his Telugu Desam men too are riding on liquor money.

High on the ACB drive, Kiran Kumar Reddy had planned to replace the private vendor model of selling liquor in Andhra Pradesh with an alternative model. The idea being to break the liquor syndicate, which for all practical purposes is running the state today. Now even the chief minister cannot be sure, if that will happen.

(Pic courtesy : flickriver.com)