India bans sale of alcohol near main roads

India’s Supreme Court has gone ahead with its ban on the sale of alcohol near main roads across the sub-continent.

Traffic in India

The legislation, which came into effect on 1 April, is designed to combat drink driving and will hit all alcohol producers because some 35% to 40% of all drink outlets are reckoned to be within the stipulated 500 metres of state and national highways.

Industry sources suggest that there will be considerable short-term disruption to the supply chain as the Supreme Court refused to heed petitions requesting the extension of the deadline beyond April 1 to allow licenses previously granted to shops near the main roads to expire. Those outlets have had to close overnight or find alternative premises beyond the 500 metre limit.

The effect will create a measure of destocking affecting volumes for groups such as United Spirits, but insiders predict that as the new law relates to supply, not demand, sales will return to near normal levels once stockists relocate. That said, the dislocation is likely to hit major suppliers’ quarterly profits.

Individual states derive significant income from local sales taxes on alcohol. That prompted several including Kerala, Tamil Nadu, Arunachal Pradesh, Punjab, Telangana and Haryana to petition the Supreme Court before the law came into effect. They wanted it to narrow the 500-metre exclusion zone around the main routes to mitigate the impact of the sales ban.

Now that has been refused, they are taking novel measures to circumvent it and protect their revenues.

The Rajasthan government has redesignated state highways passing through inhabited areas as urban or district roads, which are not covered by the ban. In similar vein, Chandigarh has also declared all city roads as urban roads.

Meanwhile, Bengal has issued on-premise licences to all existing alcohol outlets within 500 metres of highways in response to a “clarification” issued by Attorney General Mukul Rohatgi which declared that that the Supreme Court’s ban was applicable only to off-licences, not to bars and restaurants.

These overnight changes to road classification have made Pernod Ricard’s chairman and chief executive, Alexandre Ricard, seem clairvoyant. In London in February, when discussing the potential impact of the Supreme Court’s planned exclusion zone, he asked: “Anyway, what is a highway?”

That question is something India’s Supreme Court may now reconsider.