Kerala CM smells of Bacardi: What's the liquor storm targeting VD Satheesan

Barely into office, the Congress government under Chief Minister VD Satheesan appeared to have been hit by the first major political storm after its proposal to sharply reduce the sales tax on low-alcohol beverages. Touted as a tax rationalisation measure in Satheesan's budget, it quickly snowballed into a controversy of massive scale, drawing sharp attacks from the Left Democratic Front (LDF), criticism from religious organisations, dissent within the Congress, and questions from senior party leaders, including KC Venugopal.

The issue escalated into a full-blown political confrontation with the LDF launching its strongest offensive against the new government since its electoral defeat, accusing the government of tailoring the tax proposal to benefit liquor major Bacardi. Left leaders dubbed it the "Bacardi tax" and alleged that the "Chief Minister smells of Bacardi". The controversy spilled onto the streets on Wednesday as Left-backed youth and student organisations staged protest marches across the state, while the Assembly witnessed chaotic scenes during heated exchanges over the issue.

As political pressure mounted, Satheesan sought to defuse the controversy by indicating that the proposal would not be implemented without the approval of the ruling coalition. "If the United Democratic Front decides to permit the sale of low-alcohol liquor, the government will proceed accordingly. If the UDF does not approve it, the proposal will not be taken forward," he said, effectively passing the ball to UDF.

At the centre of the controversy is the Opposition's allegation that the revised tax structure disproportionately benefits liquor manufacturers, particularly Bacardi, while encouraging alcohol consumption and potentially costing the state exchequer hundreds of crores in revenue. The government has rejected the charge, insisting that it has merely rationalised the tax structure for a category of beverages, created under the previous Left Democratic Front (LDF) government and that it has neither altered Kerala's liquor policy nor expanded the availability of alcohol.

TAX OVERHAUL TRIGGERS CONTROVERSY

A proposal in the revised Budget 2026-27 presented by Satheesan, who holds the finance ministry, was the trigger of the storm.

Under the proposal, alcoholic beverages containing 0.5-10 per cent alcohol by volume (ABV) would attract a 120 per cent sales tax, while beverages with 10-20 per cent ABV would be taxed at 175 per cent, replacing the earlier uniform 251 per cent sales tax applicable to all Indian-made foreign liquor (IMFL).

The government has maintained that the move is purely a fiscal rationalisation based on alcohol content and does not amount to a change in liquor policy. It has repeatedly argued that the "low-alcohol" category itself was introduced by the previous CPI(M)-led government through amendments to the Abkari framework and that no new licences have been issued by the present UDF administration.

LDF ALLEGES CORPORATE FAVOURITISM

The LDF countered with strong defence. It accused the government of extending a massive tax concession to liquor companies, repeatedly naming Bacardi during Assembly proceedings.

Former Excise Minister MB Rajesh and other CPI(M) leaders alleged that the proposal was designed to benefit a Karnataka-based distillery and could reduce the state's annual revenue by nearly Rs 600 crore while encouraging rapid growth in the ready-to-drink alcohol market.

Leader of the Opposition Pinarayi Vijayan questioned the rationale behind what he described as a "131 per cent" tax reduction, arguing that cheaper low-strength alcoholic beverages could become "as easily available as soft drinks" and increase alcohol consumption among young people.

CPI(M) state secretary MV Govindan alleged that the proposal had created fertile ground for corruption, while former Finance Minister KN Balagopal claimed the decision had been unusually fast-tracked through the bureaucracy.

Left MP and one of the CPI(M)'s prominent young leaders, AA Rahim, launched a sharp attack on the government, alleging that "VD Satheesan smells of Bacardi" and accusing it of orchestrating a "multi-crore scam to favour liquor barons".

The opposition also accused Satheesan of maintaining links with liquor interests during his tenure as Leader of the Opposition, allegations the government dismissed as politically motivated and baseless.

ASSEMBLY ERUPTS IN MAJOR SHOWDOWN

The issue reached a flashpoint in the Assembly on Tuesday after former Finance Minister KN Balagopal moved an adjournment motion seeking an immediate discussion on the tax revision. The Speaker rejected the notice, ruling that the matter could be debated during the ongoing Budget discussion and citing Assembly precedents that ordinarily bar adjournment motions during budget proceedings.

The ruling triggered dramatic scenes inside the House.

Pinarayi Vijayan defied the Speaker by reading out the contents of the rejected motion, drawing sharp objections from the treasury benches. LDF legislators rushed to the well of the House, raised slogans accusing the government of shielding corporate interests and later staged a walkout.

Chief Minister Satheesan and Home Minister Ramesh Chennithala accused the Opposition of violating Assembly rules by reading out a disallowed motion and demanded that Vijayan's remarks be expunged from the official record. The Speaker said he would examine the request.

The confrontation continued during the Budget debate, with the Opposition accusing the government of encouraging alcohol consumption among the youth and favouring private liquor companies, while the treasury benches countered that the LDF itself had created the low-alcohol regulatory category during its tenure.

SATHEESAN TURNS THE TABLES ON LDF

Responding to the allegations, Chief Minister Satheesan launched a sharp counterattack, accusing the previous Pinarayi Vijayan government of laying the foundation for the very policy it is now criticising.

He told the Assembly that soon after assuming office in 2021, the second Pinarayi government had itself sought a formal definition of "low-alcohol content" and that the Excise Department initiated the process within six months under then Excise Minister MV Govindan.

According to Satheesan, the previous government amended the foreign liquor rules to facilitate the sale of low-alcohol beverages, completed procedures for a separate tax structure and acted after receiving representations from liquor manufacturers, including Bacardi.

"The previous government was the first to intervene on behalf of Bacardi. The legal and regulatory framework for low-alcohol beverages was created by them. We have only revised the tax structure after examining the experience of other states," the Chief Minister said.

Rejecting allegations of political interference, Satheesan said the revised tax rates would come into force only after the government took a final implementation decision based on administrative and fiscal considerations.

He also dismissed allegations that his government was favouring liquor companies, claiming that unlike the previous administration, it would not allow tax assessment files to be routed through party offices.

Further attacking the Left front, Satheesan said Kerala had only 28 bars when Pinarayi Vijayan assumed office in 2016 but that the number had crossed 900 during the LDF's decade in power. He argued that those who had overseen a large-scale expansion of liquor outlets were now accusing the UDF of promoting alcohol.

CONGRESS FACES INTERNAL DISSENT

The issue has also exposed divisions within Congress.

Congress general secretary KC Venugopal sought to contain the fallout, noting that the government had been in office for only a month and assuring that concerns raised within the party would be addressed through internal consultations. He also said public concerns over the proposal should be clarified by the government.

Veteran Congress leader and former KPCC president VM Sudheeran wrote to the Chief Minister demanding immediate withdrawal of the proposal, calling it a betrayal of the UDF's promise to curb alcohol and drug abuse.

Citing World Health Organisation findings that no level of alcohol consumption is completely safe, Sudheeran argued that the proposal undermined the party's longstanding commitment to prohibition and anti-addiction policies.

The controversy has also drawn the Indian Union Muslim League (IUML), a key UDF ally, into the political battle. Left leaders questioned how the Muslim League, which publicly opposes alcohol, could support a government proposing lower taxes on liquor.

In response, IUML leader and Local Self-Government Minister KM Shaji reiterated the party's ideological opposition to alcohol while accusing the LDF of dramatically expanding liquor outlets during its decade in power. He argued that the Opposition lacked the moral authority to criticise the UDF.

The proposed tax revision has drawn strong opposition from major religious organisations across Kerala, including prominent Muslim organisations and several Christian churches. Among those who voiced concern were Thalassery Archbishop Joseph Pamplany, Orthodox Metropolitan Yuhanon Mar Diascoros and Bishop Mar Remigiose Inchananiyil of the Catholic Church, who, along with other religious leaders, urged the government to withdraw the proposal. They warned that lowering taxes on low-alcohol beverages under the guise of tax rationalisation would weaken Kerala's long-standing campaign against alcohol addiction and send the wrong message to society.

PUBLIC HEALTH VERSUS REVENUE DEBATE

The controversy has also revived the debate over the balance between public health and fiscal policy.

Public health experts have pointed to international evidence suggesting that lower alcohol prices generally increase consumption, particularly among younger people. The World Health Organisation has consistently identified higher alcohol taxation as one of the most effective measures to reduce harmful drinking.

While the LDF estimates the revised tax structure could cost the state nearly Rs 600 crore in annual revenue, the government argues that broader market participation and increased sales volumes could offset part of the revenue loss. It also maintains that low-alcohol beverages would continue to remain heavily taxed by international standards.

The dispute has once again thrust Kerala's liquor policy into the political spotlight, reviving the state's long-running debate over prohibition versus regulation.

The previous UDF government led by Oommen Chandy had drastically reduced the number of bars and announced a phased prohibition policy. After returning to power in 2016, the LDF gradually reversed many of those restrictions, expanded bar licences and introduced separate regulatory categories for low-alcohol beverages through amendments to the Abkari framework.

The present UDF government maintains that it is only modifying the tax structure of a category inherited from the LDF, while the Opposition argues that the scale of the proposed tax reduction fundamentally alters the economics of alcohol consumption, disproportionately benefits select liquor manufacturers and undermines public health objectives.

- Ends