Barely a month after assuming office, the Congress-led government headed by Chief Minister VD Satheesan has found itself facing its first major political controversy. The storm erupted over a proposal in the state budget to significantly reduce sales tax on low-alcohol beverages, a move the government described as tax rationalisation but which quickly triggered criticism from the Opposition, religious organisations, and even sections within the Congress party.
The issue has evolved into a major political battle, with the Left Democratic Front (LDF) launching a sustained attack on the government. Opposition leaders have alleged that the proposed tax changes would primarily benefit liquor giant Bacardi, prompting them to label the measure the “Bacardi tax.” The controversy has spilled beyond political debates, with Left-backed youth and student groups staging protests across Kerala, while heated arguments disrupted proceedings in the Assembly.
Facing mounting pressure, Satheesan attempted to ease tensions by stating that the proposal would move forward only if it received approval from the United Democratic Front (UDF). He clarified that the government would not implement the measure without the coalition’s consent, effectively placing the final decision in the hands of the alliance leadership.
Tax Proposal Sparks Political Row
The controversy stems from provisions included in the revised Budget for 2026–27, presented by Satheesan in his capacity as Finance Minister.
Under the proposal, alcoholic beverages containing between 0.5% and 10% alcohol by volume (ABV) would attract a sales tax of 120%, while products with 10% to 20% ABV would be taxed at 175%. This would replace the existing uniform sales tax rate of 251% applied to all Indian-made foreign liquor (IMFL).
The government has maintained that the proposal merely restructures taxation based on alcohol content and does not represent a shift in liquor policy. It has also pointed out that the category of low-alcohol beverages was originally introduced under the previous CPI(M)-led administration and that no new licences have been issued since the UDF returned to power.
Opposition Alleges Corporate Favouritism
The LDF has strongly opposed the proposal, arguing that it grants substantial tax relief to liquor companies while encouraging alcohol consumption and reducing government revenue.
Former Excise Minister MB Rajesh and other CPI(M) leaders alleged that the policy would disproportionately benefit certain manufacturers, particularly Bacardi, while potentially reducing state revenue by hundreds of crores annually.
Leader of the Opposition Pinarayi Vijayan questioned the justification for what he described as a steep tax reduction, warning that cheaper low-alcohol beverages could become more accessible and encourage increased consumption, especially among younger people.
CPI(M) state secretary MV Govindan alleged that the proposal created opportunities for corruption, while former Finance Minister KN Balagopal claimed the decision had moved through administrative channels with unusual speed.
Adding to the criticism, CPI(M) MP AA Rahim accused the government of favouring liquor interests and described the proposal as a major concession to alcohol manufacturers.
The Opposition has also attempted to link Satheesan to liquor industry interests, allegations that the government has dismissed as politically motivated and without evidence.
Heated Confrontation in the Assembly
The dispute reached its peak in the Assembly when former Finance Minister KN Balagopal moved an adjournment motion seeking an immediate discussion on the issue. The Speaker rejected the request, stating that the matter could be debated during the ongoing budget discussions and citing parliamentary conventions that generally discourage adjournment motions during budget sessions.
The ruling led to dramatic scenes inside the House.
Pinarayi Vijayan proceeded to read portions of the rejected motion, prompting objections from treasury benches. Opposition members entered the well of the House, raised slogans against the government, and later staged a walkout.
The government accused the Opposition of violating Assembly procedures, while demands were made to remove Vijayan’s remarks from the official record. The Speaker later indicated that the matter would be reviewed.
The debate continued throughout the budget session, with the Opposition accusing the government of promoting alcohol consumption and benefiting private liquor companies. In response, the ruling side argued that the regulatory framework for low-alcohol beverages had itself been created during the LDF’s tenure.
Satheesan Defends the Government
Responding to the criticism, Satheesan turned the spotlight on the previous government, arguing that the foundations of the current policy had been laid during the second Pinarayi Vijayan administration.
According to the Chief Minister, the previous government had initiated efforts to formally define low-alcohol beverages and amend relevant regulations to facilitate their sale. He stated that these changes were undertaken after receiving representations from liquor manufacturers, including Bacardi.
Satheesan argued that his government had only proposed adjustments to the tax structure after studying practices followed in other states.
Rejecting allegations of favouritism, he stressed that the revised tax rates would take effect only after a final administrative decision and maintained that the government’s actions were guided by policy considerations rather than corporate influence.
The Chief Minister also highlighted that the number of bars in Kerala had increased significantly during the LDF’s decade in power, questioning the Opposition’s moral authority to criticise the UDF on liquor policy.
Congress Faces Internal Criticism
The issue has also exposed differences within the Congress party.
Congress general secretary KC Venugopal sought to calm the situation by assuring that concerns raised within the party would be addressed through consultations and that the government would clarify the rationale behind the proposal.
Veteran Congress leader and former KPCC president VM Sudheeran strongly opposed the measure, urging the government to withdraw it immediately. He argued that lowering taxes on alcoholic beverages contradicted the UDF’s long-standing commitment to reducing alcohol consumption and combating substance abuse.
Referring to global public health research, Sudheeran maintained that no level of alcohol consumption could be considered entirely safe and warned that the proposal could undermine anti-addiction efforts.
Religious Organisations Voice Concern
The controversy has also drawn criticism from major religious organisations across Kerala.
Several prominent Christian and Muslim leaders expressed reservations about the proposal, arguing that reducing taxes on alcoholic beverages could weaken the state’s efforts to curb addiction and send an inappropriate message to society.
Religious leaders called on the government to reconsider the proposal and prioritise public welfare over fiscal considerations.
The issue also placed the Indian Union Muslim League (IUML), an important UDF ally, in a difficult position. Opposition leaders questioned how a party that publicly opposes alcohol could support such a proposal.
In response, IUML leaders reiterated their ideological opposition to alcohol while arguing that the LDF itself had overseen a substantial expansion of liquor outlets during its years in power.
Public Health Versus Revenue Debate
Beyond the political confrontation, the controversy has reignited a broader discussion about the relationship between public health and taxation policy.
Health experts have often argued that lower alcohol prices can contribute to higher consumption, particularly among younger demographics. International organisations, including the World Health Organization, have consistently identified higher alcohol taxes as an effective tool for reducing harmful drinking.
The Opposition estimates that the proposed tax revision could result in a revenue loss of nearly ₹600 crore annually. The government, however, argues that increased market participation and higher sales volumes could offset part of the reduction in tax collections. It also points out that the beverages would remain heavily taxed even after the proposed changes.
The debate has once again brought Kerala’s long-standing dispute over prohibition, regulation, public health, and revenue generation back into focus. While the government insists that it is merely modifying a framework inherited from the previous administration, critics contend that the scale of the tax reduction could significantly alter alcohol consumption patterns and disproportionately benefit large liquor manufacturers.
