CHAPTER III 46-74
THE KERALA STATE LOTTERY : AN OVERVIEW ...... 46
Introduction.................................................................... 46
Historic Evolution of Lotteries ...................................... 46
Lotteries in India............................................................ 50
Kerala State – A Prelude................................................ 52
Lottery in Kerala............................................................ 53
Growth of Kerala State Lottery ..................................... 54
Method of Operation of Kerala State Lottery................ 56
Printing and Distribution of Tickets ............................. 56
Agency of Kerala State Lottery ..................................... 58
Procedure of draw.......................................................... 59
Distribution of Prizes..................................................... 61
Organizational setup of Kerala State Lottery ............... 61
Performance of Kerala State Lottery ............................. 64
Revenue from Lottery.................................................... 64
Unclaimed Prizes ........................................................... 67
Income Tax .................................................................... 68
Recent Trends ................................................................ 71
46
CHAPTER III
THE KERALA STATE LOTTERY : AN OVERVIEW
Introduction
The word lottery is derived from the German word ‘lot’ which means
fortune or trial. Encyclopedia Britannica defines lottery as a game of hazard
in which small sums are ventured with the chance of obtaining a large sum1.
Sometimes it may also be in the form of articles. It is a contest for prizes in
which the contestant surrenders considerations-money or some other stake
and which is in whole or in part determined by chance. Lotteries have been
used widely for amusement, to determine the ownership among multiple
claimants, to dispose of private property, to raise money for benevolent
purposes and also as a substitute for taxation by governments.
Historic Evolution of Lotteries
Lotteries have been evolved from simple efforts such as Roman
soldiers casting lots for Christ’s government at the crucifix or Neros
entertaining their guests by drawing for a house or slave etc. Today it is a
complex form of business raising enormous sums for their promoters.
Contests were once decided by coloured stones, beans or numbered slips.
But deviations developed such as the game of bingo and its many related
forms. Bingo is a gambling game played with cards having rows of 1 Encyclopedia Britannica, Vol.XI, 15th edition 1974.
47
numbered squares, no two cards being numbered alike. Players use markers
to cover the numbered squares on their cards corresponding to the numbers
drawn by lot, and the player who first gets a row covered is the winner.
Ancient India, China, Greece and Japan all had lotteries.2 The
Emperor Nero had lotteries at parties.3 The Great Wall of China was partly
financed by conducting lottery. The Holy Bible is replete with references to
drawing lots. Lot casting was a favoured means of communication between
man and God. As early as 1420 AD lotteries were used in Europe for public
works. High value commodities such as land and art were sold through
lotteries.4 The first publicly run European lottery was started in Florence in
1530 in order to raise money for public works. The first public English
lottery was launched in 1566 AD which was also a part of public works
projects. In 1753 the British Museum was found by the funds raised from a
lottery. There were private lotteries also in England. But they became such
as a scandal that the parliament outlawed them in 1699 AD.
In the modern world lotteries have a long history but with ups and
downs. In the modern history lotteries revived with the legislation of the
New Hampshire lottery in 1964. This was a low-stake, low-excitement
lottery. Drawings were held twice a year and the prize amounts were not
large. Lottery was restructured after the Irish Sweepstakes. The winning
2 Jain Sugal Chand N. (1999). “A Handbook on Lotteries”. Sugal & Damami Chennai,
p.37. 3 Encyclopedia Britanica, Vol.XI, 15th edition 1974. 4 Nair CPS (1973). “Chit Finance”, Vora and Publishers, Bombay, p.66.
48
numbers were tied to the winner of a horse race. However it was not a skill
based game as the numbers were randomly selected.
In Italy modern lottery was developed in the middle ages and spread
to France, Germany, Australia, America, England and India. The practice of
determining the distribution of property by lot is traceable to ancient times.
In the Old Testament the Lord instructed Mose to take census of the people
of Israel to divide the land among them by lot. The Roman emperors Nero
and Augustus used lotteries to distribute property and slaves during
Saturnalian feasts and other entertainments. In Rome merchants used to sell
goods by lotteries. The first known lottery in Europe was organized by the
Dutch for raising money for fortifying the town of Sluis.
The first public lottery to have paid money as prize is believed to be
‘La Lotto de Frenze’ in Florence in 1530. The continental congress in 1776
voted to establish a lottery to raise money for the American Revolution. But
it was not successful and immediately abandoned. Lotteries of small sizes
continued as a source of raising voluntary taxes. Several American
universities were built by lotteries and include Harvard, Dartmouth, Yale,
Kings College, William and Mary, Union and Brown. In Italy the first
national lottery was started in 1863 with regular weekly drawings for raising
funds for the state. The Italian lottery ‘Lotto’ is regarded as the basis for the
modern games of ‘Lotto’, ‘Keno’ and ‘Bingo’.
The Louisiana Lottery organized in 1869 was run for 25 years
continuously in the H.S.A. In 1930 the Irish Hospital Sweepstakes was
established as a highly organized lottery. In the USSR lotteries were
49
conducted in the post-war period to finance its economic development.
There were money lotteries, sports lotteries, arts lotteries, book lotteries etc.
also in the USSR. These lotteries based on socialistic principles tried to have
an equitable distribution of prizes. Moreover, investment of lottery gain in
profitable channels was dissuaded in USSR.
In England lottery was established in 1680 to raise funds for
improving London’s water supply scheme. In Australia a lottery was
conducted for constructing the Sydney Opera House. In Spain and Ireland
too lotteries were conducted for public programmmes and projects. The
Government of Singapore constructed a number of swimming pools and
stadiums and the famous Junog bird park by conducting lotteries. The
Montreal Olympics of 1976 was partly financed by lottery. Similarly the
1980 Moscow Olympics was also financed to a certain extent by conducting
lottery. In 1993 lotteries were legalized in England by an Act by which the
National Lottery came into existence. It was aimed at providing funds for the
development of sports, arts and for the institutions of national heritage.
In the above paragraphs we have reviewed the origin and progress of
lotteries world wide. The discussion establishes that the concept and
mechanics of lotteries were known and familiar from ancient days. It is also
revealed that even though the starting of lotteries dates back to 500 years, in
any of the countries it had a continuous history. In majority of the cases
lotteries were started on an adhoc basis. Otherwise the continuous existence
of lotteries was nullified by the State interventions mainly in the form of
enactments and legal interferences. During the course of enquiries by the
50
scholar it was also felt that the availability of old literature relating to
lotteries is very scanty and discontinuous.
Lotteries in India
In India the first Lottery was established in 1771 in Madras by Lord
McCartney to raise money for the empty treasury. A lottery under
government control was started in 1817. Thereafter many changes took place
in the evolution of lottery. The first prize of the lottery conducted in 1832
was Rs.1 lakh and the total prize amount was Rs.492000. The scheme
consisted of 6000 tickets in two classes. (the St. George Gazette Jan 4
1832)5. The Prize of the ticket in the first class was Rs.30 and additional
prize of the ticket bought and not drawn in the first class was Rs.60. The
prize of the ticket in the Second class was Rs.90.
The prize amount and the cost of ticket are directly related. It is also
felt that even about 200 years back high valued tickets were in existence.
Later the Madras government tried many experiments with the lottery system
by varying lottery schemes.
The famous Moore Market in Madras was built out of funds raised
from lotteries. The Victoria Public Hall, the Ripon building and the
Government Museum Theatre in Madras owed their existence to lotteries
partly. (The Cambridge History of India by H.H. Dodwell)6
5 The Fort St. George Gazette (1-4-1832), p.91.. 6 Dodwell, H.H. (1961), “The Cambridge History of India”, S. Chand and Company, New Delhi, p.63
51
In other parts of the country the most popular lottery was the Goa
lottery. The Portuguese Government authorized the Holy House of Charity
(Santa Cara Miseri Cordia) to run a lottery for financing its welfare works in
Goa. In 1947 Portuguese founded “Provedoria da Assistantia Publica”
(Institute of Public Assistance) to co-ordinate all social welfare activities in
the colony and run lottery on a monopoly basis (CPS Nair, Chit Finance)7.
The Travancore Government, during the rule of H.H. Sree Chithira
Thirunal Balaramavarma organized a lottery for Rs.1000000 of which 50
percent was utilized for aid in the Second World War (Travancore
Administration report)8. The founder of Malayala Manorama, Kandathil
Varghese Mappila started a lottery in 1893 to raise funds to complete the
construction of M.D. Seminary High School. In 1927 Poet Vallathol
Narayana Menon organized a lottery to collect funds for the benefit of the
Kerala Kalamandalam.(Vallathol Unnikrishnan Nair, Mathrubhumi
Newspaper)9.
Private lotteries were rather few till independence. Even the few that
existed were given permission to conduct it only after giving an undertaking
that profits accrued would be used for public welfare activities. Ranger Club
Bengal, D.B. Charities fund Calcutta, H.R. Charities Fund, K.C. Charities
fund and Basanthi Raffles Cuttack etc. were the first few lotteries in India.
7 Op.cit. 8 Travancore Administration Report, 1950. 9 Vallathol Unnikrishnan Nair, The Mathrubhumi daily (Malayalam), 5th January, 1991.
52
Kerala State – A Prelude
The Kerala state was formed on 01-11-1956 by amalgamating
Travancore Cochin princely states and also Malabar which was a district
under the Madras presidency. The state constitutes only 1.18 percent of the
total land area of India but has to feed about 3 percent (2005) of the country’s
population. The state has completed 50 years of its existence. These five
decades history and development profile of the state reveals many interesting
peculiarities and these peculiarities make discussions on Kerala
internationally renowned. Kerala is the first state in India to be governed by a
communist regime elected through ballot (1957). Later the state witnessed
the see-sow of politics, the rule by the left and the right parties at almost
regular intervals. Many political scientists and economists evaluate the
governmental instability as a blockade for steady and sustainable progress.
The development of agricultural and industrial sectors was in an un
even condition over the decades. As far as agricultural sector is concerned
there are sectoral changes especially after 1985. The most visible change is
the shifts in cropping pattern in favour of commercial and horticultural crops.
But this shift has not significantly contributed towards the development of
the state. High cost of agricultural inputs, labour cost, labour militancy,
absence of infrastructure facilities, absence of agro processing, ineffective
agricultural marketing network, weak institutional linkages, absence of a
long term policy etc. are the important reasons for this trend. In recent years,
the farmers complain that they do not get remunerative prices for their crops.
In short, the trends are not very pleasant in the agricultural sector. The
53
industrial sector is also not an exception to this. Compared to other states the
number of large scale enterprises and public enterprises are few in Kerala.
Over the years the state lost its traditional industries. Many small scale
industries struggle to continue. Low resource base, low capital, labour
militancy, high wage rate, lack of infrastructure, absence of a steady market
etc are the important reasons for the stagnation in the industrial sector. The
behaviour of other production related sectors are also not satisfactory.
Barring these limitations directly in the production sector, the state is
well known for its progress in Human Development Indicators (HDI). The
contradictions in development coupled with very high Human Development
Index are beautifully coined as Kerala Model Development. In short,
Kerala’s development is unique in many respects.
Lottery in Kerala
The ‘Kurikalyanam’ existed in north Kerala (Malabar area) may be
viewed as the oldest form of lottery in Kerala. A ‘Kuri’ is conducted when
one requires money for a marriage or for the construction of a house. A date
and venue is fixed for the ‘Kuri’ and is intimated to the local people. People
assemble at the prescribed place, enter their names in a register and
contribute money according to their capacity. Tea will be served to all the
participants. The small contributions of a large number of people thus
become a huge sum which is useful for the purpose for which the ‘Kuri’ is
arranged.
54
The Kerala State Lotteries was started in 1967 with the special interest
of the then state finance Minister P.K. Kunju Sahib under E.M. Sankaran
Namboodiripad ministry. It was the first of its kind in India – fully state
owned and regulated. It was organized under the Kerala State Lotteries
Department in September 1967, with the following objectives, as given in the
administrative report of the State Lotteries Department 1968.
1. To mobilize the much wanted non-tax revenue
2. To generate maximum employment opportunities to the weaker
sections of the society.
The history of the Department for the last 38 years is full of
noteworthy incidents and growth.
Growth of Kerala State Lottery
The first director of the Department P.K. Syed Muhammed, who was
formerly the treasury director, did all the works connected with the
establishment of a separate lottery department including the preparation of a
project report. The structure and style of functioning of the department was
also framed by him. This has provided a strong basis for the department.
P.K. Syed Muhammed retired in April 1968 and was followed by Mr.
Appadurai Aiyer the then treasury director. The next director was Mr. K.
Ananthan Pillai who has been in the revenue department as R.D.O. During
his period district lottery offices were established in almost all districts and
the working of the department was effectively restructured. He retired in
January 1969 to be followed by the then joint secretary of finance department
55
Mr. K.V. Thomas who also held the office only for a short period. Three
other directors were appointed one after another for short periods- Sri. V.
Velayudhan Nair, Sri. K.A. Abraham and Sri. K.P. Thevan.
In November 1973 Sri. V.K. Chandrasekharan, who was the deputy
secretary in the Panchayat department, took charge as director of Kerala state
lotteries. He served for more than 7 years. It was during his period that the
system of counterfoils was started so that the genuineness of the tickets could
be verified by comparing with the counterfoils before giving prizes. Mr.
Chandrasekharan proceeded on leave from April 1980 and Sri. K.S. Krishna
Pillai became the director. He was the first person to be a director from the
lotteries department. He was followed by Sir K. Madhavan Pillai who had
experience from clerical cadre in the department. He continued up to May
1986. Mr. C.V. Thomas who was the joint director then became director.
During his time a bi-weekly lottery was also started which contributed to
revenue in a significant way. The next tenure was that of Sri. K.P.
Muhammad. During his time the department made magnificent growth with
three weekly draws. Some other major developments were also made during
his period such as branding of different lotteries as Kairali, Periyar Maveli
etc, starting bumper draws in all months and the starting of regional deputy
director office at Ernakulam etc. Also the idea of welfare fund for lottery
agents was put into practice during his period.
In 1993 September Sri. G. Krishnan Nair took charge as director.
During his time the price of Maveli tickets was fixed at Rs.2 and the first
prize was increased to Rs.3 lakhs. He also started a new draw named
56
Sowbhagya. Mr. Gopinathan Achary, who became director in April 1995
continued for one year and during his period the prize schedule of
Sowbhagya was modified and festival bumpers were started. In May 1996
Sri. A. Sasidharan Nair became the director. During his period the prize
structure of Sowbhagya lottery was rescheduled, lottery was made a
profitable department and the draw time of Maveli, Periyar and Sowbhagya
was fixed at 2.30 p.m.. The grand Onam bumper of 1997 offered a first prize
of Rs.75 lakhs and that bumper draw made a profit of Rs.1.9 crores which
was an all time record.
Method of Operation of Kerala State Lottery
Cent percent transparency is maintained in conducting lotteries by the
Kerala State Lotteries Department in the following respects.
Printing and Distribution of Tickets
The design of a lottery ticket is made by experienced panel artists under
the direct supervision of the director of state lotteries. The design is to be
approved by the government. Then it is given for printing to government press.
The design contains signature of the secretary taxes department. In each ticket
and in each counterfoil the name of the lottery, number, date of draw and the
ticket number will be printed. On the reverse side of the ticket the prize
structure and the procedure for obtaining prizes will be printed. Tickets are
printed only in Kerala government controlled presses, with strict security
measures. The number of tickets to be printed, number of series and the alphabets
of the series in English are all decided by the government. Kairali and
57
Soubhagya tickets are printed in books of 25 tickets each and Periyar and Maveli
in books of 50 tickets each.
From the press the tickets reach the lotteries department where they
are thoroughly verified and recorded in a register. Tickets are delivered to
the district lottery offices from the Directorate of state lotteries under the
strict supervision of the officials of the department. In the district offices
seal of the department is affixed on each and every ticket including counter
foil and they are verified once more. Tickets are then distributed to agents
after keeping the counter foils in the offices. Tickets are distributed to
agents from the Directorate of state lotteries, district lottery offices and also
from selected treasuries.
The following are the weekly lotteries conducted by the Kerala state
lotteries Department.
Table 3.1 Details of weekly lotteries conducted by the Kerala State lotteries dept.
Name of Lottery Day of draw
Prize of Ticket (Rs.)
First prize (Rs. in Lakhs)
Maveli/ Chaithanya
Wednesday 10 20
Periyar Tuesday 10 20
Kairali Thursday 5 10
Soubhagya Saturday 10 20
Source: Official Website of Kerala government.
All lottery draws are conducted at 2.30 p.m, in different parts of the
state to claim credibility . Super bumper draws are organized periodically
58
such as Onam bumper, Vishu bumper, X’mas bumper etc. The first prize of
these bumper draws vary from Rs50 to Rs100 lakh. The price of the tickets
of bumper draws varies from Rs20 to Rs50.
Agency of Kerala State Lottery
Tickets of Kerala state lottery are distributed to the public through
agents. Any person who has attained the age of 18 can become an agent of
Kerala state lottery. But among government employees only last grade
servants can become agents.
The process to become an agent is very simple. One has to apply in
the prescribed form, along with a registration fee of Rs.25, to any of the
district lottery offices or the Directorate of state lotteries. Two passport
size photos are also necessary. A registration as agent is valid for a period
of one year which is to be renewed thereafter by paying a renewal fee of
Rs.10. In addition to this any person purchasing tickets for not less than
Rs.100 will be considered as casual agent and will get a reduction of 25
per cent on ticket price. The agency of a person can be cancelled by the
Directorate of state lotteries or by district lottery offices on complaints
received from the public .
The following rates of commission are allowed to agents by the
Kerala state lottery as on 1st April 2006.
100 tickets : 25%
101 to 50,000 tickets : 27.5%
50001 to 700000 tickets : 28%
700001 and more tickets : 28.5%
59
Procedure of draw
The draw procedure is also transparent and open. To gain public
confidence draws are held in different parts of the state. The place and time
of each draw is decided by the lotteries department taking into
consideration the opinions of agents and the public. Once the draw is
decided a judging committee is formed with the local Member of Legislative
Assembly) as chairman and various social, political and cultural dignitaries
as members. Peoples representatives of various bodies also will be included.
The place and time of draw and the names of the judging committee
members will be published before the date of draw and wide publicity is
given.
Draws are conducted with public participation. Public places like
auditoriums or schools are selected for this purpose so that maximum
number of persons can watch the proceedings. The procedure for the draw
is simple. Seven drums of different colours are placed in front of the judges
facing the public. One drum will be marked ‘series ‘ and the other six
drums will be marked ‘lakh’, ‘ten thousand’, ‘thousand’ , ‘hundred’, ‘ten’
and ‘one’ respectively. Tickets are printed for different draws in different
series such as ‘AB’, ‘DC’ ‘XY’ etc. Purses containing tokens representing
the series of the concerned draw will be put in the drum marked ‘series’. In
the drum marked ‘lakh ‘ will be put purses containing tokens of the
numbers of number of lakhs tickets printed. For example, if three lakh
tickets are printed in each series in a five series draw digits one to three will
be put in the ‘lakh’ drum. Similarly in the other drums of ten thousand to
60
‘one’ tokens of digits from 0 to 9 will be put in purses. After this the drums
are rotated with the handles fixed on them and the tokens are mixed
properly. The chairman of the judging committee then draws the number for
the first prize.
The chairman takes a token from the ‘series’ drum and shows it to the
other members of the committee and the public. The series so selected will
be exhibited in writing on the board kept in the hall. Also it will be entered
in a register by the officers of the lottery department. The judging
committee members will enter this series in the form given to them. Then
purse is drawn from the ‘lakh’ drum and opened to see the number in the
‘lakh’ position. This number will be entered in the register and forms
supplied to the judges and will be written on the board also. Similar
procedure is followed for selecting numbers from ‘ten thousand’ to ‘one’.
Thus finally a series followed by a six digit number is generated which will
be the first prize winning ticket number . In the same manner, other prize
winning numbers will be selected depending on the prize structure of the
draw. This direct method is followed even now and computers are not used
for the draw as in online draws.
If a number so obtained happens to be that of an unsold ticket (not
sold from the Directorate or district offices. But the unsold tickets with the
agents are included) the same will be cancelled and a new number is
drawn. For this purpose statements showing the tickets printed, sold and
unsold will be given to the judging committee members and other officers
before hand. Cancellation of unsold tickets drawn and drawing sold tickets
61
for prizes is a peculiarity of the Kerala state lottery. This ensures public
confidence and avoids cheating as is done by many private lotteries.
Distribution of Prizes
The Kerala state lotteries department has evolved a prize distribution
scheme which enables payment of prize money without delay. Prizes up to
Rs.5000 will be given by the district lottery offices concerned. For this,
prized tickets with the name, address and signature of the winner and a
stamped receipt are to be submitted. Prizes above Rs.5000 will be given
from the Directorate of state lotteries, Trivandrum. For this the ticket with
the name, address and signature of the winner, photocopies of the two sides
of the ticket, two passport size photos of the winner and a stamped receipt
are to be submitted to the Directorate or to a bank . Prizes above Rs. 5000
will be given after deducting income tax @ 40%, for the amount remaining
after Rs.5000 which is tax free. 5% agents commission and 5% sellers
commission will also be deducted in addition to income tax. Prized tickets
should be surrendered within 30 days of the draw. The validity of the
ticket is verified by comparing with the counter foils kept in the office
concerned. On the basis of satisfactory explanation prizes will be given on
late submitted tickets up 270 days. After 270 days no prizes will be given.
Organizational setup of Kerala State Lottery
Initially the Kerala state lotteries department was functioning under
the control of the finance department. But now it is under the taxes
62
department. The Directorate of Kerala state lotteries is situated at
Trivandrum.
The Kerala state lotteries department is headed by the Director of state
lotteries and assisted by a joint director, 2 deputy directors, one regional
deputy director, one publicity officer and one accounts officer (internal
audit). The finance officer and publicity officer are deputed from the
finance department and public relations department respectively. The
accounts officer (internal audit) is deputed from the Accounts General’s
office. The sales and prize sections in the directorate are functioning under
the supervision of two deputy directors. The budget, publicity and internal
audit wings in the directorate are functioning under the supervision of the
finance officer, publicity officer and accounts officer respectively. There are
about 450 employees working under the department.
One regional deputy director office at Ernakulam and 14 district
lottery offices are functioning under the lotteries Department . Printing
and distribution of tickets of Kairali and Periyar lotteries and conducting
of the weekly draw of Soubhagya lotteries are the main functions of the
regional deputy director’s office. Sales of lottery tickets, agency
distribution, agency renewal, sanctioning of prize money up to Rs.5000
are carried out in district offices. The general administration, prizes,
agents of other states, overall control etc. are the main functions of the
Directorate.
63 63
Figure 3.1 Organisational chart of Directorate of Kerala State Lotteries
Directorate of State Lotteries Director
Deputy Director (Sales)
Joint Director
Deputy Director (Prizes)
Regional Deputy Director
Section Officer (Sales)
Section Officer (Prizes)
Staff (Sales) Staff
(Prizes) Staff
Sales
Section Officer
Finance Section Officer
Publicity Officer Auditor
Establishment Section Officer
Publicity Officer
Accounts Section Officer
Staff Staff Staff Staff Staff Staff Staff
District Lottery Officers in all Districts and their Staff
64
Performance of Kerala State Lottery
As mentioned earlier, the Kerala state lottery was started with multiple
objectives. So far about 40 years have been completed after the starting of the
lotteries. Hence, it is quite relevant and appropriate to evaluate the
performance of lotteries. This can be done only with detailed data frame
available with the lotteries department. The attempts made by the researcher
revealed that the department is maintaining detailed data only for a short
period. The past data are not available or they are kept in a very crude form.
Thus, the detailed investigation is limited to the last three years starting from
2001-02 which is attempted in the next chapter. However, a macro
perspective is presented from 1967 onwards.
Revenue from Lottery
The total receipt, expense and profit from lotteries to the Kerala State
Lotteries Department since its inception in 1967 are given below.
Table 3.2 Receipt, expenses and profit for the period 1967-68 to 2003-04 of Kerala
State Lotteries Department
Year Receipt (Rs. in crores)
Expenses (Rs. in crores) Profit
1967-68 00.20 00.06 00.14 1968-69 00.84 00.34 01.50 1969-70 02.43 00.94 01.49 1970-71 02.04 01.17 00.87 1971-72 01.52 01.01 00.51 1972-73 01.42 00.89 00.53 1973-74 01.41 00.82 00.59 1974-75 01.63 01.05 00.58
(Contd . . . .)
65
Year Receipt (Rs. in crores)
Expenses (Rs. in crores) Profit
1975-76 01.54 00.95 00.59 1976-77 02.16 01.24 00.92 1977-78 02.75 01.45 01.30 1978-79 02.99 01.50 01.49 1979-80 02.54 01.48 01.06 1980-81 03.01 01.77 01.24 1981-82 04.30 02.98 01.32 1982-83 05.93 04.02 01.91 1983-84 08.88 05.70 03.18 1984-85 11.72 07.78 03.94 1985-86 12.57 08.12 04.45 1986-87 10.20 07.33 02.87 1987-88 33.38 28.00 05.38 1988-89 39.12 32.92 06.20 1989-90 41.62 35.08 06.54 1990-91 51.88 44,24 07.64 1991-92 54.48 48.09 06.39 1992-93 59.26 51.92 07.34 1993-94 65.01 56.50 08.51 1994-95 71.22 60.51 10.71 1995-96 93.27 81.44 11.83 1996-97 106.74 93.33 13.41 1997-98 105.32 93.07 12.25 1998-99 112.01 96.48 15.53
1999-2000 101.38 91.18 10.20 2000-01 134.16 120.72 13.44 2001-02 122.69 114.54 08.15 2002-03 131.69 118.29 13.40 2003-04 129.63 120.23 09.40
Source : Publication by the Kerala State Lotteries Department, Trivandrum named “First in India Then and Now”, September 2004.
66
Figure 3.2 Receipt, expenses and profit for the period 1967-68 to 2003-04 of
Kerala State Lotteries Department
020406080
100120140160
1967
-68
1969
-70
1971
-72
1973
-74
1975
-76
1977
-78
1979
-80
1981
-82
1983
-84
1985
-86
1987
-88
1989
-90
1991
-92
1993
-94
1995
-96
1997
-98
1999
-2000
2001
-02
2003
-04
Receipt (Rs. In crores) Expenses (Rs. In crores) Profit
Table 3.2 presents the details of receipts, expenses and profits for the
period from 1967-68 to 2003-04. In the initial year receipts was only Rs.0.20
crores and expenses Rs.0.06 crores making a profit of Rs.0.14 crores. In the
next year there is an unprecedented rise in the receipts. The trends continued.
But since 1970-71 a fall in the receipts is noticed for hardly five years. This
may be due to a fall in sales, reluctance of the people to buy tickets etc. The
opportunity for identifying the specific reason is not available since it is an
old story and the employees at that time are already retired. Quantum jump in
the receipt is later noticed from 1987-88 onwards. One of the reasons for this
trend is the launching of more number of lotteries. By the middle of 90’s
lottery receipts crossed Rs.100 crore mark with proportionate increase in the
profit. It is also noticed that the rise in the rate of profit is not very attractive
and there are fluctuations in the profit. These fluctuations are due to
fluctuations in the expenses and also due to changes in the percentage of
prizes claimed. Rs. 10 crore profit is not a very handsome contribution to the
67
exchequer. Hence the argument that lotteries will help to mobilise revenue is
not very substantial relative to the budget of the state government.
Though receipts have increased by 600 times, profit has increased by
100 times only because the expenses were disproportionate. In the first year
that is 1967-68, when the receipt was only Rs.20 lakhs the profit was ``Rs.14
lakhs, i.e., 70 per cent was profit and expense was only 30 percent. But in
1998-99 the total receipt was Rs.112.01 crores and the profit was Rs.15.53
crores i.e., below 14 percent. In the year 2003-04 when the profit was Rs.9.4
crores the percentage of profit was slightly above 7 percent (sales was
Rs.129.63 crores). It means that expense comes to more than 90 percent. In
other words expense has increased disproportionately.
Unclaimed Prizes
When the researcher searched the documents at the lotteries
Directorate, there was a very interesting observation that many prizes are not
claimed. Prize money is accounted as unclaimed only after five years of the
declaration of the results or after the settlement of the dispute. Even though
not very systematically arranged, the researcher collected the details of the
unclaimed prize amount for the periods available and is presented in
table 3.3.
The total amount of unclaimed prizes from the beginning of Kerala
state Lottery up to the end of the year 1998-99 comes to Rs. 27,28,67,424.
Table 3.3 presents the details of value of unclaimed prize amount. In
the year 1994-95 the total value of unclaimed prize amount came to
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Rs.1.5 crores. In the next year the amount increased to Rs.2.23 crores and so
on. In the year 1998-99 the total unclaimed amount reached Rs.2.29 crores.
Figure 3.3
Unclaimed prizes for the years 1994-95 to 1998-99
15346000
22356550
27325139
17432197
22917547
0
5000000
10000000
15000000
20000000
25000000
30000000
1994-95 1995-96 1996-97 1997-98 1998-99
An attempt was also made to examine the reasons for the unclaimed prize
amount. In the discussion with officials they opined that the unclaimed prize
amount is mainly due to suits in the court and partly due to lack of actual
claims. But compared to the total prize amount which comes on an average
about Rs.60 crores a year, the unclaimed prize amount of rupees two crores is
not a large percentage. These trends suggest that a large share of ticket
buyers is particular about the drawings, results and in claiming the prize
amount. Logically one can derive a significant association between the low
income of the majority of the ticket buyers and their desire to claim the prize
amount. However, the unclaimed prize amount of about Rs.2 crore is a
financial gain to the department to meet at least their establishment cost. This
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is also evident from table 3.3 which establishes the relation between profit
from lotteries and unclaimed prize amount. Details since 1998-99 cannot be
examined since the department does not have relevant data. However, the
discussion hinted that the trends are not different in recent years.
Table 3.3 Profit from lotteries and unclaimed prizes for the period from 1994-95 to
1998-99 Rs. in crores
Year Profit (Rs. In crores)
Unclaimed prizes (Rs. In crores)
Total (Rs. In crores)
Percentage of profit
Percentage of
unclaimed prize
1994-95 10.96 1.53 12.49 87.75 12.25
1995-96 11.86 2.23 14.09 84.17 15.83
1996-97 13.50 2.73 16.23 83.17 16.83
1997-98 12.3 1.74 14.04 87.61 12.39
1998-99 15.53 2.29 17.82 87.15 12.85
Source : Publication by the Kerala State Lotteries Department, Trivandrum named “First in India Then and Now”, September 2004.
During the five years, that is from 1994-95 to 1998-99 the total
income of the department from operational profit as well as unclaimed prizes
came to Rs.74.67 crores. Of this, Rs.64.15 crores is from profit and Rs.10.52
crores is from unclaimed prizes. The percentage of profit and unclaimed
prizes do not show significant variations.
Income Tax
By conducting various lotteries the Kerala state lotteries department is
contributing a huge sum to the central government by way of income tax
70
deducted from prize money given on various draws. Income tax deducted
from prize money for the three years from 2001-02 to 2003-04 is given
below.
Table 3.4 Income tax deducted from prize money for the period
from 2001-2002 to 2003-2004
2001-02 Rs.
2002-03 Rs.
2003-04 Rs.
Kairali 42702435 38814032 26501352
Mavele/Chaitanya 18689750 17241965 10919156
Soubhagya 35748130 34439348 30658350
Periyar 41127590 29781765 23216146
Total 138267905 120277110 91295004
Source : Publication by the Kerala State Lotteries Department, Trivandrum named “First in India Then and Now”, September 2004.
Figure 3.4
Income tax deducted from prize money for the period from 2001-2002 to 2003-2004
05000000
1000000015000000200000002500000030000000350000004000000045000000
Kairali Mavele/Chaitanya Soubhagya Periyar
2001-02 2002-03 2003-04
71
Income tax is deducted at source from the prize money given at the
rate of 40 percent of the prize money after an exemption of Rs.5000 (At
present the rate of income tax on prize money is 30 per cent). In the year
2001-02 more than Rs.13 crores has been given as income tax. In the year
2003-04 it was only above Rs.9 crores. Income tax need not be given on
prizes below Rs.5000. Also on larger prizes Rs.5000 is exempted from
income tax. Increasing the number of small prizes reduces the tax collection.
Increase in the total number of prizes also reduces tax collection because
from each prize Rs.5000 is exempted. More over income tax is deducted
only when the prize money is claimed and paid. In recent years there has
been a number of cases of unclaimed prizes and unsettled claims. This has
also reduced tax collection. During the three years the maximum income tax
was deducted from Kairali followed by Soubhagya. This is due to the
differences in prize structure of various lotteries. It is the least in Maveli/
Chaithanya where the number of small amount prizes is large. However it
can be seen that the central government is gaining at least marginally by way
of income tax from Kerala state lotteries.
Recent Trends
The beginning of the 21st Century witnessed many changes in the
structure and pattern of lotteries. Single digital lottery, bunch lottery etc.
became popular. With the increased use of computers online lottery also
became popular. These developments affected the sales of Kerala state
lottery tickets adversely. These new types of lotteries became more
72
attractive to those interested in gambling . The tactics of private lottery
companies also increased the popularity of new lotteries.
With the launching of these lotteries some unhealthy practices like
cheating the public by giving prizes for unsold tickets, improper tax
collection and remittance, delaying the prize money, not giving all the
declared prizes etc. were also increased. People with gambling practices
became addicts to such lotteries and experienced enormous loss. Because of
these tendencies the central government brought a ban on all kinds of
lotteries in 1999.
Kerala government vehemently opposed this move. The public and
media were behind the state government. In Kerala the conduct of lottery
was different as it is 100 per cent government regulated. Any profit arising
out of lotteries is used for developmental activities. Above all nearly 3
lakh people earn their livelihood by selling lottery tickets. In a state like
Kerala suffering from chronic unemployment a ban of lottery will affect the
social set up badly. The government of Kerala fought both politically and
legally against the ban. Pressures from all sides persuaded the central
government to rethink and ultimately the proposal to ban lotteries was
completely withdrawn.
In Kerala the growth of online lottery was tremendous. Complaints
associated with them also multiplied. The state lost sale tax revenue. Many
of the online lotteries were operating from other states. So money began to
flow outside the state. The sales and profit of the Kerala state lottery
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started declining. Even the existence of the Kerala state lotteries
department was questioned. Considering the difficulties to control online
lottery alone legally, the Kerala government brought a total ban on all kinds
of lotteries including paper lotteries on 25th January 2005.
Protests from all sides mounted, especially from those who are
employed by selling lottery tickets. All political parities were for continuing
paper lottery. On 23rd February 2005 the Kerala government approved a bill
to ban online lottery by bringing them under the purview of Gambling Act
and another bill to fix high tax on paper lotteries from other states. The aim
of the government was to discourage the operation of paper lotteries of
other states as there were widespread complaints about their operations.
The government banned on line lotteries in exercise of powers conferred
under section 5 of the lottery Regulation Act 1998.
Kerala government started a special purpose lottery known as sports
lottery in January 2007. The profit arising from this lottery was intended for
the development of sports in the state. An amount of Rs.40 crores was
offered as prizes. The price of the ticket was Rs.100. But due to various
reasons this attempt was a failure. The government could collect only an
amount of Rs.29 crores by the sale of tickets (February 2007). Thus actually
the government incurred a loss of Rs.11 crores in this lottery. The main
reason for the failure was the high price of the ticket. The government has
plans to revive this lottery shortly.
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Thus the government of Kerala is taking all steps to protect the Kerala
state lottery and to improve its performance by reducing competition from
other state lotteries and online lotteries. Also attempts are made to introduce
new and attractive schemes so that people are more attracted towards lottery.
The profit arising from lotteries is spent mainly for welfare activities and
developmental works.