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

69

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

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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.

74

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.