Ethanol imports, liquor sales boom despite Govt.'s sobriety policy

Any solution proposed to resolve the current issues related to the South Asia Institute of Technology and Medicine ( SAITM) must be in accordance with the Government’s commitment to enable some level of non-state higher education, including in the medical sector, and must not be a financial burden on the state, a five member Presidential Committee said in its report.

Ethanol imports for the manufacture of hard liquor doubled from 10.4 million bulk litres in 2013 to 20.4 million bulk litres in 2015 after the new Government took over, Excise Department statistics show.

The high levels were maintained in 2016 when 18.4 million bulk litres were legally imported. In the first six months of this year alone, nine million bulk litres were brought in for the liquor industry. The largest quantity to be imported in a single month during the last five years-- that of three million bulk litres-was recorded in March 2015, just three months after the

“The solution must be equitable to all stakeholders. It must be transparently implementable and monitored independently. It must be financially viable at the earliest and sustainable in the long term," it said. The report was handed over to President Maithripala Sirisena on Friday.

The Committee headed by Deputy Minister Harsha de Silva also recommended that to trigger the proposed solution and Government change.

Between 2015 and 2017, nearly 50 million bulk litres of ethanol were imported for the domestic liquor industry. By contrast, the quantity of ethanol legally imported in 2013 and 2014 was 23.9 million bulk litres. The numbers point to a significant expansion in local production.

Much of the additional ethanol seems to have gone to WM Mendis & Company Ltd, which is chaired by Arjun Aloysius, the controversial former director of Perpetual Treasuries. Industry statistics show that production by that company to end the boycott of medical students of state-universities, as an immediate step, the Secretary to the Ministry of Higher Education should discuss with the Attor ney General to determine an appropriate legally binding mechanism. This would be to inform SAITM to suspend admission of new students until a proposed restructuring is complete, and fresh approvals are granted for the degree programme in terms of legally empowered minimum standards.

“This phase is to be time bound so that any mala fide delays could be avoided and investors are able to complete the restructuring exercise. This action is expected to build confidence among all stakeholders the genuine desire of the Government to implement the proposed recommendations, which will be equitable to all,” it said.

soared from 2.92 million proof litres in 2014 to 8.99 million proof litres in 2015. This is a 207 percent increase.

In 2016, WM Mendis released 9.73 million proof litres, which is still an eight percent increase over the previous year. However, the Distilleries Company of Sri Lanka (DCSL), the market leader, clawed back by upping its own production. The Excise Department’s 2015 performance report states that hard liquor output increased by 17.7 percent industry-wide that year when compared with 2014.

The records were obtained through an application to the Department of Excise under the Right to Information Act. They show a sharp contradiction between reality and the Government’s published policy of promoting sobriety.

Retail growth in the liquor sector is largely fuelled by the brisk sale of 180ml ‘kaley bothal’ or ‘nips’, as the industry calls them. The Sunday Times visited liquor outlets around Colombo and observed the smaller bottles flying off stacks of crates. Dealers said cheap prices helped promote the sale of hard liquor. Companies give generous incentives (to the owners, managers and counter boys) to plug their own brands in a drive for market dominance.

Government tax policy has also pushed growth in the hard liquor sector. In October and November 2015, duties on mild and strong beer--which have lower alcohol content-were raised significantly above those imposed on strong liquor. This, too, made nips more attractive to customers, dealers said. “They get a higher ‘kick’ for a cheaper price,” explained one.

Credit ratings agency Fitch has predicted a continued rise in hard liquor’s share of the alcohol market this year. Taxes on a unit of pure alcohol of strong beer surpass that of hard liquor after back-to-back tax increases in 2015. This caused the revenues of DCSL to grow while the gross revenue of Lion, the largest beer maker, contracted, Fitch said.

There are eight licensed importers of ethanol for manufacturing liquor and eleven for industrial purposes. The data show that ethanol imports for industrial purposes-- the manufacture of soaps, perfumes and similar items--dropped from 380,000 bulk litres in 2013; to 185,500 in 2014; and 126,800 in 2015. Last year, it was 143,300 bulk litres.

In addition to encouraging ethanol imports and growth in the hard liquor market, the Government has facilitated local ethanol production by authorising the construction of a facilitating local ethanol. The Government has also facilitated the erection of a grain-based extra neutral alcohol (ENA) distillery by WM Mendis in Kalkudah in the Batticaloa district.

Despite widespread local protest, including by local councils, construction of the Rs 4.5bn factory is proceeding. Permission was facilitated through the Ministry of Finance under Ravi Karunanayake, who recently resigned from his portfolio after it was exposed he had lived in a flat paid for by Mr Aloysius. The Excise Department was also under his purview and acted on written instructions to grant approval for the factory.

The Government’s recent approach towards liquor places it at sharp odds with the World Health Organisation (WHO) policies that say price can be used to reduce underage drinking and halt progression towards drinking large volumes of alcohol and episodes of heavy drinking--rather than the other way around. Studies have repeatedly proved that consumers, including heavy drinkers and young people, are sensitive to changes in the price of drinks.

Last year, Sri Lanka even launched a National Policy on Alcohol Control despite the Ministry of Finance having introduced measures to benefit the hard liquor sector. Despite this, there is not even a social dialogue at present about rising alcoholism in the country. Nor are there structured, school-based education programmes to discourage drinking.

Price- sensitive, low-end consumers are increasingly shifting to hard liquor in smaller bottles which are now affordable and can be taken away in one’s pocket, an industry source confirmed. “Nips is not a social drink,” he warned. “We need to talk about this.”