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

Sunday Times (Sri Lanka) - - FRONT PAGE -

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.”

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