State of the Sri Lankan Alcohol Industry and Analysis of ... · State of the Sri Lankan Alcohol Industry and Analysis of Governing Policies iv Executive Summary The main objective

Research Studies: Working Paper Series No.19

December 2013

G.D. Dayaratne

State of the Sri Lankan Alcohol Industry andAnalysis of Governing Policies

INSTITUTE OF POLICY STUDIES OF SRI LANKA100/20, Independence Avenue, Colombo 7, Sri Lanka

Research Studies: Working Paper Series No.19

December 2013

State of the Sri Lankan Alcohol Industryand Analysis of Governing Policies

(Printed copy)

G.D. Dayaratne

INSTITUTE OF POLICY STUDIES OF SRI LANKA

The views expressed are those of the author and do not necessarily represent those of the Institute of PolicyStudies of Sri Lanka.

Copyright C Decem ber, 2013

Institute of Policy Studies of Sri Lanka

National L ibrary of Sri Lanka-Cataloguing-In-Publication Data

Dayara tne, G. D.,

S ta te of the Sri Lankan Alcohol Indu stry and Analysis of Governing Policies / G. D. Dayara tne .- Colombo : Inst itute of Policy Studies of Sri Lanka , 2013

70p. ; 28 cm. .- (Working Paper Series: No.19)

ISBN 978-955-8708-78-1

i. 338.47 6631095493 DDC23 i i. Title

i ii . Series

1. Alcohol Industry – Sri Lanka

ISBN 978-955-8708-78-1

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Acknowledgements

i

Table of Contents

List of Tables, Figures and Boxes................................................................................... ii

Acknowledgements...................................................................................................... iii

Executive Summary...................................................................................................... iv

1. Introduction.............................................................................................................1

2. History of Sri Lanka Alcohol Industry..................................................................... 3

3. Key Players in the Industry......................................................................................43.1 DCSL.............................................................................................................. 63.2 ID Lanka Ltd....................................................................................................63.3 W. M. Mendis & Company Ltd.........................................................................73.4 Rockland Distilleries (Pvt) Ltd.......................................................................... 7

4. Sri Lanka Alcohol Brand Name “Arrack”.................................................................8

5. Arrack Production Profile by Major Producers.......................................................9

6. Toddy Tapping Industry..........................................................................................11

7. Liquor Production and Consumption Trends in Sri Lanka .................................... 127.1 Trend in Liquor Production.......................................................................... 137.2 Trend in Liquor Consumption........................................................................ 14

8. Patterns of Drinking ............................................................................................ 17

9. Household Expenditure on Alcohol Consumption................................................ 19

10. Illicit Alcohol.........................................................................................................21

11. Revenue from Liquor............................................................................................. 23

12. Excise Taxes........................................................................................................... 2512.1 Tax on Unrecorded Alcohol.......................................................................... 32

13. Tax on Unrecorded Alcohol.................................................................................. 3213.1 Regulating Physical Availability ................................................................... 3513.2 Modifying the Drinking Context.....................................................................3613.3 Drink-driving ............................................................................................... 3813.4 Regulating Alcohol Promotion...................................................................... 39

14. Emergent Policy Issues.......................................................................................... 42

15. Way Forward and Conclusion ............................................................................. 4415.1 Way Forward ............................................................................................... 4415.2 Conclusion....................................................................................................45

16. References............................................................................................................. 49

Annexure.....................................................................................................................51

Identification of the Poor in Sri Lanka

State of the Sri Lankan Alcohol Industry and Analysis of Governing Policies

ii

List of Tables

Table 5.1 : Molasses Arrack Production 9

Table 5.2 : Coconut and Processed Arrack Production 10

Table 5.3 : Special Arrack Production 10

Table 5.4 : Beer Production Profile by Major Producers 10

Table 7.1 : Recorded Licit Alcohol Consumption in Sri Lanka 16

Table 9.1 : Average Expenditure for One Month on Alcohol Beverages per SpendingUnit by Income Group 19

Table 9.2 : Average Monthly Expenditure on Liquor by Household and by Person 20

Table 12.1 : UK Excise Duty Rates from 2000-2013 30

Table 12.2 : Sri Lanka Tax Rates on Liquor 2005-2011 30

Table 13.1 : Number of New Liquor Licences Issued 2005-2011 33

Table 13.2 : Drunk Driving Laws By Country 39

List of Figures

Figure 3.1 : Share of Major Arrack Producers in 2011 5

Figure 3.2 : Percentage Share of Arrack Production by Major Producers 2005-2011 5

Figure 3.3 : DCSL Gross Turnover and Profit After Tax, Pre-War and Post-War 7

Figure 5.1 : Percentage Share of Beer Producers 10

Figure 7.1 : Production of Arrack, Beer, and Toddy 2001-2011 13

Figure 7.2 : Alcohol Usage by Population in Selected District 2012 15

Figure 9.1 : Monthly Expenditure on Liquor by Income Group 20

Figure 10.1 : Number of Excise Raids Conducted 2005-2011 23

Figure 11.1 : Total Tax Revenue, Excise and Liquor Revenue 2005-2012 24

Figure 11.2 : Revenue from Liquor as a Percentage of GDP 2005-2012 24

Annexure

Table 1 : The Quantities of Liquor Manufactured 2005-2011 51

Table 2 : Revenue from Liquor Manufactured 2005-2011 51

Table 3 : Molasses Arrack Production 2005-2011 52

Table 4 : Coconut and Processed Arrack Production 2005-2011 53

Table 5 : Special Arrack Production 2005-2011 54

Table 6 : Bottled Toddy Production 2005-2011 55

Table 7 : Excise Tax Cross Country Comparison 56

Acknowledgements

iii

Acknowledgements

The author wishes to express sincere thanks to Saman Kelegama, Executive Director, IPS, foroverall guidance and support provided during various stages of preparing this paper.

The author acknowledges the valuable support by Wimal Hettiarachchi, Senior Visiting Fellow,IPS and D. D. M. Waidyasekera, Editor, IPS, for helpful comments and editorial support.

Finally, the author wishes to thank the Commissioner General of Excise, D. G. M. V.Hapuarachchi and his staff for the valuable information provided, and Asuntha Paul for herformatting assistance in finalizing the paper for publication.


iv

Executive Summary

The main objective of this study is to formulate a balanced policy option for decision makersas Sri Lanka never had a comprehensive alcohol policy, inspite of continuity of enhancingstate revenue from legal alcohol. This study reviews the opinions of a cross- section ofstakeholders from the industry, wholesalers, retailers, illicit brewers and producers, moderatedrinkers, law enforcement officials, government officials and religious dignitaries , to developa rational policy framework to implement, monitor and enforce it effectively.

More recently, there has been a growing interest in the scientific study of alcohol policies as auseful ally in combating the ill-effects of incorrect and ineffective policies and therefore, anattempt has been made to equip decision-makers to make informed policy choices in light ofthe current situation on alcohol production, sales, and consumption in the country.

As well as having psychoactive properties, alcoholic beverages are also regarded ascommodities. The production and sale of alcoholic beverages, together with the ancillaryindustries, are important parts of the Sri Lanka economy by providing employment for manypeople, income for alcohol producing companies and substantial tax revenues to government.These economic and fiscal interests are often important determinants of policies that can beseen as barriers to public health initiatives. In the Sri Lankan context, recognition of publicinterest that can counterbalance these economic and fiscal interests is not given a due place.

Alcohol is a complex policy area with many issues that have long been debated. Some of theseare addressed by popular policies to an extent not possible to achieve expected results. In SriLanka, declaration on excessive policies while depending on industry earnings to supplementthe state revenue, has given rise to conflicting and confusing issues and challenges that shouldbe met appropriately by policy makers and the civil society, and incorporated into policyrevisions on par with world best practices.

The Sri Lankan alcohol industry as well as the consumption of alcohol has reached a newheight since the conclusion of the North East war. Even before the conclusion of the war,liquor producing was one of the most profitable industries and the volume of liquor producedmaintained an increasing trend. Also, the production and importation of nearly all forms ofliquor and spirit have greatly increased despite the 'Mathata Thitha' alcohol restraining policiesintroduced in 2005.

In the world over, taxation is the foremost mechanism in place to regulate the alcohol industryand the market. But in Sri Lanka taxation policies have not been effective to discourage ormodify the drinking culture. As the population grows at a decreasing rate it appears that thecohort of elderly age groups is expanding and more of them are entering into the band ofdrinkers boosting the liquor consumption. Also, excessively restrictive excise laws have led toa thriving of the illicit liquor industry in the country. Existing taxes are seen as being regressiveas the poorer folk have been forced to pay a higher proportion of their income in the form of

Executive Summary

v

taxes. Although alcohol taxation, accounts for a considerable proportion of government taxrevenue, reducing consumption should be dealt with measures that influence the price ofalcohol. In this context,taxation according to alcohol content allows consumers to chooseproducts with a lower price with low alcohol content, continue to generate high governmentrevenue, and promote the production of low alcohol beverages.

Among some measures adopted by the government such as the ban on advertising of alcoholin the media, prohibition of the sale of liquor in close proximity to religious places and placeswhere young adults congregate could be valued as an ethical and religious consideration butdoesn't have a great impact on the drinking pattern. Drunken driving and other offences suchas violence under the influence of alcohol are grave issues that are yet to be addressed despitethe legal measures in place.

The highly politicized nature of the illegal alcohol industry counteracts any measures taken toright track the drinking habits as politicians1 are often correctly or incorrectly considered asbeing involved in production and violating customs laws when importing input requirementssuch as spirit for producing alcohol. The lack of seriousness and commitment when regulatingthe alcohol industry and the lackadaisical attitude of some law enforcement officials in enforcingthe law, erode the justification of any effort to modify the drinking culture. The attempt torestrain (Mathata Thitha) the physical availability of alcohol is undermined by issuing moreand more licences by the same sources to open retail outlets on political considerations.

The strategy of modifying the drinking habit by promoting the drinking of soft alcohol orcontrolled amounts of alcohol needs to be encouraged by offering low taxation on soft alcoholas practised in Western Europe, as this is more realistic than encouraging complete abstinenceor avoidance.

The issues of illegal alcohol consumption and harm caused under the influence of low qualityalcohol are problems that need to be addressed. In this task the government has a responsibilityto explore strategies to prevent people from indulging in consuming harmful illicit brew mainlyby specific sub-populations.

It is in this context, that the author attempts to discuss the misconceptions on the legal alcoholtrade and address the issues related to the illicit alcohol industry after assessment of the groundreality.

1 http://www.dailymirror.lk/opinion/172-opinion/35090-editorial-mathata-thitha-cheers-or-jeers-n.html.


vi

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Executive Summary

vii

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.Kkdjla flf¾ wjOdkh fhduq lrhs'


viii

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kPsha;Tf;F ,l;Lr; nry;fpd;wJ.

tlf;F fpof;F Aj;j Kbtpd; gpd;G ,yq;ifapy; kJghdf; ifj;njhopYk; mJNghd;Nw

kjghdg; ghtidAk; GjpanjhU vy;iyiaj; njhl;Ls;sJ. Aj;jk; Kbtila Kd;du;

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mw;fNfhy; kw;Wk; ];gpupl; tiffspd; cw;gj;jpAk; ,wf;FkjpAk; “kJtpw;F Kw;Wg;Gs;sp;”

vDk; kJghdj; jil nfhs;if 2005 ,y; mwpKfg;gLj;jg;gl;l NghjpYk; ghupasT

mjpfupj;Js;sJ.

Executive Summary

ix

cyfshtpa uPjpapy; tupapayhdJ kJghdj; njhopw;Wiw kw;Wk; re;ijia

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td;Kiw Nghd;w Fw;wq;fs; njhlu;ghf rl;l eltbf;iffs; fhzg;gl;l NghjpYk;

milahsq; fhzg;gl Ntz;ba ghuJhukhd gpur;rpidfshfTk; mit cs;sd.

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khw;w KbahJ. “kJtpw;F Kw;Wg;Gs;sp” vDk; kJ xopg;G epfo;r;rpahdJ ngsjPf

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murhq;fj;jpw;F kf;fs;; Mgj;J kpf;f rl;ltpNuhj kJghdq;fis EfUtjpypUe;J

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kJghd njhopw;WiwapYs;s jtWfis ajhu;j;jj;jpd; mbg;ggilapy; fye;jhNyhrpf;f

Kw;gLfpd;whu;.

Introduction

1

1. Introduction

Alcohol policies are those regulations, laws and rules that govern the manufacture, promotion, distribu-

tion, sale, and use of alcohol. Looking at the history of alcohol legislation applied and effected in the

country in the past, those could be viewed as being less pragmatic in controlling consumption and more

directed towards denial of access for good section of the population. But in the world over during the past

century the policy has been in promoting the adults drinking in moderation . Alcohol policy needs to be

formulated taking into account the social, religious, cultural, economic, political and public health di-

mensions of alcohol use and abuse. A more holistic approach, based on a long-term objective would be

ideal, rather than ad hoc policy making. Like many Asian countries, Sri Lanka may be approaching alcohol

use and abuse from a narrow, short-term perspective, without adequate consultation from different disci-

plines.

As part of the plan for a study entitled " The State of the Sri Lankan Alcohol Industry and Analysis of

Governing Policies," the author undertook a content analysis(a standard methodology in the social sci-

ences for studying the content of communication ) designed to complement the wealth of original data

collected by means of key-informant interviews. The purpose of the content analysis was to examine

elicited information from various sources including stakeholders in order to discern thematic patterns

relevant to the study's main focus. In this study, we present findings relating to important issues in

formulating a national alcohol policy while assessing the present state of the alcohol industry. To substan-

tiate the exercise, the author's attempt is to discover evidence - if there is any of areas of conflict or overlap

between government intervention (by way of taxation and other measures) and alcohol industry interests or

consumer interest , and any evidence of competitive divisions within the industry camps which could be

harmful to the end users.

In recent years there have been a number of developments relevant to the alcohol policies the world over.

Greatest public support is typically granted to policy measures that are not seen as intrusive to the moder-

ate or occasional drinkers and do not penalize the alcohol industry.

Some comparative analyses of the comments made by the stakeholders have indicated that the level of

public support for a policy may reflect a reaction to a particular policy. For example, a comparison of the

actual policies and views on what is practised, suggests that the general public is less supportive of

restrictive policies (where access measures are more intrusive) and more supportive of policies that involve

lower levels of access control.

As discussed in the next few chapters, the successive government's attitude towards alcohol is complex

and its religious sensitivities, together with the ambivalent position regarding alcohol, creates a disjointed

national approach to the survival of the legitimate industry. On the other hand, the government continues

to have a strong interest in alcohol tax revenues. In 2011, alcohol excise duties contributed around Rs.

55.2 billion. It has been seen that increasing taxation of alcohol has been taken continuously without

policy direction but on an ad hoc basis to meet the Treasury requirement, the best example being the

increase of prices of cigarettes and liquor on 31 August 2013."The government announced increases to

excise duties on tobacco, cigarettes, liquor and ethyl alcohol and import duties on vehicle tyres, excluding

for buses, vehicle parts, dairy products, including butter, liquor and tobacco products was also revised

2


with effect from 31 July 2013 ".1 Accordingly, the price of a litre of arrack increased by Rs.25 to Rs. 30

while a litre of beer increased by Rs. 10. Use of ad hoc midnight tariff changes were signs of the financial

constraints that the state is facing. In a such complex economic situation, it would be an enormous task

to formulate a set of guiding principles for future policy directions that would perhaps take the form of

finding answers to questions relating to anti- competitiveness of the industry, the nature and effectiveness

of taxation measures to curb illicit alcohol use, measures to influence the drinking habit to shift from more

harmful to less harmful, liquor advertising, location of liquor sales outlets, existence of illegal alcohol and

law enforcement.

Alcohol has become much more readily available over the past two decades in most economically devel-

oped countries and developing countries, including Sri Lanka and alcohol misuse is now second only to

tobacco as a preventable cause of death and hospitalization in most of the countries.

Some sub-populations in Sri Lanka too are at particular risk of alcohol-related harm. These include the low

income, unemployed or partially employed rural and urban working population who are mainly addicted

to consuming of illicitly brewed alcohol. As there is no national alcohol policy except for ad hoc strategies

introduced from time to time , it is very much relevant to quote here the view of a stakeholder; that "The

successive Governments of Sri Lanka had been following a duplicitous policy with respect to alcohol.

While the Government has made it a major source of revenue and has been raising the excise duty rates on

legal alcohol to prohibitively high levels and continues to depend on it to finance its expenditure, it is

treated as a sin industry placing all kinds of obstacles and restrictions affecting its smooth functioning.

Also, whilst decrying it in public, alcohol is being consumed at the highest levels and is being served at

official functions".

As for the distribution of income by the population,50 per cent of the income is enjoyed by the 20 per cent

of the higher income earning category of the people whereas, only 16 per cent of the income is accrued to

the 40 per cent of the population in the lower income category. This is further illustrated by looking at the

income distribution among households. The mean incomes of the lowest 4 deciles of households are very

close together, all falling below Rs. 17,833/- per month. Further, more than 30% of households have a

monthly income which is less than half the national average. In contrast, at the other end of the income

distribution, the highest decile of households have a mean income of over Rs. 140,000/- per month. While

the lowest 4 deciles of households together account for just 13% of total household income, the highest

decile of households, alone accounts for a staggering 39.5% of total household income.2

This distortion of income distribution implies a denial of reasonable living standards for larger sections of

the population who live in rural and urban areas. "Of the 1.8 million identified as poor, the large majority,

or 84.7%, live in rural areas".3 And they are most vulnerable for unhygienic food intake including illicit

spirit.

On the other hand, Sri Lanka embraced an open economy in full scale followed by a programme of

privatization of government owned ventures. Among the state owned enterprises privatized was the Sri

1 http://www.island.lk/index.php/page_cat=article-details&page=article-details&code_title=84782.2 CEPA, A Closer Look at Sri Lanka's Poverty Figures, http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=88119.3 Ibid.

3

History of Sri Lanka Alcohol Industry

Lanka Distilleries Corporation. This step could be viewed as divestiture carried out without any in-depth

study of the industry and market, and thereby depriving fair play, but creating anti-competitive monopolis-

tic and monopsonistic activities by a dominant market force of this industry.4

2. History of Sri Lanka Alcohol Industry

The earliest literature of the island has ample reference to liquor drawn from the coconut flower. Indeed,

the legends associated with the life of Lord Buddha too contain reference to such a beverage, the most

known being the story of how the Enlightened One quelled an elephant, fortified with the heady brew,

which was sent to attack him. There is evidence to show that people have been consuming intoxicating

beverages from the very early ages of mankind. There are some stories in Ceylon history also about Toddy.

There are many stories about King Dutugemunu's heroes and how they drank pots of toddy.

Historical books like the Mahavamsa show that there were spots where Toddy was sold at that time. One

day king Dutugemunu and his army including the heroes, Gotaimmbara, Theraputthabaya, Suranimala,

Nandimithra and Gotabaya went to the battlefield in Anuradhapura, on foot from Magammana city. On

the way to Anuradhapura through the coastal areas, it is said that they relaxed and drank toddy in Magalkanda

Village. This story shows that toddy tapping has been going on since a very long time ago in the coastal

areas.

Moreover, toddy tapping, the first step in the process, is an age-old vocation, a tradition passed down from

father to son, from generation to generation, and an activity described and celebrated in the folk stories of

the country. It is now known that Ceylon, as the island was called then, exported large quantities of

Arrack made out of Toddy to India as far back as the early 19th Century. It is recorded that a century later,

there existed some 250-300 distilleries in the district of Kalutara alone, indicating a thriving cottage

industry.

In 1505, with the Portuguese invasion of Sri Lanka, the situation changed and influenced the drinking

habit among Sri Lankans.5 The Dutch who invaded the country after the Portuguese continued the

propagation of alcohol. With the arrival of the British,they introduced the first Excise Ordinance in the

form of the Toddy Act of 1912 and liberally introduced licences to open taverns in most parts of the

country, to increase the revenue to State coffers and promoted the drinking habit. Reliable records, during

the British period show that toddy tapping in the Kalutara area was started in 1870s. It is said that the

governor Sir William Henry Gregory (1873- 1877) developed this industry in Kalutara area according to a

proposal made by an European Christian Mission Monk.

At that time this industry was limited only to a few families. They were referred to as "Renda - Karuwan".

Distilleries Company of Ceylon was started after the development of toddy tapping. At that time Mr. Elaris

Cooray and Dr. Edmond Cooray who lived in Wadduwa, gave a new life to the toddy industry by introduc-

ing a new technology to brew arrack. In the effort of developing the toddy industry they realized that

Sinhalese toddy tappers were not doing their job properly,and they went to India and brought 500 people

4 http://www.dcslgroup.com/pop/story_arrack_sub.h.5 Wijesundara, Anula, 2012, A More Dynamic Liquor Policy, an Urgent Need. http://www.sundayobserver.lk/2012/07/22/imp01.asp.

4


from Malabar, Kerala and Tamilnadu after taking permission from the British Government. They were

trained to tap coconut trees by skilled Sinhala people. After that, toddy tapping was started on a large

scale. At that time the distilleries such as Wawugala, Anwil, Sirilanda were started by Christian upper

class people. Only the people who served those upper class Christians were given permission to operate

the Toddy industry by the British Rulers.6

With the establishment of tea plantations in colonial life, privately owned imported foreign liquor outlets

were established in key cities like Colombo, Galle, Kandy, Nuwara Eliya and Jaffna. Dated back to 1913

the Excise Department was constituted to manufacture liquor (Arrack) for the local market. Operations

became more streamlined subsequently, especially when the state established its own distilling facility.

This situation continued for 60 years until 1974. During this period the main distillery of the state was

located in Galoya Valley and the brand name of "Galoya Pol" and "Gal Arrack" became popular among

the alcohol consumers.

In 1974, the State Distilleries Corporation was formed to take over the distilling and bottling activities of

the Excise Department which continued to function as the monitoring and controlling authority of the

industry. The State Distilleries Corporation was profitable since its inception, except for the year 1989, but

the profits made have been trivial compared to the capital invested in the business. The Corporation has

been ineffective in many spheres. Large scale pilferage of spirits and packing materials to the illicit market

resulted in illegal manufacturers producing identical products. In addition, large numbers of people were

employed over and above the cadre requirements. In pursuance of the then Government's peoplisation

policy, 60 per cent of the issued share capital of the State Distillery Corporation was sold at the Colombo

Stock Exchange on 27 February 1992. At the time of privatization there were only seven licensed bottlers

in the industry. From 1913 until 1992 when the Distilleries Corporation of Sri Lanka was privatized, the

government of Sri Lanka had the virtual monopoly in the production and distribution of Arrack.

Since the privatization of Sri Lanka's alcohol industry in March 1992, the volume of liquor produced in the

country has leaped to a record level of 46.9 million7 proof litres of all categories of legally produced Arrack

in 2011 from 14.9 million8 proof litres in 1991. During the period of 20 years the production has

increased by 216 per cent.

3. Key Players in the Industry

Sri Lanka's legal alcohol beverages consists of hard liquor and soft liquor i.e.various types of Arrack and

locally made foreign liquor as hard liquor and malt liquor mainly Beer as soft liquor. In addition, Toddy

production through Coconut , Palmyrah and Kithul trees is in existence.

As mentioned above, at the time of privatization there were only seven licensed bottlers in the industry

which increased to 20 bottlers in 2011, as per CGE (Commissioner General of Excise) Administrative

Report 2011.Among them the company DCSL is the leading producer with a share of 76 per cent in 2011

6 "The Toddy Industry and The Life of The Toddy Tapper", http://www.ent.mrt.ac.lk/~040337/c2.htm.7 Administration Report, Commissioner General of Excise 2011.8 De Mel, Nishan, "Towards Describing the Alcohol Industry and Formulating a Government Policy", IPS 1996.

5

Key Players in the Industry

of the production of Arrack totalling 46.9 million proof litres (Figure 3.1). Prior to the conclusion of the

North & East war there had been 16 Arrack bottlers.

DCSL has been maintaining the monopolistic position in Arrack manufacturing and distribution right from

the time they became owners of the government owned Distillery Corporation. DCSL has been maintain-

ing an average of 80 per cent of share of the business until 2008 and reached a highest share of 90 per cent

in 2009 which reduced to 76 per cent thereafter with the entrance of new players after the end of the war.

(Figure 3.2).

Source: Commissioner General of Excise, Administration Report 2011.

Figure 3.1Share of Major Arrack Producers in 2011: Total Production

46.9 ml Proof Litres

Figure 3.2Percentage Share of Arrack Production by Major

Producers 2005-2011

Source: Commissioner General of Excise, Administration Reports 2005- 2011.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005 2006 2007 2008 2009 2010 2011

PercentageShare of Arrack Production

DCSL W.M.Mendis Rockland ID Lanka Acme Lanka All others

Perc

en

tage s

har

e o

f A

rrac

k p

rod

uct

ion

6



Among the three categories of Arrack that are marketed namely, the Molasses Arrack, Coconut and Pro-

cessed Arrack and Special Arrack,DCSL maintains the leading producers position with 38 per cent of the

production of Coconut Arrack, and 87 per cent of Special Arrack in 2011.(Table 5.2 & 5.3).

Next to DCSL are I.D. Lanka Ltd,W.M.Mendis, Rockland ID and Acme which have market shares

between 1 per cent to 10 per cent. Among these liquor producers DCSL, I.D Lanka Ltd,W. M .Mendis and

Rockland Companies have a long history in the liquor making industry. A brief note on these four private

entrepreneurs are given below.

3.1 DCSL

The company manages one of the successful diversified blue chip portfolios spanning from beverages,

telecommunications, plantations, hotels, textiles, financial services, creative and media services and logis-

tic services. Beverages is the most significant segment as it amounts to 82% of the company's total

revenue.

The DCSL Group is among the top 5 corporate conglomerates in Sri Lanka with assets in excess of Rs. 52

billion and an annual turnover of approximately Rs. 47 billion.

The DCSL has a history spanning from 1913 as a part of the Excise Department. In 1913, when the

Excise Department of Ceylon which was initially created as the enforcement authority and to distribute

and sell liquor products in Sri Lanka, branched out, the distillation and manufacture of liquor products

went to the Distillery Company. Since the privatization in 1992, the Company has been transformed as

the premier distiller, manufacturer and distributor of local liquor products in Sri Lanka.

The Company enjoys approximately 75 per cent market share and an annual gross turnover of Rs. 30

billion. It has upgraded by investing in state-of-the-art fully automated bottling plants and pot and patent

distillation units located in four strategic locations such as Seeduwa, Kandy, Kalutara and Badulla and an

island-wide distribution network. The flagship products of the Company are Extra Special Arrack and

varieties of Coconut Arrack.

The Company is also the exclusive agent for world renowned foreign liquor imported brands of the

prestigious group Pernod Ricard of France such as Royal Salute, Chivas Regal, The Glenlivet, Ballantines

whiskies, Martell Cognac, Absolut Vodka, Beefeater Gin, Havana Club Rum, Jacob's Creek, Long Moun-

tain, Montana wines and G.H. M. Beverages.9

DCSL has reaped the benefit of the post-war development by enhancing after tax profit to Rs. 7.7 billion in

2011 (Figure 3.3 below).

3.2 ID Lanka LtdEstablished in 1980 as Gilbys Lanka Limited (GLL), its current identity is ID Lanka Limited since October

2004. The company is Sri Lanka's second largest alcoholic beverages company. In their 30 year history, it

9 Source: http://www.dcslgroup.com.

7

Annexure

Figure 3.3DCSL Gross Turnover and Profit After Tax, Pre-War and Post-War

has earned a reputation as a maker of quality spirits. IDL product portfolio includes the finest coconut

arracks, including the much popular Old Reserve, gins, vodka, whisky, brandy, rum and a selection of

premium wines.10

3.3 W.M.Mendis & Company Ltd

Established in 1960 by Mr. E.M.Mendis,an expert in the preparation of local liquors,the Company has a

history of producing quality liquor for well over four decades. The ultra-modern Distillery is located in Sri

Lanka's Southwest coast. It is surrounded by Coconut plantations, from which the Company obtains its

main raw material - the sap of the Coconut flower.

The distilling process is done using the traditional Pot Still as well as the modern Patent Still, imported

from France (the same machinery used in the production of cognac). It is matured in Halmilla casks and

vats for at least two years.

The bottling factory situated in the Northern outskirts of Colombo, houses five fully automatic bottling

lines manufactured in Germany. The Company produces 27 types of products comprising of pure Coco-

nut Arracks, Old Arracks, Blended Arracks, and Foreign Liquors.11

3.4 Rockland Distilleries (Pvt) Ltd

Rockland Distilleries commenced on a family estate in 1924. A pioneering venture, it was set up to

produce high quality Arrack for the first time in Ceylon's history and for nearly a century, Rockland

Distilleries remained a privately owned family business. Rockland has initiated to make their distillery as

distillation to produce the much relished Coconut Arrack.12

10 Source: http://www.idl.lk/about-us.php.

11 https://www.google.lk/search?q=W.M.Mendis&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox.

12 http://www.rockland.lk/green_distillery.html.

8


4. Sri Lanka Alcohol Brand Name " Arrack"

Sri Lanka's alcohol industry is based on "Arrack", its production spanning from many years. Similar to

Scotch Whisky in Britain, Vodka in Russia, Sake in Japan, Arrack has become the alcohol trade mark for

Sri Lanka.

Discovered as far back as the 5th Century A.D. in Sri Lanka, Coconut Arrack is a unique alcoholic beverage

obtained by tapping the Cocos Nucifer or coconut palm. Lush coconut plantations in the island, spanning

thousands of acres, were the inspiration for the tapping of Toddy or coconut sap and its subsequent

distillation to produce the much relished Coconut Arrack.

The first step involves Tapping or extracting coconut sap or Toddy, as it is popularly known, from the

unopened flower of the coconut tree. At dawn, 'tappers'move from tree to tree along connecting ropes to

extract the sap of the yet unopened coconut flower (Photo 1). A deft slice with a sharp knife draws the

nectar out of the flower. It is collected in a clay pot placed under the flower (Photo 2 & 3). A tree on

average yields approximately two litres of toddy per day. The liquid ferments quickly into a mildly alco-

holic drink locally called 'raa' or 'toddy'.

Once the toddy is collected in the earthenware pot, it undergoes rapid fermentation due to the natural

variety of wild yeasts and bacteria. It is then poured into large wooden casks made out of Halmilla wood

after a minute filtration process. These wooden casks are then gently transported to factories for distilla-

tion. The liquid from thousands of trees are transported in wooden barrels to collection centres, tested for

quality, and taken to the distillery and poured into wash backs made of teak or Halmilla; all this within 3-

4 hours of the sap being drawn from the flower. Then begins the delicate process of distillation.

There are two processes of distilling; continuous distillation and the batch process, also called 'pot distil-

lation'.

The distillation process is completed within 24 hours.Spirits obtained are the purest and without impuri-

ties but leaves behind the authentic flavours with the spirits so that enhancing and smoothening will be

Photo 1At dawn, A ‘Tapper’ Moves from Tree to

Tree Along Connecting Ropes

Photo 2Placing the Clay Pot under the Opened

Flower to Draw Nectar

9

Arrack Production Profile of Major Producers

Photo 3Nectar Out of the Flower is Collected in a

Clay Pot Placed under the Flower

Source: http://www.ent.mrt.ac.lk/~040337/c5.htm. The Toddy Industry And The Life of The Toddy Tapper.

done by the magical maturation process that takes place, inside the Halmilla wooden vats.Here, the

contents of the wooden vats/casks are mixed thoroughly for a fortnight for better aeration and enhanced

contact with the wooden surface. Herbs and spices from ancient recipes are also added to enhance flavour

and mellow the beverage at appropriate times during this all-important maturation process.

Coconut Arrack is a pure spirit, in that it contains not a trace of methanol. The fact that it is distilled from

naturally fermented coconut toddy, makes it one of the most natural alcoholic beverages available in the

world. Finally, spirits of different age groups are selected with different flavours and blended to manafacture

Arrack under careful supervision for the purpose of bottling.

5. Arrack Production Profile of Major Producers

Arrack and beer are the two beverages categories that are popularly consumed and among Arrack espe-

cially the Special Arrack has been mostly demanded by the people.Out of the total production of 36

million proof litres of all categories of Arrack in 2005, Special Arrack accounted for 89 per cent , reduced

to 83 per cent of 49.5 million proof litres produced in 2011. During the period between 2005-2011 total

Arrack production increased by 37 per cent.

Table 5.1Molasses Arrack Production (Proof Litres)

2005 % 2011 %

W.M. Mendis & Co 222,840.0 23 212,103.1 7

ID Lanka Ltd 538,648.5 56 1,937,130.4 66

Others 198,612.3 21 787,654.1 27

Total Production 960,100.8 100 2,936,887.5 100

Source: Source: Commisioner General of Excise, Administration Reports 2005, 2011.

10


Table 5.2Coconut and Processed Arrack Production (Proof Litres)

2005 % 2011 %DCSL Co.Ltd 2,213,439.3 78 2,153,212.0 38

W.M. Mendis & Co 54,350.7 2 49,075.4 1

ID Lanka Ltd 201,649.2 7 504,771.1 9

Rockland Distil.Ltd 340,066.7 12 1,153,773.7 21

Others 35,802.6 1 1,744,559.6 31

Total Production 2,852,308.4 100 5,605,391.8 100

Source: Commisioner General of Excise, Administration Reports 2005, 2011.

Table 5.3Special Arrack Production (Proof Litres)

2005 % 2011 %

DCSL Co.Ltd 26,748,790.5 82 35,663,081.3 87

W.M. Mendis & Co 353,931.0 1 38,052.5 0.1

ID Lanka Ltd 2,436,204.0 8 2,699,985.2 6

Rockland Distil.Ltd 1,006,834.4 3 12,298.7 0.001

Uva Glenn 133,047.0 0.4 118,204.0 0.3

Acme lanka Ltd 200,451.3 0.6 580,144.0 1

Others 1,488,993.1 5 1,966,636.7 5


Table 5.4Beer Production Profile by Major Producers (Proof Litres)

2005 % 2011 %

Mc Callum Brewery 2,001,135.5 3.9 0

United Brewery 4,815,042.0 9.4 0

Lion Brewery 44,732,755.9 86.7 69,915,941.0 80.0

Asia Pacific 15,056,977.9 17.2

Millers Brewery 2,526,948.6 2.8




Figure 5.1Percentage Share of Beer Producers 2011 (Litres)


11

Toddy Tapping Industry

There are two categories of Beer production in the country namely,Beer with alcohol content below 5 per

cent and above 5 per cent. Beer with alcohol content above 5 per cent accounted for a share of 83 per cent

of the total beer production in 2011.

There had been three Beer producers in the country continuously and in recent years ownership of Macallum

Brewery and United Brewery changed their ownership to Millers Brewery and Asia Pacific brewery,

respectively.

Sri Lanka's Beer industry is supportive of planned government initiatives designed to achieve a sustained

reduction in per capita alcohol consumption by shifting consumers from hard to soft liquor, according to

official sources.

It advocates reducing excise taxes on beer and liberalising licensing requirements to make beer more

available, while cracking down on illicit alcohol production and distribution."The market for beer in Sri

Lanka is extremely small but the potential for growth is enormous if the right policies are implemented by

government," according to a brewery official.

Sri Lanka's per capita beer consumption is two litres a year compared with 100 litres in the US and 20 in

Singapore. The nature of Sri Lanka's market is the exact opposite of world trends where 80 per cent is beer,

and only 4-5 per cent is hard liquor. Brewers are restricted by their ability to distribute.

In other countries, beer can be sold relatively freely while hard liquor sales are restricted. In Sri Lanka both

beer and hard liquor are sold through restricted sale practices.Hence illicit alcohol consumption is on the

increase. Since illicit alocohol is not taxed, consumers can buy a bottle with 30-40 per cent alcohol

content for Rs.60. Considering that an individual consumes about a quarter of a bottle, the price is about

1/8th of a bottle of beer.

Even though people know that illicit alcohol consumption is harmful, they have no choice because they

cannot afford to buy beer. Furthermore, illicit alcohol is freely available.

6. Toddy Tapping Industry

As mentioned earlier,Toddy is the major supply sources of spirit for the liquor industry in Sri Lanka among

other sources such as rectified spirits from Pelwatta and Sevanagla Sugar Companies and rectified spirits

that are imported. Sri Lankan liquor manufacturers who have improved the quality of their products over

the years, are conscious of maintaining a consistent taste in their products, and to overcome the problem

of uneven supply of quality local spirit, have entered into long-term agreements with spirit producers

overseas to receive regular supplies in addition to their selected local supplies. This has deprived the local

toddy industry of a sustainable existence.

Toddy supply for the industry flows from the northern tapping belt, and the southern tapping belt. The

toddy tapping industry in Kalutara district from Panadura to Beruwela, which provides employment to

more than twenty thousand people, is facing a number of problems and consequently is on a declining

trend. Some of the causal factors are:

12


• The partition of coconut estates in the coastal region from Panadura to Beruwala has greatlyaffected the toddy industry as the number of trees for tapping is reducing progrssively. Devas-tation of thousands of coconut trees due to the 2004 tsunami has also affected the industry.

• The smallholders of coconut trees are affected as they could obtain a higher income by sellingnuts.

• The distillery owners have refused to give a higher rate for a litre of toddy. As a result, toddycontractors are unable to earn a higher income as earlier.

• There is a shortage of toddy tappers and the contractors have been compelled to pay a higherwage for them.

• The government had inaugurated a project to train toddy tappers at Kalutara and Wennappuwa

but it was not a success.

Today the number of people who are involved in this industry does not exceed 5,000. It was 50,000 during

in 1970/71 period.

From mid-February to late December people who own coconut lands undertake contracts with distilleries

to deliver their toddy. Sap matures and begins to ooze out in late March. Until then they need a large

number of labourers to form steps over the trunks of the coconut trees, form couplings, and tap the sides

of the flower cluster etc.. Even contractors who have a small number of coconut trees will have to spend

about Rs. 100,000/= initially for pots, ropes, coconut husk, manna-petti, labukata, toddy barrels, knives,

buckets and so on. Toddy tappers are paid Rs. 25,000/= as an advance which is valid till the end of the

year. This sum of money is deduced monthly, but the toddy tapper is paid about Rs. 2000/= weekly.

Due to severe shortage of toddy, both licensed and illegal liquor had turned to man-made toddy using

sugar and an ingredient used in bread making. This man-made toddy has also entered the market as bottled

toddy depriving the status of the genuine industry.

"Latest now we learn is that anti-depressants are mixed with toddy. Is it an act of mercy on the part of

toddy traders who want to help tipplers ward off the excruciating pain derived from the decay of their

viscera due to poisonous hooch? Perhaps, anti-depressants may be the least harmful ingredient in gahayata

raa or toddy produced under coconut and kitul palms with a cocktail of chemical substances including

fertiliser and illicitly distilled alcohol which, sometimes, kills people or makes them go blind".13

7. Liquor Production and Consumption Trend in Sri Lanka

All varieties of Arrack produced in 2002 amounted to 27.1 million proof litres which increased to 36

million in 2005 and to 49.5 million in 2011. Rate of increase of Arrack production between 2001 and

2011 is 82.6 per cent during the 10 year period.

Production of soft alcohol known as Beer (Malt Liquor) was 42.7 million litres in 2002 which increased

to 51.5 million litres in 2005 and 87.4 million litres in 2011.Out of the 87.4 million litres produced in

2011, 73 million litres consisted of alcohol contents above 5 per cent. Rate of Increase of Beer produc-

tion during the 10 year period between 2002- 2011 was 105 per cent.

13 http://www.island.lk/index.php?page_cat=news-section&page=news-section&code_title=55.

13

Liquor Production and Consumption Trend in Sri Lanka

Country made foreign liquor including Wine production increased from 1.24 million litres in 2002 to

2.2 million litres in 2005 and to 4.1 million litres in 2011. Foreign Liquor Production as a percentage of

total alcohol production is in the region of 1 per cent.

Bottled Toddy produced in 2002 was at 2.5 million litres and increased to 4.7 litres in 2005 and in 2011

it was further increased to 5.8 million litres. Rate of increase between 2002 and 2011 was 132 per cent.

Figure 7.1 below shows that the production of major alcohol beverages mainly Arrack and Beer has

reached a new height since the end of the North East war in 2009.

7.1 Trend in Liquor Production

Commercial alcohol production does have a substantial positive economic and social impact. It provides

employment opportunities and stable incomes to many people and an important source of public revenue

to governments. This is consistent with the social determinants of health approach, developed and pro-

moted by WHO, as alcohol production helps to alleviate poverty and improve the local physical environ-

ment.

From a production point of view, most health-related issues arise from poor-quality alcohol, produced in

an unsafe environment and addiction to alcohol. All major local producers of hard liquor, beer and wine,

have developed strict quality and safety controls and are willing to share their expertise with the govern-

ment. As an example, Rockland Distilleries has initiated to make their distillery as eco-friendly as

possible through their Eco-pond, Re-usable Energy and water conservation system. At the DCSL distillery

plants the waste water treatment plants and an environmentally friendly zero-harm effluent management

Figure 7.1Production of Arrack, Beer and Toddy 2001-2011

Source: IPS Alcohol Data Base.

14


system ensures that waste water and effluents are all managed well within the compliance norms. ID lanka

Ltd, located in Melfort Estate in Kaduwela is an eco-friendly enterprise.

Since the privatization of Sri Lanka's key alcohol industry (State Distilleries Corporation) in March 1992,

liquor production has been expanding at an increasing rate despite the fact that the country was experienc-

ing a continuous North-East War until 2009. With the conclusion of the war, liquor production was

boosted with the opening of the market in war ravaged areas and as a result, the number of bottlers too

increased to 20. During the period between 2005 to 2009 Arrack production increased by 34 per cent,

and by 58 per cent from 2009 to 2011.It also to be noted that the major producer/bottler has earned an

after tax profit of Rs.7.7 billion in 2011 as dividends after the conclusion of the North & East War, as

against Rs.2.2 billion after tax profit earned in 2009. The increasing rate of liquor production indicates the

upward trend of the growing demand despite the fact that the Company Tax for liquor industry was

increased from 35 per cent to 40 per cent since April 2011. The production has increased to a new level

of profit making by producing companies. Rs.38.9 billion turnover followed by Rs. 7.7 billion net profit

by DCSL Co. Ltd in 2011 is an example (Figure 3).

CGE in his report says that Rs. 55,318 million has been collected as excise duties during the year 2011

which is an increase of 50 per cent over the revenue collected in the year 2010.A significant increase of

production of both hard liquor and soft liquor have been shown in 2011 over the year 2010. The reasons

for this increase are :-

(a) Removal of obstacles for the liquor sales in Northern and Eastern areas due to the restora-tion of law and order in those areas.

(b) The increase of tourist arrivals.

(c) The intensive raids carried out by the Excise Department and Police Department whichcaused a decrease of illicit liquor supply.

7.2 Trend in Liquor Consumption

The price of alcohol is a key factor influencing levels of consumption and subsequent alcohol-related

harm. There is considerable evidence that low alcohol prices encourage higher consumption, including

heavier drinking per occasion and under-age drinking, leading to increased alcohol-related harm. When

prices rise, the use of alcohol and other drugs decreases, and vice versa.14 But it was evident right through

in Sri Lanka that the prices of local alcohol has not impacted on the consumption pattern of alcohol amidst

the frequent tax increases, due to its highly inelastic nature of demand. .

Total alcohol consumption can be divided into recorded and unrecorded alcohol consumption. There are

several ways to record alcohol consumption in Sri Lanka and the accuracy of unrecorded alcohol con-

sumption will not be exactly the same as recorded consumption. Alcohol consumption is recorded either

on the basis of the amount of retail sales or the sales of alcoholic beverages to retail sale outlets, while

unrecorded alcohol consumption consists of home production (legal or illegal), travellers' imports of

alcoholic beverages, smuggled alcohol, or legally produced alcohol that is illegally sold in domestic

markets .

14 Babor, T., R. Caetano, S. Casswell, et al. 2010. Alcohol, No Ordinary Commodity: Research and Public Policy. 2nd edition. Oxford University Press.

15

Liquor Production and Consumption Trend in Sri Lanka

It is reported that arrack consumption has increased from 67.1 million litres in 2006 to 75.2 million litres

in 2010, bottled toddy from 10.5 million litres in 2006 to 16 million litres in 2010, Malt Liquor (which

is beer, stout and porter) from 51.9 million litres in 2006 to 66.9 million litres in 2010 and sparkling

wines from 375,739 litres in 2006 to 395, 892 litres in 2010.15 The report further says that the Colombo

District has topped the list of consumption with 11.3 million litres of arrack, 113,000 litres of whisky,

576,560 litres of brandy, 10.1 million litres of malt liquor, and 22,896 litres of bottled toddy. The

Gampaha District is the second highest with 7.9 million litres of arrack, 98,548 litres of whisky, 395,012

litres of brandy, 9.2 million litres of malt liquor and 406,768 litres of bottled toddy. These two Districts

account for the two highest District populations in the country around 2.30 million and 2.29 million in

Colombo and Gampaha Districts, respectively in 2012 in which 77.6 per cent and 76.5 per cent belongs

to the age group of 15 years and above for the two Districts respectively.

Of the Northern Districts, Jaffna leads with 1.6 million litres of arrack, 2,700 litres of whisky, 25,151

litres of brandy, and 2.4 million litres of malt liquor while there has been no sale of bottled toddy as home

made Palmyra Toddy is freely available. There had been a shift in consumption patterns in the North from

the days of the LTTE rule where the Tigers had large moonshine factories under their administration and

they did not allow the northern citizens to brew moonshine. It was reported that now the people of the

North are increasingly drinking the legal alcohol instead of moonshine for which no taxes are paid.At

present, daily sales turnover of all alcohol including Toddy is Rs. 7,500,000 and a litre of Toddy is sold at

Rs.40 per litre. Jaffna District recorded a population of 0.58 million in 2012 with 75.1 per cent belonging

to the age group of 15 years and above.

Colombo, 42.8%

Gampaha, 33.3%

Galle, 40.1%

Kegalle, 29.0%

Anuradhapura, 38.0%

Kandy, 33.8%

Batticaloa, 31.6%

Jaffna, 30.0%

Polonnaruwa, 38.5%

Trincomalee, 43.5%

Hambantota, 29.3%

Matara, 31.3%

Figure 7.2Alcohol Usage by Population in Selected District 2012

Source: DCSL, ID Lanka Ltd.

15 National Drug Control Board. A Handbook of Drug Abuse Information – 2011.

16


According to the news release by the Ministry of Cultural Affairs of the Southern Provincial Council, per

capita consumption of alcohol has been 12.8 litres in 2011 in the Province.It further says that total alcohol

consumption in the Southern Province has been 23.7 million litres consisting of 10.4 million litres in the

Galle District, 8.0 million litres in Matara District and in Hambantota District 5.3 million litres, with

74.7,74.4 and 73.6 per cent in the age group of 15 years and above,respectively for the 3 Districts in 2012.

As for the other seven provinces, there had been fluctuations though the increases or the decreases were

marginal.

Based on retail level sales of Arrack and Beer , major industry sources reveal that the consumption pattern

by District is led by the Trincomalee District followed by Colombo District (Figure 7.2). Trincomalee

District accounts for a 0.37 million population with 68 per cent in the age group of 15 years and above.

This development will certainly raise an eyebrow particularly in the context where the current regime

spearheaded a liquor free righteous society way back in 2005 with the implementation of the 'Mathata

Thitha' campaign and censored liquor consumption scenes in the electronic media.

CGE's estimate of per capita consumption of 7.41 litres in 2010 derived from total consumption to the

total population,where total consumption is by the population above the legal age of 18 years,is more

realistic.Based on that assumption,per capita consumption by the population above 18 years is 9.79 litres

in 2010. This estimate is somewhat close to the IPS estimate of 11.2 litres each Sri Lankan is recorded and

unrecorded to have consumed in 2011. As a result, the country now ranks among the top boozing nations

in the world when both recorded and unrecorded liquor consumptions are taken into account, below only

to the Czech Republic, France and Russia.

Also, it is to be noted that CGE's have estimated unrecorded consumption as 9.38 litres in 2010,which

needs to draw serious attention. Accordingly, added to the recorded consumption of 7.41 litres the re-

corded and unrecorded consumption would be 7.41+ 9.38 = 16.79 litres in 2010.

In the meantime the country's per capita consumption stands at 6.3 litres for beer and 10.5 litres for hard

liquor in 2010 according to a study conducted over two months amongst Colombo's female working

crowd and university students, and it was concluded that in the post-war period most ladies had picked up

the drinking habit.16

Table 7.1Recorded Licit Alcohol Consumption in Sri Lanka (Mil. litres)

Year 2000 2005 2008 2009 2010

Arrack 50.35 64.15 72.33 71 75.26

Foreign Liquor 3.52 4.91 4.14 6.05

Beer 50.66 60.48 53.54 52.49 66.94

Total 101.01 128.15 130.78 127.63 148.25

Per Capita Consumption

converted proof litres 5.05 6.41 6.5 6.40 7.41

Source: Commisioner General of Excise, Administration Reports 2000-2011.

16 Shashreeka Abeysinghe, Investment Analyst TKS Research.

17

Patterns of Drinking

The consumption of hard liquor and beer and their local production have seen an overall increase during

the past ten years, despite the government's campaign against the use of alcohol. In fact the biggest tax

earners for the government today are cigarette and liquor sales. In 2011 - tax earnings on liquor was Rs.

55.2 billion while in 2010 it was only Rs. 36.6 billion.The CGE emphasized that the decrease in the

supply of illicit liquor was one reason for the increase of excise income, but it has to be presumed that

raids on illicit liquor is a selective and earmarked operation carried out based on the level of influence

towards the law enforcement personnel.

Further, it has been estimated that there are over 200,000 illicit brew retailers, compared to the 3,332

licensed retail shops ("wine stores") in the country as at 2011. Raids on illicit liquor dens, however, do not

divert the users to consumption of legally manufactured liquor because illicit liquor consumers are com-

pelled to consume the product that is affordable to them, within their buying capacity. There are also a few

large scale manufacturers engaged in distilling high strength illicit alcohol and selling watered down

products through established outlets, thereby denying a substantial revenue to government by way of loss

of excise duty and VAT.

Heavy taxes imposed on hard liquor has created a state-induced incentive to smuggle or produce tax

unpaid products. As a result,illegal alcohol production is on the rise in Sri Lanka, made with 'artificial

toddy' and spirits imported under the guise of making paint and baby cologne according to the industry

sources. Toddy that is rejected by the legal alcohol producers for not meeting quality standards were being

bought by the contractors to produce illicit liquor which could even cause health hazards among consum-

ers. Also, smuggled imported spirits are being used to produce imitated hard liquor. The paint industry

and baby cologne industry has increasingly become a façade for the importation of spirits in order to pass

through customs, while also becoming a front for the illegal manufacture and sale of liquor.

Industry sources say that alcohol is a sector where the island's elected ruling class is supposed to have got

involved in retail licensing and supporting large scale tax unpaid alcohol-making. Many retail licences

held by those connected to the above class are 'leased' to those who actually operate the premises,

industry sources say. Though small moonshine or 'kasippu' producers have always been a hallmark of the

sector, industry sources say that large scale distilleries - including those with licensed operations - that

produce tax unpaid products, usually operate with political backing. The country's illicit alcohol market,

which still accounts for half of the liquor market that narrowed down from 65 per cent market share in

201017 has potential to shrink further due to the growth in per capita GDP levels, expansion of distribu-

tion network for licit alcohol (ease of access) and increase in health awareness of alcohol consumers

though heavy excise duties would slow down the shift.

8. Patterns of Drinking

WHO estimates that there are about 2 billion people worldwide who consume alcoholic beverages. There

appears to be a clear convergence trend between drinking levels around the world. That is, countries with

historically higher levels of consumption including the European region are gradually consuming less per

capita and the traditionally low consumer countries in South East Asian Region including India and Sri

Lanka are showing consistent increases in consumption.

17 IPS estimate.

18


The demographics of the drinking culture also share global similarities. Around the world, on average,

women consume less alcohol than men and in most parts of the world adolescent drinking is becoming an

increasing problem as the drinking age for the initial drink has dropped.Such similarities include: (1) that

moderate and social drinking are clearly distinguished from alcohol misuse; (2) that alcohol-related prob-

lems are experienced by only a small minority of miscreants and not by a large majority of the population;

(3) there is no linkage between average alcohol consumption in a society and the prevalence of alcohol-

related harm; (4) the policies that restrict alcohol availability have become ineffective or counter-produc-

tive the world over.

Moderate drinking in appropriate circumstances presents little or no risk of harm to either the drinker or

society. Indeed, it is widely accepted that, in moderation, alcohol can provide both health and social

benefits. Alcohol misuse, on the other hand, can be very harmful to the drinker and society.

Harmful drinking is defined in International Classification of Diseases (ICD-10) as a pattern of drinking

that causes damage to physical or mental health. Episodes of depression are secondary to heavy consump-

tion of alcohol. The diagnosis requires determining that actual damage should have been caused to the

mental or physical health of using alcohol by the user.

Though there is currently no international overseeing authority regulating the consumption and produc-

tion of alcohol, there appears to be a global consensus reached regarding a range of policies adopted in

partnership between the respective governments, industry and interest groups in order to address the

potentially harmful effects of alcohol abuse without neglecting the economic benefits of the liquor indus-

try. The European region, North America and Australia are amongst the heaviest consumers of alcohol in

the world and seek to approach the issue on a comprehensive alcohol regulatory framework. This includes

a combination of formal legislation and voluntary guidelines which are broadly adhered to.

Sri Lanka's alcohol consumption depicts a strange and uncommon pattern when compared to the con-

sumption of the same the world over. The consumption of alcohol world over, mainly in the developed

world indicates that around 80 per cent consume soft alcohol like beer and 14 per cent consume wine,

while the consumption pattern of hard liquor or alcohols strong in strength seems to be negligible at

around 6 per cent. This shows an exactly opposite or strong dissimilarity to Sri Lanka's drinking pattern.

The statistics just go to prove that Sri Lankans, despite their low per capita income appear to be able to

afford liquors of all types. Best example is Sri Lankans' penchant for sipping imported foreign brews,

notwithstanding the increased local taxes and high cost of living.

According to a survey carried out by ADIC(Alcohol Drug Information Centre), 28 per cent of the total

population has used alcohol .Sector-wise ever use of alcohol both among males and females was more in

the urban sector. The percentage of ever use by males has been six times that of females.18 Alcohol plays

a large and important role in almost all social settings in rural and urban other than in Muslim settings.

Although there are two broad categories such as alcohol users and abstainers in Sri Lankan society, there

are more sub-categories such as occasional users, never users and frequent users that exist. The calculation

of money spent on alcohol enumerated in official household surveys seems to be underestimated as most

18 ADIC 2006, Alcohol, Tobacco and Other Drug Use. ResearchAbstract, Colombo.

19

Household Expenditure on Alcohol Consumption

of the cost of alcohol spent were on the way home and it was not divulged at household level nor was the

cost of alcohol spent for celebrations reported. The highest percentage of daily current users was in the

lowest income category and those addicted to illicit alcohol who drink quickly. One of the commonest

reasons given by Kassipu drinkers for drinking the same is that they did not develop any after effect, and it

is the only drink that they could afford. Compared to those who drink Arrack, no one who drinks Kassippu

takes it to the place of residence to drink.

Aggressive and drunken behaviour after the use of alcohol could be seen mostly in the estate sector, or in

the community where daily wage earners or labour grades congregate , as well as on festival days among

thr Sinhala and Christian communities. But this situation has seen a decreasing trend in recent times

which may be due to economic reasons. The most common reasons for consuming alcohol are for

happiness and to forget problems. Consuming alcohol to forget problems has led to addiction. Beer has

been consumed mainly due to peer pressure or social status.

9. Household Expenditure on Alcohol Consumption

Sri Lanka doesn't have a proper estimate of the percentages of heavy drinkers, moderate drinkers, and

occasional drinkers except for the findings in two sample surveys i.e., Household Income and Expenditure

Survey (HIES) of the Department of Census and Statistics, and Consumer Finance Survey (CFS) of the

Central Bank which provide only the expenditures on alcohol at household level.

Alcoholic beverage Income Group (average) One Month Income

0-300 301-600 601-1200 1201-1800 1801-2400 2401-3000 3001-4500 4501-6000

Toddy - - - 3.11 2.25 6.66 4.94 5.54

Arrack - - 23.43 9.45 12.11 15.33 14.49 25.85

Beer - 16.41 - - - 0.92 0.32 1.03

Whisky/Brandy/Gin - 25.24 1.88 0.92 4.63 - 1.17 0.66

Wine - - - - - - - -

Other ( Imported) - - - - - 0.67 0.56 0.23

Kassippu 6.33 3.53 35.78 7.96 22.12 22.70 29.32 39.08

Other Local - - 1.32 - 0.14 0.22 1.46 3.31

Total 6.33 45.18 62.41 21.44 41.25 46.5 52.26 75.7

Alcoholic beverage Income Group (average) One Month Income

6001- 7501- 9001- 12001- 15001- >30000 Overall

7500 9000 12000 15000 30000Toddy 8.23 7.73 6.63 6.27 5.76 - 5.84

Arrack 26.66 33.86 52.85 32.89 90.21 171.29 35.05

Beer 1.17 1.32 5.65 5.32 12.26 35.2 3.39

Whisky/Brandy/Gin 0.15 - 0.31 - 1.71 51.51 2.01

Wine - - 0.62 - - - 0.07

Other ( Imported) - - - - - 6.1 0.33

Kassippu 45.37 45.47 38.95 24.13 8.85 - 31.76

Other Local 0.54 0.53 3.1 2.66 0.28 - 1.54

Total 82.12 88.91 108.11 71.27 119.07 264.1 79.99

Table 9.1Average Expenditure for One Month on Alcoholic Beverage per

Spending Unit by Income Group

Source: Central Bank Consumer Finance Survey 2003/2004.

20


The Department of Census and Statistics in its Household Survey on Income and Expenditure in 2009

reveals more information on Monthly Average Expenditure on Alcohol as follows.

Average expenditure for one month on alcohol beverages per spending unit by income groups revealed that

among all income groups, spending is highest for Arrack (see Figure 9.1 above).

The Table shows that except for the lowest two income groups,all the other income categories spend more

on Arrack while the two lowest categories spend more on non-commercial kassipu. According to industry

sources, the percentage of alcohol users indicates that among the current alcohol users around 80 per cent

belong to the age group above 25 years. Also, among the users there are three categories namely, Daily

users, Few times a month and Special Occasion users. The majority of them are daily users and few times

a month users. Among them mostly drink hard liquor and beer. Those who abstain from consuming

alcohol have various reasons such as health hazard, family influence and obligation, moralistic and reli-

gious, and economic hardship.

Figure 9.1Monthly Expenditure on Liquor by Income Group-Rs.

Source: Central Bank Consumer Finance Survey 2003/2004.

Household Per Person

Toddy 11.60 2.92

Arrack 241.97 60.88

Kassippu 38.77 9.75

Beer/Stout 18.05 4.54

Whisky/Brandy 3.98 1.00

Gin 3.12 0.79

Wine 1.44 0.36

Othe Liquors 0.17 0.04

Total 319.10 80.08

Table 9.2Average Monthly Expenditure on Liquor by Household and by Person Rs.

Source: Department of Census and Statistics, Household Survey on Income and Expenditure in 2009.

21

Illicit Alcohol

In general for Sri Lankans, drinking provides a form of relaxation. For many who drink socially it plays an

important role in providing social networking with approximately 50 per cent of the respondents of those

drinking alcohol stating that their usual place of alcohol consumption is licensed premises, such as

restaurants and licensed liquor sale outlets.

Drinking patterns vary by age, race and income. The world over, alcohol is known as a male specific drink,

and in Sri Lanka too it is preferred by men in all strata of the population except perhaps by the urban elite

group. The gender gap in alcohol consumption is one of the few universal gender differences in human

social behaviour. In general, population studies throughout the world indicate that as compared with

women, men are more often drinkers, consume more alcohol, and cause more problems by doing so.

However, the size of these gender differences varies greatly from one society to the other.19

Fewer drinkers are found among the Muslim population. With the introduction of the "Clubbing" culture

among the Colombo elite society, there are reasons to believe that an increasing number of younger

women from this society are beginning to drink, but there is no survey data available to confirm this.

However this situation has taken a new trend with the conclusion of the North East war and it was

reported that the percentage of Sri Lankan females who consume liquor has gradually increased within the

last five years. The growth in tourism, rising income, changing perceptions and returning migrants would

be the key catalysts for growth in female drinking. Rural and urban low-income workers in the informal

employment sector are the primary consumers of Toddy and "Kassippu" or illicitly brewed alcohol. As

with other middle and high-income drinkers, their drinking habits are conditioned by price, quality and

prestige.

There exists a different drinking culture in the plantation sector. It is common for these estate workers to

buy quality hard liquor at the beginning of the month, when they receive their salary; to shift to the less

expensive "Kassippu" toward the middle and end of the month, when they have less money.The Plantation

Companies have revealed that in the plantation sector, among 25 per cent of women and 70 per cent of

men consume alcohol once or twice a week.

A most noteworthy feature of the drinking context is that in general, alcohol consumption among youth

has been found to be moderate or significantly low in the population, possibly due to various reasons such

as increasing level of education, awareness of harmful drinking, purchasing power or family responsibili-

ties tied to levels of living. There is considerable debate among researchers whether higher prices in

beverage alcohol, either through price differences or taxes, has resulted in a change in alcohol consump-

tion patterns, particularly for certain target at-risk populations, e.g., young people with harmful patterns of

drinking.

10. Illicit Alcohol

Although Sri Lanka's per capita recorded consumption of alcohol is at around 9.79 litres20 a year the

potential for growth in the market is constrained by the dominance of illicit liquor.

19 R. W. Wilsnack, N. D. Vogeltanz, S. C. Wilsnack, et al. (2000)” Gender Differences in Alcohol Consumption and Adverse Drinking Consequences: Cross-Cultural Patterns”. Addiction 95, 251–265.

20 IPS estimate 2010.

22


About 65 per cent of the total alcohol market in Sri Lanka is estimated to be illicit, with 30 per cent

consisting of legal hard liquor and just 5 per cent of beer. Beer remains the most expensive alcoholic

beverage, in marked contrast to the trend elsewhere, where the reverse is true, because of skewed excise

duties and highly restricted wholesale and retailing licensing and distribution systems.21

The industry contributed around Rs.16.billion in 2005 and Rs. 60 billion in 2012 on liquor as excise tax.

But the reality is that (excluding illicit alcohol), the state coffers do not receive the total taxable income on

liquor because a substantial amount of liquor produced within the country does not fall under the tax

bracket. This segment that deprives the government of revenue is known as the "illegal alcohol industry"

sector which sells liquor (High ABV) at the same price as the legal product and probably using the same

channels, but does not pay taxes. Though small moonshine or 'kasippu' producers have always been a

hallmark of the sector, industry sources say that there are large scale distilleries - including those with

licensed operations - that produce tax unpaid products and which usually operate with political backing.

At present, the illegal market is a sizable portion compared to the legal market and if infused into the

mainstream, the government can be assured of even more revenue which can in turn, be invested in much

needed vital sectors such as Education and Health .

It is in the hands of the authorities and the Excise Department's responsibility to devise a strategy to

monitor the production and sales of this non-commercial sector and claim the tax revenue due to the state.

Illicit alcohol goes by many names: Kasippu, Goda, and moonshine, local, illicit, or unrecorded alcohol.

It includes alcohol beverages that are not produced within a legal setting and are therefore not reflected in

official statistics, such as sales figures. Also, illicit alcohol is often not subject to the same standards of

quality and purity as its commercially produced counterparts. The lack of data about non-regulated alcohol

makes research into the drinking patterns around it difficult. There is currently a dearth of scientific

evidence about non-regulated alcohol, its production, consumption patterns, and related outcomes. High

taxation may lead to increased consumption of potentially dangerous kinds of non-commercial and illicit

beverage alcohol with higher safety and health risks.

As per ECG's report, during the year 2011 the Special Operation Bureau of the Excise Department made

a total of 48,056 detections of illicit liquor dens in which around 20,000 were in Colombo, Gampaha and

Kurunegala districts .The number of excise raids conducted by the Special Operation Unit in each year

reflect the size of the illicit alcohol industry in the market (Figure 10.1).

Raids of illicit liquor dens do not divert the users to consumption of legally manufactured liquor because

illicit liquor consumers are compelled to consume the product that is affordable to their buying capacity.

According to ECG in Colombo, " Thotalanga" is the central place where illicit alcohol trade thrives. This

location is the haunting place for over 10,000 manual workers engaged in work at the Colombo Port and

the receiving terminal flow of illicit alcohol from all directions. Kassippu traders control the lives of the

poorer community in the area. They provide jobs in the trade and spend money freely on the welfare of the

community. In Thotalanga it has been found that there are over 20 major outlets which are open 24 hours.

21 “Liquor Industry Suffers from Illicit sales “http://www.sundaytimes.lk/040411/ft/5.html.

23

Revenue from Liquor

Importation of spirits (Rectified Spirit and Ethynol) has become a boost to the illicit alcohol industry.The

Country is importing nearly 25 million bulk litres of rectified spirits for industrial purposes including the

production of Arrack, in addition to 7 million litres of local production. In recent times, ethyl alcohol

importation has taken the lead in such importation. The Government has banned the import of ethyl

alcohol which has a strength of more than 80 per cent. It was reported recently that the Customs seized a

stock of imported ethyl alcohol which had a strength of 96 per cent, which import amounting to 62,000

litres was valued at more than Rs. 110 million. The importer had declared to the Customs that the

consignment was for the production of paint. It was reported that a few large scale manufacturers have

been engaged in importing high strength spirits under the façade that those imports are for paints and

perfume industry,and diverting the same for distilling high strength alcohol, the watered down products

are then sold through established outlets thus denying a substantial revenue to the government by way of

loss of Excise duty +Vat.

11. Revenue from Liquor

"In 2012, the country's revenue declined to 13 per cent of GDP from 14.3 per cent of GDP in 2011,

mainly due to tax revenue declining from 12.4 per cent of GDP in 2011 to 11.1 per cent in 2012. Revenue

from VAT declined by 0.8 per cent of GDP in 2012 compared to 2011 (3.5 per cent to 2.7 per cent of

GDP)",22 "Fiscal deficit up 20 per cent as revenue fall. The relatively slower growth in imports and the

Figure 10.1Number of Excise Raids Conducted 2005-2011

Source: Commissioner General of Excise, Administration Reports 2005-2011.

Each outlet has a sale of a minimum of 100 bottles per day.The special feature in the trade is that among

every ten retail traders, on an average 7 are women. The Sales outlet is a partitioned area of the main house.

Customers drink their need in a few gulps and move out quickly.It was estimated that all women engaged

in the trade drink Kassippu.

22 P.B. Jayasundara .Treasury Secretary Tells Private Sector as Govt. Revenue Fallshttp://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=81999.

24



slowdown in import related domestic economic activities such as motor vehicle financing and leasing and

related business coupled with the decline in the consumption of cigarettes and liquor was reflected in the

revenue collection of the government during the first four months of 2013" the Treasury said in its Mid

Year Fiscal Position Report 2013.

The above two quotes emphasise the prevailing crisis situation in Sri Lanka's economy due to fall of the

fiscal acounts resulting from fall in revenue collection. In a situation of this nature, the fiscal policy

makers focus their attention toward liquor and cigarette taxation as an immediate rescue attempt among

other sources.

Tax revenue from liquor which was Rs.16 billion in 2005 increased to Rs. 60 billion in 2012 which is an

increase of 275 per cent during the period (Figure 11.1).

Source: Central Bank Annual Report 2011, 2012.

Figure 11.2Revenue from Liquor as a Percentage of GDP 2005-2012

Figure 11.1Total Tax Revenue, Excise and Liquor Revenue 2005-2012 (Rs. bn.)

Source: Central Bank Annual Report 2005-2012.

25

Excise Taxes

Although there is a significant increase in revenue from liquor annually, there is a decline as per GDP

ratio partly due to increase in GDP (Figure 11.2).

From time to time, government increased the tax rates to enhance revenue. Apart from the tax rates for

liquor, the most noteworthy increase was made in April this year in Corporate Tax Regime where prior to

April 2011 there was a uniform corporate tax rate of 35 per cent. This was changed in April with the

introduction of a 40 per cent tax rate for Alcohol Producing Companies,(as well as Tobacco companies)

while a 28 per cent rate was made applicable to all other companies.

With regard to revision of taxes on liquor, Sri Lanka is in the habit of adopting ad hoc revisions contrary

to the system that has been used by many other countries which used taxation as a tool to discipline

drinking culture. As an example, Table 12.2 indicates that tax rates for liquor was increased on ten

occasions during the 7 year period from 2005 to 2011.As an example,tax increase for Arrack was 122 per

cent during the period while the tax increase for Beer ( Alcohol +5%) was 120 per cent. Tax rates for all

alcohol was increased on three occasions in 2005 and repeated in June to November in 2010.As a

result,revenue from liquor was increased from Rs.28.5 billion in 2009 to Rs.36.6 billion in 2010,which

was a 28 per cent increase while the total alcohol consumption also rose from 127.6 million litres in

2009 to 148.2 million litres in 2010 which was an increase of 16 per cent. Since 2009 revision of taxes

could be viewed as mainly to exploit the renewed liquor sales in war affected areas as a result of the

opening of the alcohol market with the end of the war to meet the suppressed and denied demand for

alcohol. Also the period that the new tax rate was introduced in 2010 coincided with the preparation of

the annual Budget of the country.

12. Excise Taxes

Tariffs on alcohol imports and excise duties on local production have historically been a source of govern-

ment revenue, and this practice continues to be particularly important in many developing economies.23

Revenue from alcohol excise duties can potentially contribute to off-setting the economic impacts of

alcohol-related harm.24

Alcohol tax policy provides an opportunity to look beyond issues of government revenue, however the

evidence shows that governments can use their alcohol excise rates as a public health tool to reduce levels

of alcohol-related harm.25

Alcohol excise duties are typically imposed at the wholesale level, collected by Customs and Excise

Officers from importers and producers at the point at which products are about to enter the retail market.

Collection requires some form of registration or licensing of all producers or places of manufacture. The

recommendation in the global strategy for regulatory mechanisms in regard to production, importation and

wholesaling of alcohol is largely to facilitate these taxation procedures. In Sri Lanka, regulation at the

production level appears to be strongest in jurisdictions which formerly had a state monopoly at this level.

23 Narsey, W. 2003. The Inclusion of Alcohol and Tobacco Products in the PICTA. University of the South Pacific for the Pacific Forum Secretariat.,Fiji.

24 Room, R., 1991, “Drug Policy Reform in Historical Perspective: Movements and Mechanisms.” Drug and Alcohol Review 10: 37-43.25 Easton, B. 2003, Taxing Harm: Modernising Alcohol Excise Duties. Wellington: Alcohol Advisory Council, www.alcohol.org.nz.

26



The excise duty on spirits is typically higher because production costs in relation to the alcohol-by-volume

are lower than for other beverages.

The effect of price changes on alcohol consumption is described as the price elasticity of demand. It has

been shown in many countries including Sri Lanka that demand for alcohol is price inelastic. That is,

when the price of alcohol increases, there is a drop in consumption, but this drop is not large enough to

reduce the excise tax revenue (often a concern of governments).

Sri Lanka's alcohol tax system can best be understood as a constantly changing reflection of the constraint

in the current account of the National Budget. It also reflects the powers vested with the Treasury on

taxation at short notice.As a consequence, different products such as Arrack, Beer, Foreign Liquor, Toddy

and other liquors are taxed differently. The excise duties arrangements can generally be described as a

volumetric tax system, because the amount of excise duty depends on the volume of alcohol contained in

the particular product mainly for Arrack and beer. Wine and Foreign Liquor equalisation tax can be

described as an ad valorem tax system, because the rate of tax depends on the value of the retail selling

price of the particular product.

From the Sri Lankan context, given the complexity of the relationship between alcohol price and consump-

tion, increasing alcohol taxation does not necessarily lead to a linear reduction in the levels of alcohol

consumption. This is mainly due to the existence of cheap varieties of alcohol outside the normal alcohol

market process.

While increasing the price through taxation is likely to lead to a reduction in per capita consumption in the

short run,increasing the price of individual products may not necessarily achieve this goal. In some cases,

product-based changes can create opportunities for new products and drinking patterns to emerge. As an

example, in the Sri Lanka beer market, producers have introduced two varieties of beer such as beer with

less than 5 per cent Abv and Beer with Abv above 5 per cent which are sold as strong beer in the market.

In this context, it is important to recognise that the production costs of alcohol products vary considerably

between product types (e.g. spirits are relatively inexpensive to manufacture compared to beer and wine

products) which in turn has a bearing on the cost price to consumers.

Excise taxes are indirect taxes on the sale or use of specific products or transactions. The tax is often passed

on to people and organizations that purchase particular products or services. A tax based on the alcohol

content in a product is an excise tax; other examples of excise taxes on products include tobacco, energy

(oil and gas taxes), and waste (trash containers). Unlike value-added taxes and sales taxes, excise tax is

usually not a function of the value of the product being taxed, but rather a fixed rate tax or specific tax,

expressed as a monetary amount per quantity, not value, of the product. Exceptions to this general rule

exist in cases where a government taxes either the value of the product or both the quantity and the value.

Excise taxes usually have one of two purposes, either to raise revenue to the government and/or to

discourage particular behaviour. In Sri Lanka the former gets the priority.

Excises on particular commodities are sometimes earmarked, that is pledged for a particular purpose rather

than for general revenue. In some countries, excise taxes on beverage alcohol are used to pay for health

care, alcohol abuse preventive programmes or treatment for alcohol addiction.

27

Excise Taxes

Taxes such as those on fuel, alcohol and tobacco are often justified on both grounds. When used to modify

consumption patterns, excise taxes, as well as variations in excise tax rates, are aimed at limiting the use

of products and services (for example, the proposed carbon fuel taxes have been introduced as a means of

conservation or limiting harm to the environment) or at discouraging their use or misuse on the basis that

they could potentially pose a risk to someone's health (for example, cigarettes). Beverage alcohol excise

taxes are used both to discourage consumption, relative to non-alcoholic drinks, and to modify drinking

patterns, relative to alcohol products with a lower percentage of alcohol by volume.Excise taxes are

considered a regressive form of taxation because everyone, regardless of income level, pays the same

monetary amount for the product or service. The burden of such excise taxes typically falls more heavily on

the lower-income population who pay a larger percentage of their income than the higher-income popula-

tion. Much of the research literature on levels of excise taxation on beverage alcohol notes that excise tax

rates are infrequently increased, not indexed to inflation, and thus over time the result is an overall decline

in revenue value which the tax generates. In some countries, there are regular adjustment changes in excise

tax rates on beverage alcohol. But the consumers point of view of that Sri Lanka's excise tax on alcohol

appears to have reached excessive levels can not be altogether rejected.

In Sri Lanka, like in most other countries, beverage alcohol -- beer, wine and distilled spirits like Arrack- is

subject to taxation, mostly as an excise tax. There are other taxes paid associated with beverage alcohol

manufacture and consumption e.g., corporate income taxes, Licence fees, Value added sales taxes, but

these will not be addressed in this report.

Excise taxes are levied by the central government. The excise taxes are generally passed on to consumers in

the form of higher prices, putting downward pressure on consumer demand. Who bears the cost of the tax

is determined by the price elasticity of demand for the good. For more inelastic goods, like cigarettes and

gasoline, almost all of the tax is paid by the consumer. For beverage alcohol, there is considerable debate

regarding the substitution between alcohol and non-alcoholic drinks sectors as well as between categories

within the beverage alcohol sector (e.g., Arrack, beer, and illicit alcohol). However, governments used

taxes on beverage alcohol mainly to generate revenue and not as an attempt to reduce abuse and harm by

making alcohol less accessible or to encourage the purchase of domestic product over imported products.

Today alcohol plays a key role within the leisure and tourist industry that accounts for a substantial section

of Sri Lanka's economy. According to the supply and demand theory, (when all other things being equal),

increases in the price of alcohol should lead to an overall reduction in consumption, and decreases in price

should lead to an overall increase in consumption. In the case of Sri Lanka, rapid fluctuation in demand for

alcohol against the price factor seems to be not the same as the theoretical model. As an example, in 2002

when the government reduced beer prices,there had been an increase in consumption of beer but the hard

liquor consumption didn't decrease. For this reason, it was evident from the past that taxation and other

measures of influencing the price of alcohol will have an insignificant effect on the consumption pattern

or on modifying consumption.

To reduce the distortions produced by the current taxation system, an attempt has been made here to

introduce a tiered volumetric-based excise system based on alcohol content. The introduction of such a

system cannot be challenged by mid and high strength liquor producers as the per capita consumption of

pure alcohol of high strength liquor account for 0.79 proof litres compared to 0.12 proof litres of pure

alcohol consumption of low strength alcohol.

28



A volumetric alcohol taxation system would enable all alcohol products, regardless of type, to be taxed

according to alcohol content under an expanded excise system. For example, the excise rate applying to

low and mid-strength alcohol would also apply to foreign liquor products with the same alcohol content.

Extra excise tiers could be added to accommodate higher rates for any products that fall between 3.5 per

cent and 10 per cent alcohol per volume. Similarly, additional excise tiers could be added for alcohol

products with greater than 10 per cent alcohol per volume. There is likely to be considerable opposition to

this suggestion from the high strength liquor industry and much of the Arrack industry. In this context,

market experience in 2002 by reducing beer prices is worth a revisit. On the other hand, our observation is

that there is a non-linear relationship between the alcohol tax rate and tax revenue. As an example,

increase in tax for Arrack will not relatively improve the consumption of beer. Instead, more Arrack users

will shift to consume high strength illicit product at a lesser cost. Somewhere in between these two

extremes there will be a rate that maximizes revenue. Increasing the tax rate from zero will lead to

increases in revenue, but only up to a certain limit determined by ability to pay (APL).Cutting duty will

lead to a fall in total revenue because the revenue loss on each unit sold outweighs the gain from increased

sales. If the tax rate is at a maximum, cutting duty will lead to an increase in revenue due to increase in

sales. When the tax rates are at maximum, the loss per unit sold from a reduction in the rate is outweighed

by the gain from increased sales.

In the case of the prevailing alcohol market in the country, the relationship between the tax rate and tax

revenue depends on total expenditure on household goods, the current tax rates and how responsive

consumers are to a change in the price of alcohol (the price elasticity of demand). If beer and Arrack are not

complements to each other, then when the price of Arrack falls (following a tax cut) people will buy more

Arrack and there will be an increase in revenue from Arrack, so we are more likely to see an increase in

total tax revenue following a tax cut on Arrack.If beer and Arrack are substitutes for each other, a fall in the

price of beer will lead to an increase in sales of beer but a fall in sales of Arrack. The result would be a fall

in revenue from Arrack, so we are less likely to see an increase in total revenue following a tax cut on beer.

The responsiveness of demand for one good with respect to a change in the price of another good is called

the cross-price elasticity of demand. Also important for the total revenue effect is the rate at which the

complement or substitute is taxed. The more heavily the complement or substitute is taxed relative to the

good itself, the more likely the change in revenue from the complement or substitute will outweigh any

opposite effect on revenue from the good itself. This is because, for a given change in demand, the higher

the tax rate, the greater the change in revenue. In overall,we find that the duty rate on Arrack and Beer is

almost at an unaffordable level for an average consumer and prevailing economic situation and the stress

on household income level provide little scope for them to continue mainly on Arrack and beer continu-

ously without harming the sustainability of the family values, education of children employment and

cultural values.

It is also not reasonable to raise the prices of alcohol which simply accrued to general revenue instead of

a progressive taxation approach of using some of the revenue, if not all, of such taxes to develop programmes

to prevent and limit the harm associated with alcohol consumption. Public displeasure against resulting

price increases may be alleviated by the funds being allocated to prevention strategies at least.

In many countries, alcohol taxes have mainly risen apace with inflation and along with the prices of other

commodities. In Australia, wine has had taxes linked directly to the cost of manufacture and the retail

29

Excise Taxes

price. Beer and spirits have been taxed principally by excises calculated as rates per litre of ethanol that

rise with the cost of living.26 (Ethanol, also called ethyl alcohol, pure alcohol, grain alcohol, or drinking

alcohol, is a volatile, flammable, colourless liquid. It is a somewhat potent psychoactive drug, best known

as the type of alcohol found in alcoholic beverages and in modern thermometers).27 From the Sri Lanka

context, this is a point to ponder.

Existing taxation on alcohol in Sri Lanka has some serious shortcomings that impact adversely on high-risk

sub-sets of the population mainly of the poorer sections. Table 9 below gives the trend in taxation over the

years. The rapidity of frequency in increasing taxes, and the affected sales prices is likely to be one

dominant factor underlying the increase in consumption of illicitly brewed alcohol and related harm. In

this context, it is to be noted that while maintaining the commercial interest in the alcohol trade, the

governments' policy should be to pursue actively programs including those to curtail sale of liquor to

minors, smuggling and illegal production, initiatives related to risks associated with being drunk and

driving. But Sri Lanka's experience until recent times was that the above mentioned issues were not much

of concern , but a range of initiatives was directed at increasing the state revenues, which tend to be linked

to a higher sales volume.

In Sri Lanka,there was no evidence that the real price of alcohol declined until 2002, when excise duty

under the Excise (Special Provisions) Act on beer (10 per cent) and on liquor (30 per cent) was removed and

all excise taxes on liquor brought under the Excise Ordinance. In order to recoup the revenue loss, excise

duty rates were adjusted by reducing taxes by Rs. 5 per bottle. As there was no increase in Excise Duty for

soft liquors, the tax on beer was substantially reduced. In Sri Lanka, liquor prices have never kept pace with

fluctuating consumer prices of other products mostly demanded. In some countries especially in the

United States, alcohol prices have kept pace with disposable income or consumer prices.

While there have been numerous changes to the alcohol taxation system over the years, many have been a

result of government burden of deficit financing rather than responses to public health concerns. There has

never been a positive change in taxation and pricing policies to create a national excise scheme for taxation

of liquor and correct the anomaly which has resulted in the expansion of illicit and illegal alcohol manu-

facturing and trade.

A volumetric alcohol taxation system would enable all alcohol products, regardless of type, to be taxed

according to alcohol content under an expanded excise system. For example, the excise rate applying to

low and mid-strength alcohol would also apply to foreign liquor products with the same alcohol content.

Extra excise tiers could be added to accommodate higher rates for any products that fall between 3.5 per

cent and 10 per cent alcohol per volume. Similarly, additional excise tiers could be added for alcohol

products with greater than 10 per cent alcohol per volume. In this context, it will be useful to look at

alcohol taxation and its effect on final prices in UK.

Two indirect taxes are charged on alcohol in the UK. All alcohol is subject to the standard rate of Value

Added Tax (20 per cent). In addition, excise duties are levied at different rates according to the type of

26 www.ato.gov.au.

27 http://en.wikipedia.org/wiki/Ethanol.

30



Date of Change Wine 5.5-15% Sprit 37.5% Beer 1 % Abv Beer 4% AbvAbv 75 cl Bottle 70 cl Bottle per Litre per Pint

1/4/2000 1.16 5.13 0.12 0.17

13/04/03 1.19 5.13 0.12 0.28

21/03/04 1.23 5.13 0.12 0.29

20/03/05 1.26 5.13 0.12 0.29

26/03/06 1.29 5.13 0.13 0.3

26/03/07 1.33 5.13 0.13 0.31

17/03/08 1.46 5.6 0.15 0.34

01/12/08 1.57 5.83 0.16 0.37

23/04/09 1.61 5.94 0.16 0.37

29/03/10 1.69 6.25 0.17 0.39

28/03/11 1.81 6.7 0.18 0.42

26/03/12 1.90 7.04 0.19 0.44

25/03/13 2.00 7.41 0.19 0.43

Table 12.1UK Excise Duty Rates from 2000-2013 British Pounds ( £)

Source: Facts and Figures :Wine and Spirit Trade Association. UK, http://www.wsta.co.uk/excise-duty-rates.html

alcohol. Duty on beer and spirits is charged at different rates according to alcoholic content. The rate of

duty on wine is applied to the volume of wine and the same duty rate is applied to wine within a range of

strengths. See Table 12.1 above.

The data in Table 12.1 indicates that the per cent duty rate for spirit had been increased by 44 per cent to

7.41 Pounds in 2013 from 5.13 Pounds in 2000. With regard to Beer, increase in duty rate during the 11

year period is 58 per cent for Beer with alcohol 1 per cent of Abv, and 150 per cent for beer alcohol of 4

per cent abv or above. The special feature of duty on Beer in UK is that the price has remained below I

Pound per unit sold during the period.

Table 12.2 below indicates that in Sri Lanka tax rates for liquor were increased on ten occasions during the

seven year period from 2005 to 2011.As an example, the tax increase for Arrack was 122 per cent during

the period while the tax increase for Beer (Alcohol +5%) was 120 per cent.Tax rates for all alcohol were

increased on three occasions in 2005 and repeated the same during June to November in 2010.In UK,the

revision of taxes has taken place only once a year except for the two increases in 2008.During the period

Table 12.2Sri Lanka Tax Rates on Liquor 2005-2011

Type

Date Jan. 05 Nov.05 Dec.05 Oct.06 Oct.07 Oct 08 Mar.09 Jun.10 Oct.10 Nov.10

Arrack Rs/Proof Lit. 366 381 396 421 510 560 610 660 710 813

Beer (Alcohol -5%) Lit 27.50 32.50 37.50 37.50 38 48 48 58 63 80

Beer( Alcohol+5%) Lit 43.50 48.50 53.50 53.50 54 64 64 74 79 96

Foreign Liquor Lit 500 525 550 640 690 690 740 790 840 953

Source: Excise Commissioner General’s Administration Reports Various Years.

31

Excise Taxes

of 13 years from the year 2000 to 2013,there had been only 13 tax rates increases. Also, in UK it appears

that year to year increase has been marginal and the rate of tax increase for spirit has been higher than that

for Beer . When one looks at the Table 12.1 about the different tax rates for Beer and Spirit, the objective

of tax revision has not been the enhancement of revenue for the exchequer which is the reverse in Sri

Lanka's case. As an example, Table 12.2 shows that in terms of duty per litre of pure alcohol, spirits are

taxed more than 500 per cent more heavily than beer.

In setting excise tiers it would be prudent to ensure that the higher tax bracket for very high alcohol

products, such as undiluted spirits, is not reduced. The advantages of the present volumetric alcohol

taxation system for Arrack and Beer are numerous. It would provide a clearer option for consumers who

wish to choose products with lower alcohol content. In this context, Arrack producers need not fear about

their market because Sri Lankans, however economically burdened they may be, have demonstrated

resoluteness in being able to afford liquors of their choice, especially Arrack. And also, it would help

Arrack manufacturers to introduce mild versions to meet such demand to the satisfaction of the users. The

Table 9.1 shows that except for the lowest two income groups, all the other income categories spend more

on Arrack while the two lowest categories spend more on non-commercial kassipu. It shows that the

demand is inelastic among categories mainly in those who are patronizing Arrack.

There is considerable debate among researchers whether higher prices in beverage alcohol, either through

price differences or taxes, result in a change in consumption patterns, particularly for certain target at-risk

populations, e.g., young people or populations with harmful patterns of drinking.

In Sri Lanka's context, studies have shown that in the case of Arrack, price elasticity is in the range of -1.0

and zero which indicates that demand is relatively unresponsive to price (price inelastic). This was amply

demonstrated in 2004 when excise duties on malt liquor of less than 5 per cent of absolute strength and

more than 5 per cent of absolute strength were increased by Rs. 22.50 and Rs. 38.50 per litre, respectively.

Excise duties on molasses, Palmyra, coconut and processed arrack were increased to Rs.351per proof litre

while Excise duty on country made foreign liquor was raised to Rs. 470 per proof litre. With these upward

revisions, the government was able to collect Rs. 17 .5 billion as Excise duty as against Rs. 13.5 billion in

2003. The revenue increase amounted to 30 per cent.

Also,at present the existing tax rate has promoted beer producers to encroach on the market with strong

beer at lower prices. If maintained uninterrupted, it would promote the production of low alcohol

products, raise the comparatively low priced bulk products, continue to generate high levels of govern-

ment revenue, save government expenditure on alcohol related problems, and would be administratively

simple and transparent to apply.

In setting rates to reflect the alcohol content of different beverage types, alcohol excise duty scales should

be graduated as finely as practicable. A scale based on steps of alcohol content that are too broad may

encourage changes in production to fit a product into the top end of a lower taxed band, resulting in a

cheaper price in relation to alcohol content. This is what happened in Sri Lanka where a new category of

Strong Beer was created by a manufacturer to fit within the tax bands of ABV + 5 %.

32


12.1 Tax on Unrecorded Alcohol

The effectiveness of raising alcohol taxes to reduce alcohol-related harm may be undermined by a possible

increase in illegal,illicit or unrecorded alcohol production.. The risk of this varies among towns and cities.

Most of these locations in the country have some level of unrecorded illicit alcohol production. Many

areas in the rural and urban countryside have indulged in producing illicit alcohol locally, some of which

is fermented and some distilled. There are issues in regard to quality and toxicity, particularly as this

informally produced alcohol is increasingly for sale rather than for personal use. The existence of a wide-

spread informal alcohol market threatens the viability of some of the more effective policy interventions

of taxation and control of availability. In some countries with high levels of informal production, attention

is being given to bring this alcohol under regulation and taxation. Mongolia is currently doing so with a

programme of quality inspection and accreditation. Bringing home production under regulation may re-

duce the number of producers, or it may encourage producers to move up to a commercial scale.

The illicit manufacturers are not making a sizable intrusion to the legal alcohol trade compared to the few

large scale manufacturers engaged in distilling high strength alcohol and selling watered down products

through established outlets under the guise of legal alcohol. Subsequently, the revenue lost to government

by way of decreased revenue from lost sales of legal alcohol plus the revenue losses from sales of non-taxed

illegal alcohol Excise duty +Vat is projected at around Rs.70 billion.28 This is a parallel illegal industry

which has ventured into producing popularly named alcohol from spirits which they acquire in the guise

of inputs for other industries. These products are sold through the licensed wine stores. This illegal alcohol

is peddled to the market with almost identical labels of the most 7 popular brands. Labels are almost the

same in appearance and the manufacturer's name is printed in minuscule size to avoid conviction under

trade mark legislation.

13. Need of a Comprehensive Alcohol Policy

The growth of trade agreements and common markets and, more generally, the processes of globalization,

have substantially weakened governments' ability the world over to use some of the most effective tools

to prevent and reduce alcohol-related problems as appropriate in their own cultures.

It is believed that Western Europe, Australia and Canada have somewhat succeeded in reaching positive

responses for revision of alcohol policies implemented in recent times. Many of these countries have

achieved positive results by modifying the drinking pattern from hard liquor to soft liquor. The primary

objective of these modifications are health concerns of the drinking population and reducing of drunk

driving catastrophes .Sri Lanka's regulations or policies related to alcohol consumption, sales and produc-

tion are an anomaly from the global best practices where Sri Lanka's tax rates and other pricing policies on

alcohol introduced from time to time without considering the implications, has contributed to an un-

healthy drinking society plus inflicting economic hardships for the poor households.

The world best practices which focus on the health and social problems for those around the drinkers are

at least as important as the problems for the drinker himself or herself. The impact of the harmful use of

alcohol on others besides the drinker is a very strong argument the world over for taking effective action to

28 IPS estimates.

33

Need of a Comprehensive Alcohol Policy

reduce the burden of alcohol problems. Sri Lanka's position in this regard is more ambiguous because the

revenue accumulation from liquor and tobacco has different priorities. Therefore, it could be argued that if

there is any element that initiate a viable action plan to reduce the consumption of alcohol, it will not

receive the necessary state patronage. The best example in this connection is that the government initiated

"Mathata Thitha" introduced in 2005 was flagrantly violated by the same source by issuing more licences

to open up liquor sales outlets (mainly as political favours) (Table 13.1). Registration of more

bottlers(manufacturers), inaction by authorities to charge the importers of spirits in violation of Custom

regulations are a few among other misdoings undermining the government sponsored programme.

From the Sri Lankan context, given that drinking customs and habits are deeply rooted in the multi-

ethnic,multi-religious and economically unequal population, effective actions to prevent or reduce the

harm caused by alcohol consumption will require the development and application of evidence-based

recommendations and strong political commitment. Building up public support for effective alcohol

policies is thus an important part of public health action on alcohol. In this instance, alcohol policies and

implementing actions should be based on the best scientific evidence about the effectiveness and cost-

effectiveness, and should be sensitive to the cultural and economic diversity of the population. In the face

of increasing levels of cross-country illicit alcohol trade and price differences in licit and illegal

alcohol,provincial and local governments including Pradesiya Sabha level solutions to the problem should

be explored because mainly the Pradesiya Sabha has been identified as the breeding sources for illicit

alcohol.

As there is a reduction of alcohol consumption among youth in the country, they are important resources

for changing existing harmful drinking cultures and patterns. They should be better mobilized and empow-

ered to participate in shaping their own environments, as well as in changing the harmful attitudes and

practices of wider adult society.

In addition, the alcohol industry and associated businesses and organizations have a primary role in

ensuring that the production, distribution, and selling of alcoholic beverages meet the highest possible

standards of business ethics. Sri Lanka never had any pragmatic alcohol policy with a concerted action plan

beneficial to the society.Since independence in 1948, successive governments have followed the same

pattern of taxation as a policy tool. In 1998, Sri Lanka attempted to formulate a National Alcohol Policy

but implemented piecemeal legislation such as a ban on advertising on TV and radio while nevertheless

Table 13.1Number of New Liquor Licences Issued 2005-2011Year Number of New Liquor Licences Issued

2005 132

2006 35

2007 42

2008 36

2009 40

2010 51

2011 41

Total 377

Source: Commissioner General of Excise, Administration Report, 2011.

34


allowing liberal imports of alcoholic beverages.Under the Mathata Thitha concept of Mahinda Chintanya

vision of 2005, it implied restriction of alcohol consumption although there had been no clear target or

designed programme or timeline for implementation.

To support the Mathata Thitha concept, two important Bills were ratified in recent times in Parliament in

connection with prohibition of sales and consumption of liquor within a radius of 1 km of the places

where young adults congregate, and prohibition of liquor within a radius of 1 km of the location of

religious places. Although there had been no clear target or design of implementation, the Mathata Thitha

concept is directed towards a total avoidance of alcohol consumption. However implementation of the

above policies experienced a lackadaisical approach and it was reported that there has been no genuine

interest to implement the policy fully. There are taverns in close proximity to schools and places of

worship still. Although a lesser number of liquor permits have been issued, it is well known that many

government parliamentarians have sold their liquor permits to make money while some operate their own

retail outlets. Among the policies that were introduced from time to time was prohibition of sales of

liquor on Poya Days which could be identified as the most flawed alcohol policy introduced in the

country. It has been seen that the day prior to the "Poya Day" has experienced a busiest trading of liquor

in retail outlets and supermarkets throughout the country, while" Poya Day" has becomes the most busiest

sales day for illicit liquor.

When one reviews the history of alcohol related policies the most far reaching policy related to alcohol

was introduced by the former Finance Minister late Dr. N. M. Perera in 1970, who took a keen interest in

the development of the toddy industry. He allowed households to tap their own coconut trees to produce

toddy after paying a licence fee.As a result there was a significant development in the toddy industry. He

introduced the EPF and a life insurance scheme for the people who were involved in the toddy tapping

industry. This helped to stop importing foreign spirits, earn an additional income to households and

helped to keep the price of toddy at the optimum level. He started a new school to train people for this

industry. This policy was withdrawn in later years when he left the coalition government.

The WHO Status Report on Alcohol Policy notes that in some countries it is "official policy of the pricing

system to steer people towards a particular type of low-alcohol or non-alcoholic beverage, in order to

substantially reduce risky or high blood alcohol levels." This corresponds well with Mahinda Chinthanaya

vision of the Mathata Thitha concept but it was undermined by the policy of increasing the state revenues

from liquor taxation linked to a higher sales volume of legal alcohol and thereby curbing of increase in

high per capita consumption of alcohol has received mild attention and is not of serious concern . Outlet

density in given jurisdictions according to enacted government regulations has been more a function of

political decision rather than the economic distribution.

The need for intensified action against the illicit liquor menace has now become urgent in view of the

increasing problems it causes in all spheres of activity in the country. The increased nature of these

offences could be attributed to the increased drinking habit of cheap alcohol and the inaction of intensi-

fied vigilance on the part of the law enforcement mechanism. Whatever the reasons, the grave threat posed

to public safety such as drunken driving and other offences mainly violence against women committed

under the influence of liquor have to be viewed with seriousness.

35


13.1 Regulating Physical Availability

Regulating physical availability refers to restriction accessibility of alcohol products to the consumers,

articulated by the policies that aim to prevent alcohol-related harm through conditional sales to the drinker

as a retail customer. Physical availability rotate around four areas, such as (i) minimum legal drinking

age, (ii)licensing of alcohol retail sales,(iii) outlet densities, and (iv) hours and days of sale.

There are two main supply side levers, price and availability, which can be used to influence alcohol use

and misuse. Physical availability refers to the likelihood that individuals will come into contact with

opportunities to obtain alcohol in their local or the nearest environment. It has been well established that

manipulating any of the main aspects of physical availability (outlet density, outlet trading hours, sales to

minors and service to intoxicated customers) causes changes in patterns of alcohol consumption and

alcohol-related harm. The ability to control or manipulate physical availability is one of the most signifi-

cant powers at the disposal of governments which was not practised in Sri Lanka in a prudent way due to

political pressure. With the exception of "Mathata Titha"experiment with avoidance, policy makers gener-

ally have taken more moderate approaches to regulating the availability of alcohol.

Restrictions on density of outlets can be achieved by requiring minimum distances between outlets or

limiting the number of outlets in a particular location. Liquor licensing systems or planning can be used

to limit the number of places where alcohol can be sold. The links between outlet density and other

outcomes are less clear cut, although some international evidence suggests that higher outlet density is

related to higher rates of: risky alcohol consumption,29 motor vehicle accidents,30 risky sexual behaviour,31

and pedestrian injury.32 There is good evidence that certain outlets contribute disproportionately to prob-

lems, highlighting the need to further examine the types of outlets that are related to violence. Further data,

such as alcohol sales, opening hours, capacity and venue style, could provide substantial insights into how

different outlets contribute to the effect of outlet density on violence. Especially this situation was amply

demonstrated in Colombo style living where many assault cases were reported in Karoaka Clubs, Other

Clubs and Restaurants in the heart of the city in the night where siblings of politicians were involved.

It is often said that alcohol consumption tends to be higher in areas with a high concentration of liquor

stores and other alcoholic beverage sales outlets. This observation was followed by a call for reductions in

the density of such outlets as a way to reduce alcohol consumption and banning of alcohol outlets within

one km radius of religious places.The two controversial Bills that were ratified in Parliament (2006)

relating to the control of the sale of alcohol for young adults, banning of advertisement, and maintaining

an alcohol free I Km distance from religious places didn't contribute to the desired objective of reducing

the normal consumption pattern.

In the backdrop of free market principles that exist today the world over, the outcome for alcohol policy is

that there has been a move to reduce state control and greater reliance on market forces. This has made it

29 Weitzman, E., A. Folkman, K. Folkman and H. Wechsler, The Relationship of Alcohol Outlet Density to Heavy and Frequent Drinking and Drinking-relatedProblems among College Students at Eight Universities. Health Plac, 2003; 9:1–6.

30 Gruenewald, P. and W. Ponicki, The Relationship of the Retail Availability of Alcohol and Alcohol Sales to Alcohol-related Traffic Crashes. Accid Anal Prev.1995; 27.

31 Cohen, D., B. Ghosh-Dastidar, R. A. Scribner, A. Miu, M. Scott and P. Robinson, Alcohol Outlets, Gonorrhea, and the Los Angeles Civil Unrest: ALongitudinal Analysis. Soc Sci Med 2006; 62.

32 LaScala, E. F. Johnson and P. Gruenewald . Neighbourhood Characteristics of Alcohol-related Pedestrian Injury Collisions: A Geostatistical Analysis. PrevSci. 2001; 2:123–34.

36


increasingly difficult to deal with population level alcohol problems by means of state policies and

regulations. It was also reported that with the conclusion of the North East war that the para-military

outfits too have engaged in manning liquor sales outlets in the said areas and engage in selling liquor

including on Poya Days. This situation has promoted the opening of unlicensed liquor sales outlets with

or without the knowledge of the law enforcement authorities. While the society as a whole has got

adjusted to the situation of closure of liquor outlets on Poya Days, it is totally inappropriate to close them

for one whole week during Wesak and for a number of days during New Year and Christmas. Such

excessively restrictive measures have supported and encouraged illegal activities in liquor trading and

consumption.

There has been a substantial proliferation of illegal liquor outlets in most parts of the country combined

with a steady progression towards the opportunity to sell illicitly brewed alcohol. The increase in the

number of liquor outlets has, in the main, been towards smaller eating houses that provide food and

usually more illegal Arrack.

Recommendations to overcome this situation suggest a careful screening of the existing licence holders to

decide who should be awarded renewal of licences.

In terms of controlling of illegal liquor sales outlets and selling of illegal alcohol in licensed outlets, liquor

licensing regulations have not yet been fully enforced by the excise law enforcement authorities due to

pressure from political patronization, and corrupt practices of the officials. There is ample evidence from

the world over i.e., Australia, Canada, New Zealand, USA and UK, that increased consumption and harm

due to availability of illicit alcohol in the communities had been countered by improving public health

and safety through effective liquor licensing regulations. In Sri Lanka, Excise Regulations are aimed at

mostly on sales of legal alcohol and raiding of Illicit liquor dens, but due prominence for improving public

health and safety had been neglected. In this regard it is recommended that licensing regulations be

reformulated to safeguard the health and safety of the patrons with the active participation of the commu-

nity, including religious bodies.These are vital institutions that can help to create an aggressive awareness

of the anti-social aspect of retailing and consumption of illicit brews and improving public health and

safety through effective community awareness programs.With the community participation, not only is-

sues related to the public health and safety but other issues such as the number, location and density of

allowable liquor licences, controls relating to the hours and days in some rural and remote communities

should also be of concern.

13.2 Modifying the Drinking Context

In selecting alcohol policies, stakeholders must decide how to encourage some behaviours and discourage

others, while maintaining what they perceive as an appropriate balance between state and individual

responsibility. The relationship between drinking and outcomes is complex. Traditionally, the extent of

drinking in the population has been measured by the average amount of alcohol consumed per person in

a country or per capita alcohol consumption commonly derived from sales, production, and taxation

statistics which were discussed in earlier pages.

Per capita consumption measures are a convenient way of collecting relevant data and are useful gross

indicators of drinking in the population. However, they do not capture the myriad ways in which individu-

37


als drink. To get a better understanding of drinking among individuals and groups, the harms and benefits

that may accompany their drinking, and interventions likely to minimize harm, it is necessary to under-

stand the patterns of drinking. These comprise a number of facets: the quantity of alcohol consumed per

occasion; types of beverages being consumed; the duration and frequency of drinking; the characteristics of

individual drinkers; the settings in which drinking takes place and activities that accompany drinking. It is

established that moderate or low alcohol consumption may have a protective role for certain diseases,

such as cardiovascular disease, ischemic stroke, and diabetes.Also knownbut less noted is the broader

benefit of drinking-its positive contribution to individual and social well-being.

Drinking behaviours are diverse and vary not only from country to country, but also between areas within

countries, between social groups, and across different time periods. The choice of policies and interven-

tions to reduce alcohol-related harm and the resources available for their implementation are influenced

by social, cultural, political, religious, and economic factors. Therefore, policies should be designed in the

context of the available resources and cultural climate-but they certainly cannot be implemented to seek

political popularity from extremist elements. Selecting the interventions that are right for particular

populations,requires getting beneath the data on the overall level of alcohol consumption and calls for

detail assessment of drinking practices in different set- ups and occasions for identification of behavioral

issues which need to be looked at.

Various studies have found the potential beneficial health effects of moderate alcohol consumption.

Furthermore, they have all convincingly found that these benefits are linked with all types of beverage

alcohol - spirits, beer and wine - not just red wine as is commonly misperceived. All these studies

recommend that 'people who choose not to drink alcohol should not be urged to drink to gain any

potential health benefit and should be supported in their decision not to drink'.

Strategy of modifying drinking habit is an important step in encouraging individuals to act responsibly.

This involves, making sure that they understand the potential risks of irresponsible drinking and alcohol

misuse, recognizes that there are both benefits and costs to alcohol use and, therefore, does not aim to cut

alcohol consumption by the whole population. Instead, it focuses on the prevention, minimization and

management of the harm caused by alcohol misuse.

According to the interviews carried out by the IPS researchers by interviewing a cross- section of stakehold-

ers, the segment of the population that drinks heavily and cause and experience substantial alcohol related-

problems is small.Unlike in other developed countries, Sri Lanka doesn't have a proper estimate of the

percentages of heavy drinkers, moderate drinkers, and occasional drinkers except for the information pro-

vided in two sample surveys i.e., Household Income and Expenditure Survey (HIES) of the Department of

Census and Statistics, and Consumer Finance Survey (CFS) of the Central Bank which provide only the

expenditures on alcohol at household level.

A most noteworthy feature of the drinking context in recent times is that in general, alcohol consumption

among youths has been found to be moderate or significantly low in the population, possibly due to

various reasons such as increasing level of education attainment, awareness of harmful drinking,limited

purchasing power or family responsibilities tied to levels of living.

38


Alcohol-related violence, particularly in licensed drinking environments with facility to 'serve from open

bottles or serve by glass' is a perennial issue.

Self-regulation of licensed drinking venues has been shown to be ineffective and intelligence-driven polic-

ing is recommended, because it has been found repeatedly that licensed retail outlet venues with drinking

facilities deprived patrons' expectations, and are susceptible to incidents of alcohol-related harm. Accord-

ing to the existing Excise Law, wine stores or liquor sales outlets are prohibited to sell liquor from open

bottle or by the glass. But many wine stores indulged in selling liquor by glass or open bottle and it was

reported that some wine stores fill legal liquor bottles with illegal liquor and sell it by the glass making

consumers unaware of what they are consuming.

Therefore, it is strongly recommended that there be a complete ban on "serve from open bottle" practised

in some licensed liquor sales outlets. To be fully effective over the longer term, the regulation of licensed

premises must incorporate elements of traditional enforcement, as well as the development of voluntary

codes of conduct. Creating safer licensed environments is primarily a regulatory problem but formal

enforcement is necessary, although not sufficient and an effective approach should include formal and

informal regulation, community mobilization and self-regulation by the alcohol industry, hotels and by

the management of the licensed drinking environment.

13.3 Drink-Driving

Drivers operating a vehicle under the influence of alcohol are commonly referred to as drunk drivers,

drunken drivers or drink-drivers.Since the mid-1990s most of the developed countries in the world intro-

duced random breath testing as well as a uniform legal blood alcohol level for drivers at an average of 0.05

mg/100 ml across their respective territories, with the first initiative toward this being in the most popu-

lous states in Australia.There is a plausible argument that the enforcement of drink-driving laws induced

consumption of drinks at home and thereby powerfully reduced harm, including road accidents. In Sri

Lanka too, the introduction of severe penalties for drink-driving had paved the way for a drastic reduction

of the same and have been shown to be very effective at reducing motor vehicle accidents among teenagers

and young adults,according to Police information. As an example, in 2004 there had been 1,461 traffic

accidents by those driving under the influence of liquor; it increased to 1577 in 2005, but reduced to 1205

in 2006, before increasing to 1461 accidents in 2007.33

It has been reported that the enforcement of the said law has been crippled by the enforcement personnel

indulging in malpractices for their own benefit and therefore it is recommended that rigorous implemen-

tation of Random Breath Testing (RBT) and low Blood Alcohol Levels (BAL) for drivers should be effec-

tively enforced throughout the island with special attention to drivers of passenger buses and school buses

as primary target groups.

Although penalties such as licence disqualification and fines can deter drink-driving, evidence suggests

that many offenders who lose their licences drive without a licence during their suspension as the risk of

being caught is relatively low. Unlicensed driving undermines the effectiveness of licence disqualification

and is linked to a cluster of other high-risk behaviours including drink-driving, speeding and activities tied

33 Source: Traffic Police.Colombo.

39


to the under-world. Therefore, there is a growing need of multi-faceted approaches to address this danger-

ous issue that includes effective remedial interventions and recommended vehicle sanctions and severe

penalties for offending drivers. Table 13.2 above provides the drunk driving laws in selected countries.

13.4 Regulating Alcohol Promotion

The manufacture and sale of alcohol is a worldwide business and part of that business involves the

promotion of use, even though all governments recognize the need to have laws that regulate sale and

supply. The fundamental question on regulation for policy makers is the extent to which active promotion

should be permitted as part of a market economy or constrained in the interest of reducing harm. It has

been argued that the marketing of alcohol undermines public health strategies, which aim to shape healthy

lives while the alcohol industry has adopted marketing strategies developed by the tobacco industry,

Country BAC Percentage Penalty

China 0.02% (CNY 200–500 fine, 1–3 months licencesuspension); 0.08% (up to 15 days prison, 3–6months licence suspension, CNY 500-2000 fine).

Hong Kong 0.05% Monetary fine and up to three years imprisonment,with 10 driving-offence points and mandatory DrivingImprovement Course.

Japan 0.03% Regardless of alcohol readings, police may alsodetermine the driver to be “driving drunk,” which ispunished more severely than exceeding the designatedalcohol limits.

Republic of Korea 0.05%

Pakistan No set limit Falls under Drink and Drugs, S. No 14. 8 Penalty Points.

India 0.03% If suspected by police, driver will be taken to Mofussilpolice stations and tested. using breath analyser. In mosttowns and cities, police carry breath analysers.

Indonesia No Limit

Malaysia 0.05%

Singapore 0.08% Strictly enforced.

United States 0.08% Strictly enforced.

UK 0.08% Strictly enforced.

Nepal 0% Strictly enforced.

Sri Lanka 0.08% Breathalyzer testing is not used routinely. If suspected bypolice the driver is produced before the closestgovernment medical officer who examines anddetermines whether the driver is under influence. If thedriver refuses examination by the medical officer he isconsidered to have been under influence by default.

Table 13.2Drunk Driving Laws by Country

Source: International Centre of Alcohol Policy 2006, Blood Alcohol Concentration Limits Worldwide, ICAP Washington D.C.

40


particularly in targeting the young . From Sri Lanka's context it is hard to find evidence to support this

argument.

Thus, regulation and health promotion initiatives need to similarly address all marketing opportunities.

With the internationalization of broadcasting, sport and internet promotions, there is also a clear need for

an internationally recognized response to alcohol promotion. In many Western countries alcohol advertis-

ing is subject to a self- regulatory code. The effectiveness of voluntary advertising codes depends on the

widespread public knowledge of the code and a sufficiently independent complaints body with powers of

sanction. In Australia, these self-regulatory codes typically prohibit the portrayal of intoxication or exces-

sive drinking, under-age drinking, promises of social or sexual success,etc. The Australian self-regulatory

system for alcohol advertising has been reviewed by a National Committee reporting to the Ministerial

Council on Drug Strategy (MCDS). MCDS is working hand in hand with the alcohol industry to enhance

the existing self-regulatory system. Government intervention and regulations will be promulgated only

when and if the industry fails to implement the recommendations.

Marketing involves integrated packages of promotions where one activity reinforces another. Since 2006

alcohol advertising is banned in Sri Lanka in the broadcast media, print media, product placement and

associating alcohol beverages with sporting events such as cricket, rugby or football, which are particularly

attractive to young males. The censorship practised on films shown on TV is, to say the least, comical if

not hypocritical. Whenever a scene appears where there is likely to be a glass of alcohol or smoking, the

scene is blocked by blurring boxes with an excuse that it is done according to the government policy.

Meanwhile, the licence to sell liquor is issued by the government itself. And also the whole film may be

about adultery, drugs, or cheating. Also, it could be argued that if the censoring is to protect the youth,

shouldn't they be protected from the vices other than mere drinking and smoking?

Social events of the society of elite overflows with alcohol while newspaper advertisements offer "a free

bottle of whisky" for every table on New Year Dance! Alcohol is prohibited only on Poya days! When

weddings are held on Poya days, liquor is made available in a corner of the wedding hall for any one to

serve themselves. As if that makes citizens give up the drinking habit! The government is not ready to stop

the import of cigarettes or liquor but prohibits underage youth from buying them, as if it is healthier for the

older ones to smoke.

In today's world, advertising has become an integral part of free trade and competition, and it has also

become an essential element when big, small, and medium market players are involved. Brand advertising

is important mainly for the players with small market shares, to avoid the creation of monopolistic

environment by large players who could enjoy the leverage to monopolize the industry when there is no

advertising.

It is known that advertising is fundamentally a role to promote a brand but not the product or consump-

tion. Sri Lanka's illicit liquor industry has captured the largest consumer segment within the industry and

is growing unchecked without any advertising. It could be seen that the government intervention by

prohibiting advertisement for the legal alcohol industry is a promotion in disguise to increase sales of

illicit liquor.In Sri Lanka, the legal alcohol industry never indulged in showing or advertising intoxication,

but it indicates the inequity of application of the rule of law by the state when dealing with alcohol.

41


The various aspects of alcohol product marketing, including advertising, labelling, consumer promotion,

packaging and merchandising, are an integral part of promoting different brands of virtually every con-

sumer good imaginable. An important part of public policy is how to ensure the integrity and standards of

product marketing. In particular, when a product has the potential to be misused and may confer harm as

well as benefit, marketing standards need to be upheld consistently.

At the same time, marketing is a commercial right in Sri Lanka like in other countries, provides consumer

information and choice, and is helpful to businesses in selling their products. Therefore, at the heart of the

issue is the need to balance commercial freedoms against safety and well-being among consumers. More

broadly, how marketing is regulated reflects the respective roles, rights, and responsibilities of the Govern-

ment and the private sector within the existing culture.

With regard to advertising, self-imposed regulatory codes by the industries exist in a range of countries and

within different regulatory frameworks and often represent a viable option to the imposition of restrictions.

Industry self-regulation and government regulation are not mutually exclusive but can exist side-by-side.

It is therefore pertinent that the government appoint an Independent Overseeing Authority on beverage

advertising to evaluate the harmful effect of advertising not confined only to alcohol but to all beverages.

The said Authority should be empowered to oversee the harmful effect of advertising any variety of bever-

ages, and set out standard guidelines to safeguard the public health as well as ethical values and encourage

voluntary codes under the aegis of set guidelines. Non-compliance should be severely dealt with by

Government Intervention.

Education of the individual consumer and working with the alcohol industry, particularly in regard to a

`social responsibility charter for drinks producers' should be developed as the prime move toward an

education and pursuance strategy. The first key aim of the strategy is to improve the information available

to individuals and to start the process of change in the culture of drinking. In this context, labelling of

alcohol beverages plays a key role. The existing labelling system doesn't provide much information, and it

is inconsistent, confusing, and doesn't help consumers to compare beverages' alcohol or calorie content.

The alcohol label should disclose the alcohol content and standard servings of the beverage. Labels would

also need to list the number of drinks per container and the amount of alcohol in a standard serving, along

with calorie information.

There is no clear evidence to show who governs the rules of alcoholic-beverage labelling, but it appears

that the labelling process suffers from some gaps between the Excise Commissioner's Department and

Industry producers. As a result, inconsistent standards for soft liquor and hard liquor and the abundance of

products that increasingly blur those two categories of alcoholic beverages, simply adds to the confusion.

Most of the labels in various types of liquor bottles in the market are illegible and information provided is

ambiguous.

There cannot be any argument against alcohol labelling but if a random survey is conducted, the revelation

would be that the price offers influenced buying more than label information. But for the benefit of the

health well-being of the consumers, it is pertinent to mention the need of labelling for alcoholic beverages

that would give consumers clear information about the alcohol they consume. The alcohol facts labels

42


will do for alcoholic beverages what nutrition facts labels have done for packaged food - provide readable

information that would enable consumers to make informed decisions about the products they consume.

And it should be given in all three languages. The proposed label would let consumers see exactly what's

in the various brands of beers, Arracks, and other locally produced liquors. Does the Excise Commissioner's

Department possess the necessary technical capacity to determine the veracity of nutrient value in the label

of contents? This is an issue that needs the serious attention of the policy makers. Advertising policy for TV

and radio can also be brought under the aegis of these institutions and the policy should be applicable to

TV soap dramas too.

In this context,it is imperative to look at the WHO guideline of evidence-based strategies and interven-

tions to reduce alcohol-related harm. This guide focuses on policies that research reviews have identified

as most effective and cost-effective, and that require legislation to implement.34

The guide provides legislative advice for implementing policies:

• To reduce the affordability of alcohol through policies on taxation and price;

• To reduce the availability of alcohol by restricting and/or regulating the sale ofalcohol to the public;

• To reduce alcohol consumption by children and young people by setting a mini-mum age for sale and purchase;

• To monitor and enforce legislation and policy;

• To reduce exposure to alcohol marketing; and

• To deter drinking and driving.

14. Emergent Policy Issues

(a) The major concern for Sri Lanka's alcohol policy should be how to address the high levels of illicit

alcohol consumption and harm across the community. Addressing this issue is seen particularly as a

stark relief among some sub-populations such as the rural, urban and plantation community.

One of the prevailing contemporary questions in alcohol policy is should Sri Lanka's alcohol policy

aim to eradicate illicit alcohol or should it aim to address patterns of drinking that have been found

to be particularly harmful, by increasing taxes?

The costs of alcohol-related harm in the general community, as well as within specific sub-popula-

tions suggest, that universal approaches to reduce illicit alcohol consumption are needed as well as

strategies targeted to reduce harm in specific sub-populations mentioned above.

Eliminating of the supply of illicit alcohol could become effective only when the nexus between

illicit brewers, politicians, Police and Excise Department officials is removed. Existing political

culture with proportional representative system has provided the best boost to illicit and illegal

alcohol producers to establish strong links with politicians. The political campaigns require an

34 WHO: 2011 Addressing the Harmful Use of Alcohol. A Guide To Developing Effective Alcohol Legislation.

43

Emergent Policy Issues

enormous amount of fund raising and illicit and illegal producers are becoming financiers for vari-

ous candidates seeking election. Once they get elected they are bound to oblige and safeguard the

business of the financiers. As long as this situation exists, it is not unreasonable to state that no

alcohol policy could be implemented at national level.

(b) Sri Lanka policy makers have taken it for granted that the legal alcohol industry is a source of funds

in waiting, which revenue could be increasingly extracted whenever there is a gap in financing the

deficit in the budget. But the policy makers are indifferent to the segment that does deprive the

government revenue known as "illegal alcohol Industry" sector which sells liquor at the same price

as the legal product and probably uses the same channels, but does not pay taxes. There is a potential

to collect another estimated amount of Rs.10 billion35 at least from this sector if the government

broadens the tax collection effort. It is in the hands of the authorities and the Excise Department's

responsibility to monitor production, sales and claim tax revenue due to the state. But mostly due to

political involvement, the authorities have failed to tax them.

(c) With the introduction of political affiliation to issue licences in 1994, a new breed of proprietors

received licences. Most of the new licence holders, but not the proprietors who had been in the

business for decades, used to lease out their licences. Thus, the third party has to pay a monthly sum

for licence fees and in addition, in order to earn more to run a profitable business, they peddle tax

unpaid liquor. In Sri Lanka, there are around 20 licensed liquor producers and according to industry

sources there are also legal licensed producers producing and selling illegal alcohol. The illegal

products they produced are identical to the legal product in appearance.

(d) According to the Excise Department, there had been 41 new licences issued in 2011, and 377 new

licences has been issued between 2005 to 2011 (Table 13.1). The existing licensing system is highly

politicized. Although all alcohol related acts are focused on the manufacturer and the production

process, monitoring of wine stores and other liquor sale outlet activities are virtually non-existent.

Issuance of technical reports which is a part of monitoring of activities for respective wine stores are

vested with Excise officers. It has been reported that there is an absence of independent monitoring

by these officers due to unofficial gratuity payments offered monthly to these officers.

(e) Growing uncertainty of full implementation of National Alcohol and Tobacco Act needs serious

attention of policy makers, although the Bill has been ratified in the Parliament. Avoidance of tax

payment by illegal producers has gone unnoticed while continuing increases in taxes of legal alcohol

has led to higher prices and thereby driving unaffordable consumers for cheap and illicit alcohol.

Control of a large number of retail outlets by this segment of manufactures has paved the way for a

thriving business of illegal alcohol.

(f) Sri Lanka is not fully acclaimed for its approach to the illicit alcohol industry while it had led to real

and significant costs to the community. Political influences, subjugated law enforcement responses

and unaffordable prices of legal liquor are the determinant factors of the thriving trend of illicit

alcohol. It appeared that none had endeavoured to make a comprehensive, multi-focused, inte-

grated study on how to counter this situation, may be due to the fear of political pressure. This paper

35 IPS estimate.

44


outlines our attempt to redress this gap. The development and evaluation of effective policies to

respond to illicit alcohol is complex when politics are involved. Evidence-based policy suggests that

the systematic collation and analysis of evidence should provide governments with the information

they require to make effective policy decisions in this regard. However, there may be enough

evidence in some areas of illicit alcohol, but notably law enforcement responses were not adopted.

Responses to illicit alcohol problems need to consider the full array of law enforcement (including

policing, criminal justice system, and interdiction).

While giving serious consideration to resolve the emerging issues mentioned above, policy makers need to

pay attention to the following basic tenets in drinking culture, to put strategies into effect in alcohol policy

making.

• Must recognize that people who want to drink will drink.

• Must consider what is more harmful and what is less harmful. And those who wantto drink to guide them into drinking what is less harmful, and drink the way it is lessso.

• Re-evaluate the credibility of the licence holders to sell liquor before renewal oftheir licences.

• Introduce strict rationale when identifying locations for new retail outlets.A popula-tion based estimate should be adopted and implemented for the number of outletsper Local government Area and Municipal Area.

• Do away with political patronage when issuing new licences.

• Introduce heavy penalties for violating of Excise Laws.

15. Way Forward and Conclusion

15.1 Way Forward

The world over most policies and regulations that are intended to restrict the availability of alcohol are

applied through retail alcohol outlets. Retail outlets set the final prices at which alcohol will be sold to

drinkers, restrict sales to of-age patrons (at least to some degree), choose locations at which to open and

compete, and determine their own hours and days of sale within the limits set by law. Retail alcohol

outlets are the formal social structures through which drinkers obtain alcoholic beverages, whether they

use them onsite or carry them away for use elsewhere. Therefore, ecological studies of alcohol outlets are

of central importance to the field. Regulations on availability directly affect the formal operations of

commercial establishments, patterns of drinking in those establishments, and associated risks. These regu-

lations also indirectly affect drinking in other contexts where alcohol is used and other risks may arise,

such as at parties and social gatherings and in the home.

Most of the research studies consistently show that restrictions on availability are associated with reduc-

tions in both alcohol use and alcohol-related problems. Although total bans on alcohol sales have been

found to markedly reduce alcohol consumption and problems, they can give rise to new problems, particu-

larly through the development of an illegal market. Illegal alcohol market in Iran and Bhutan are best

examples. From Sri Lanka's context, liquor licensing systems or planning controls can potentially be used

to limit the number of places where alcohol can be sold. But since the end of the war and the government's

highly ambitious tourist promotion programme, there has been a significant liberalization of licensing

laws and a corresponding growth in outlets, both on- and off-hotel premises.

45

Way Forward and Conclusion

Other measures restricting the physical availability of alcohol include bans of retail sales in sports and

cultural events which are not fully activitated due to various reasons such as ineffectiveness of law enforce-

ment. As a result, doubts have been expressed on the effectiveness of alcohol availability controls both by

the general public and some actors in the alcohol field.Although Sri Lanka has set the minimum legal age

of procurement of alcohol as 21 years, there is no mechanism to control under-age drinking.

Alcohol industry which is in the business of manufacturing, imports and selling alcohol, has legal respon-

sibilities. Like in other countries, the Government has to recognise the existence of the alcohol industry as

a major revenue source and should enter into partnership with the industry to tackle alcohol misuse and

illicit liquor. GOSL or the Treasury has never consulted the industry sources when enacting regulations

affecting the industry. The National Alcohol and Tobacco Authority has completely sidelined the alcohol

industry concerns. Therefore,it is of paramount importance to adopt a far sighted approach to the priorities

given below:

• Partnership with the industry will pave the way to develop an effective "Sri Lanka AlcoholPolicy" followed by an Action Plan.

• Establish an advisory panel including representatives from the alcohol industry, to partner acampaign aimed at alcohol misuse, and illicit alcohol. There is a need to set out ethicalprinciples and goals that the country can use to develop a comprehensive alcohol policy andprogrammes.

• Industry representatives should consist of on-trade and off-trade as well as producers.

• Moderation of average alcohol consumption should be the acceptable primary target forgovernment, and should be reflected in policy initiatives. A voluntary code should be advo-cated.

• Develop public awareness of the harm that can be caused by abuse of alcohol and theconsequences on the health and well-being of individuals, families and communities. Gov-ernment should work on public education with experts from across the medical, alcoholpolicy, and research community. The industry should be included as a partner.

• Policy should combine with an effective enforcement mechanism to combat illicit liquor tocurb alcohol abuse. A public health approach should be planned out with a coordinatedrange of measures covering supply side controls of illicit alcohol, and initiative to targetspecific behaviours and the identification and treatment of individuals who drink exces-sively. Industry as a partner should recognise the necessity of funding and coordinating alco-hol treatment services in the country.

• Ensure high levels of enforcement of current drink driving legislation. Reducing the legaldrink drive alcohol level would save many lives.

• Develop a taxation policy that ensures a real price of alcohol and taxation based on volumeof alcohol and to arrest the expansion of illicit alcohol. Reduction in alcohol tax observed indeveloped countries should be studied against taxation and rigorous rules governing the legalalcohol market in Sri Lanka.

• Depoliticize licensing including renewal of licences.

15.2 Conclusion

Alcohol plays an important role in Sri Lanka's economy, generating tax revenue for the government, jobs

for people and significant profit making for the industry entrepreneurs. Alcohol is no ordinary commodity.

46


It is a legal psychoactive drug that enjoys enormous popularity and special social and cultural significance

the world over.

The notion of sensible alcohol use, or developing a culture where moderation is the goal, underpins the

objective of Mathata Thitha National Alcohol Strategy. Similar to the cultural change that led to a decrease

in tobacco use or to acceptance of mandatory seat belt use, reducing alcohol-related harm in Sri Lanka will

require multi-faceted and long-term approaches which focus on social values and norms, along with a mix

of social marketing, community information, regulation and enforcement activities.

In Sri Lanka, the prevailing situation of a thriving illicit alcohol market invites the formation of a National

Alcohol Strategy Working Group which should be composed of a wide range of stakeholders and should

include representatives from Central, Provincial and Local governments, academia, non-governmental

organizations, and the alcohol beverage and hospitality industries. This National Alcohol Strategy should

be a comprehensive, collaborative strategy that provides direction and recommendations to reduce alco-

hol-related harm by focusing eradication of Illicit alcohol. It should propose or renew efforts in enforce-

ment of law from top to bottom level . To implement the Strategy, a range of approaches is required,

including those that focus on overall levels of alcohol consumption(population-level approaches),as well

as those that target specific, high-risk drinking patterns and/or vulnerable populations (targeted interven-

tions).

Given that drinking customs and habits are deeply rooted in the multi-ethnic culture in Sri Lanka, effective

actions to prevent or reduce the harm caused by alcohol will require the development and application of

evidence-based recommendations and strong political commitment but not by ad hoc popular policies.

Alcohol policies and implementing actions should be based on the best scientific evidence about effec-

tiveness and cost-effectiveness, and should be sensitive to existing cultural diversity. Where the science is

uncertain, the precautionary principle should be applied, to give priority to protecting the health and

welfare of the population.

The production and sale of alcoholic beverages, together with the ancillary industries, are important parts

of the economy , providing employment to many people, substantial revenue for producing companies

and, the most important, tax revenues to governments. These economic and fiscal interests are often

important determinants of policies that can be seen as barriers to public health initiatives related to

alcohol.

The existence of a large illicit trade in alcohol complicates all measures to reduce alcohol-related harm,

not least by confounding the assessment of their impact. A further problem is that legal producers of

alcohol are compelled to forestall voluntary regulatory measures due to the presence of a large illicit trade

that escapes the restraints imposed on the legal alcohol market. The legal alcohol industry argument that

prohibitive controls serve only to increase the consumption of illicit alcohol is very much valid in the Sri

Lanka context.

At present, the government devotes no resources to monitoring drinking patterns, or educating the public

about alcohol-related problems. In the face of high alcohol taxes and a ban on broadcast advertising of

alcoholic beverages, Sri Lanka's legal alcohol producing companies market alcohol with self-regulated

guidelines without confrontation.

47

Way Forward and Conclusion

Monitoring of the country's alcohol misuse is greatly needed in order to establish alcohol consumption

more clearly as a national health and safety issue, while stronger controls and greater corporate responsibil-

ity are required to control illicit alcohol production and marketing.

National alcohol policies should consist of many programmes and strategies which, optimally, work

synergistically to achieve agreed-upon outcomes. In Sri Lanka ,there is a void in a well planned National

Policy on Alcohol and therefore there is no significant finding available to testify that alcohol-related

harm in both the general community and some sub-populations is too high . A well framed National

Alcohol Policy Framework aimed at reducing both the overall level and possible risky patterns of con-

sumption is imperative.

What is needed now is not so much an understanding of what works, but an appreciation of how to make

it work in the various contexts in which it is implemented. The most effective strategies in the world will

not be effective if they are not implemented as intended or as evaluated. To allow for more intervention by

the state with policies such as increasing the price and reducing the access to legal alcohol will become a

complicated and negative aspect of the development of an effective National Alcohol Policy. Creating a

level playing field for all three players i.e. government, legal industry and the consumer,is the most

important aspect in the implementation of an effective alcohol policy. It is to be hoped that the policy

makers will take these considerations into account as well as the need to arrest the thriving illicit and

illegal alcohol industry in Sri Lanka in formulating a rational National Alcohol Policy.

A policy mix which includes taxation, physical access, drink-driving counter measures, promotion and

advertising, public awareness campaigns, and based on research evidence is likely to achieve success in

reducing the level of alcohol related problems. Thus, in order to be effective, it must put in place a

regulatory and enforcement apparatus to strictly activate prohibition and punishment of those who are

putting at risk others' health and safety by producing and peddling illicit alcohol. Sri Lanka policy makers

should be able to understand that the persistent alcohol harm related issues are dominantly linked to the

illicit industry. There need to be particular concern about problematic drinking behaviour of rural and

urban poor predominantly among males and plantation workers, especially with regard to "Kasippu"

drinking and intoxication.

The Government and the legal alcohol industry has responsibilities to safeguard the society from alcohol

related harm. The author recognizes that different entities may well have different perspectives and inter-

ests and sometimes show a lack of trust. However, it is believed that society is best served when there is

understanding, trust, and cooperation between the alcohol beverage industry and the government. This

requires open and regular communication leading to a consensus approach to self-regulation, co-regula-

tion, monitoring, and enforcement.

A critical feature of effective alcohol policy is partnership involving all relevant sectors of society i.e., the

key stakeholders including both the public and the private sectors - governments, and the civil society. This

approach reflects the notion that public-private partnership is increasingly important in alcohol affairs to

• Understand the drinking culture, and appreciation of the role of alcohol within it;

48


• Elicit information on prevailing drinking patterns and trends in drinking behaviour, and soci-

etal norms around drinking;

• Information on prevailing favourable and unfavourable market forces;

• Analysis of policy measures already in place and areas in which these may be in need of

further development;

• Assessment of existing levels of cooperation amongst key stakeholders.

A sound alcohol policy should be evidence-based and rely on proven findings and policy approaches that

can be tailored to fit the needs of the country, setting or population.

Policy makers should have to apply an evidence-based approach for pricing and taxation with the long-

term objective of safeguarding social values, and facilitate to establish the State and industry-sponsored

prevention efforts. Greatest attention and resources should be directed to interventions that are most likely

to have the greatest impact in reducing drinking-related problems. Alcohol industries should be encour-

aged to consider strategies that do not violate decent access to alcohol but rather reduce drinking-related

risks. In this context, required initial consideration should be of confidence building measures among the

Excise Commissioner's Department, other related state agencies, producers, distributors and retailers which

is imperative. While safeguarding the Government interest in increasing revenues, commercial interests

of producers, distributors, wholesalers and retailers, and employees' interest should be given due recogni-

tion.

Moving towards a culture of moderation signals a new way of thinking about alcohol use that includes an

understanding of when, when not, and how much to drink, appropriate motivations for drinking and

settings in which responsible drinking should take place. It requires to implement and enforce effective

measures that control alcohol availability. It requires the social responsibility mandate of government's

Commissioner General of Excise, reinforcing liquor licensing and enforcement regulations,and harmoniz-

ing minimum purchase ages across the country.

A standard set of legislative provisions for the country should be based on local circumstances and

existing regulatory frameworks. It is hoped that the legislative suggestions will be a useful starting point for

policy makers and those involved in the drafting of legislation aimed at curbing alcohol-related misuse.

Effective alcohol policy requires not only good legislation, but also effective implementation and enforce-

ment. In broad policy terms, strategies mentioned above largely depend on how they are legislated .

With regard to implementation and enforcement, in particular, current institutional structures and avail-

able fiscal and human resources may suggest the suitability or otherwise of various options, perhaps

including some that go beyond those discussed in this paper.

49

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51

Annexure

Ann

ex T

able

1 :

Th

e Q

uant

itie

s of

Liq

uor

Man

ufac

ture

d (Q

ty P

roof

Ltr

s) 2

005-

2011

Type

20

05 2

006

2

007

2

008

200

9

201

0

2011

Mola

sses

Arr

ack

960,1

00.8

12,0

09,8

48.5

81,8

16,5

85.6

6509,3

66.3

91,5

83,8

53.2

62,6

21,0

75.7

82,9

36,8

87.5

0

Coco

nut a

nd P

roce

ssed

Arr

ack

2,8

52,3

09.3

0 4

,782,7

72.0

53,4

69,4

48.0

13,4

99,1

41.2

4 4

,614,5

39.6

34,9

37,9

20.9

35,6

05,3

91.7

5

Spec

ial A

rrac

k32,3

68,2

51.2

935,4

63,6

76.5

2 4

1,6

90,8

34.3

238,4

62,6

14.3

931,8

13,2

42.4

10

37,6

94,4

99.3

841,0

78,4

02.4

7

Countr

y m

ade

fore

ign li

quor

2,2

76,3

30.2

0 2

,684,4

59.7

92,9

50,9

58.0

13,3

24,8

62.3

03,0

27,9

08.7

64,0

07,1

07.7

64,1

66,8

10.1

7

Mal

t liq

uor (

Bee

r) a

lcohol p

er c

ent b

elow

5per

cen

t 2

9,3

30,5

63.8

724,7

97,3

50.8

519,9

53,1

74.3

116,7

01,6

01.6

212,8

47,5

04.0

915,3

03,3

69.1

014,4

09,6

72.7

9

Mal

t liq

uor (

Bee

r) a

lcohol p

er c

ent a

bove

5per

cen

t 2

2,2

18,3

69.7

822,0

26,7

95.4

829,5

82,1

16.8

640,7

55,2

11.7

342,6

97,4

62.4

956,1

00,7

75.9

273,0

90,1

94.8

7

Win

e6,3

17,0

75

10,8

94.9

345,1

72.8

77,1

45.7

36,2

61.8

5

8

,52

3.0

935,6

44.0

0

Bottl

ed T

oddy

4,7

16,8

96.5

08,3

30,9

44.3

66,4

63,9

70.6

35,3

34,2

63.2

04,2

72,6

62.3

75,6

58,2

14.6

45,8

05,3

31.2

0

Den

ature

d S

pirits

34,5

29.0

018,4

80.5

032,5

60.5

00

0

00

Tota

l94,7

63,6

67.8

1100,1

25,2

23.0

5106,0

04,8

21.1

6108,5

94,2

06.6

0100,8

63,4

34.8

6126,3

31,4

86.6

0147,1

28,3

34.7

5

Type

200

5

2

006

2

007

20

08

200

9

20

10

201

1

Mola

sses

Arr

ack

3

83

,35

2,9

82

.87

816,1

21,8

53.3

4

82

3,2

70

,76

5.9

0264,9

85,7

05.2

0949,3

29,8

09.7

6

1,7

29,7

11,2

76.5

62,5

66,4

31,4

88.2

4

Coco

nut a

nd P

roce

ssed

Arr

ack

1,0

74,8

06,7

17.2

11,9

05,3

71,2

57.5

6

1

,565,6

84,4

17.3

91,8

25,4

93,2

17.6

22,7

44,3

53,8

84.8

33,2

57,8

56,4

36.6

64,9

02,4

77,7

00.2

1

Spec

ial A

rrac

k

11,9

15,9

18,2

59.3

514,2

65,8

25,9

46.4

5

17,3

89,2

41,1

85.5

120,0

53,3

14,1

07.1

319,0

12,8

44,1

71.1

724,7

01,1

29,1

59.6

335,8

74,0

32,1

76.6

3

Countr

y m

ade

fore

ign li

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1,1

25,7

69,3

82.3

71,4

24,9

17,3

39.9

7

1

,714,9

91,3

46.6

02,1

81,8

02,7

98.6

42,1

98,4

55,4

22.6

13,1

78,2

31,6

98.9

94,2

28,4

65,9

59.4

6

Mal

t liq

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Bee

r) a

lcohol p

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ent b

elow

5per

cen

t

83

4,7

16

,57

6.2

6929,9

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56.6

9

75

0,0

29

,26

9.8

6672,9

89,2

83.9

2616,6

80,1

96.0

8854,0

15,5

87.9

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72,1

22,1

43.7

4

Mal

t liq

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Bee

r) a

lcohol p

er c

ent a

bove

5per

cen

t

98

6,0

71

,52

2.7

61,1

78,4

33,5

57.9

3

1

,586,2

74,1

10.3

82,2

99,3

85,3

25.6

2,7

32,6

37,5

99.3

64,0

72,3

86,1

76.9

37,0

92,0

64,0

63.8

1

Win

e

1

,41

1,4

73

.12

2,0

09,6

43.0

02,7

03,9

16.1

02,7

00,5

97.9

32,7

81,3

30.2

74,3

12,4

61.8

74383958.1

4

Bottl

ed T

oddy

1,1

92

,63

0.3

0815,6

90.6

5

4

7,7

12

,59

0.8

053,3

42,6

32.0

042,7

26,6

23.7

556,5

82,1

46.4

558,0

53,3

12.0

0

Den

ature

d S

pirits

1

03

,27

1.0

083,1

62.2

5

16

7,2

72

.50

00

00

Tota

l Duty

on L

iquor M

anufa

cture

d (R

s)16,3

23,3

42,8

15.2

420,5

23,4

79,1

07.8

423,8

80,0

74,8

75.0

427,3

54,0

13,6

68.0

428

,299,8

09,0

37.8

337,8

54,2

24,9

44.9

955,8

98,0

30,8

02.2

3

Ann

ex

Tabl

e 2:

Rev

enue

fro

m

Liqu

or M

anuf

actu

red

(Rs)

20

05-2

011

Sour

ce: A

dmin

istra

tion

Rep

ort o

f the

Com

mis

sion

er G

ener

al o

f Exc

ise

- var

ious

issu

es.

Sour

ce: A

dmin

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tion

Rep

ort o

f the

Com

mis

sion

er G

ener

al o

f Exc

ise

- var

ious

issu

es.

52



Com

pany

200

5

200

6

200

7

2008

200

9 2

010

20

11

W.M

. M

en

dis

& C

o.,

Ltd

.2

22

,84

0.0

02

22

,75

1.2

03

29

,37

0.0

02

90

,94

1.3

31

0,8

34

.36

18

5,8

99

.11

21

2,1

03

.11

Inte

rnat

ion

al D

isti

lleri

es

Ltd

.5

38

,64

8.5

51

,32

8,2

73

.47

1,4

13

,53

5.0

21

01

,44

6.9

31

,20

1,0

97

.33

2,3

21

,44

4.2

0

1,9

37

,13

0.3

3

Uva

Gle

n (

Pvt.

) Ltd

.4

0,9

83

.00

82

,76

7.1

02

5,2

25

.28

28

,03

9.9

32

,78

7.1

14

,71

7.3

94

,51

8.4

9

Man

ori

Lan

ka

(Pvt.

) Ltd

.1

0,0

45

.20

8,4

28

.00

5,0

07

.87

7,3

00

.06

17

,95

3.4

53

4,8

87

.41

9,4

48

.34

Rio

Mar

keti

ng (

Pvt.

) Ltd

.4

,65

6.9

81

0,1

25

.24

2,3

77

.44

Ran

den

igal

a D

isti

lleri

es

4,5

34

.40

9,9

27

.90

29

,44

9.7

62

5,0

49

.06

14

,19

3.5

96

,23

6.0

1

Hin

gu

ran

a D

isti

lleri

es

Co

mp

any

44

,14

5.7

07

6,7

53

.00

11

,61

9.9

42

4,9

47

.46

23

,05

5.3

72

1,6

14

.61

2,4

44

.76

Th

ikkam

Dis

till

eri

es

Co

mp

any

44

,93

8.9

04

3,0

78

.90

Wal

ikam

um

Dis

till

eri

es

14

,58

4.4

01

89

,52

8.6

7

Nip

po

n E

xp

o1

,04

8.4

1 9

02

.13

1,5

34

.07

Acm

e L

anka

Pvt.

Ltd

.6

,90

0.0

01

5,4

55

.24

Sco

tlan

d D

isti

lleri

es

Co

., L

td..

3,9

87

.90

3,6

72

.00

Vara

ni

1,0

46

.07

21

,74

7.6

2

Sri

Lan

ka

Dis

till

eri

es

Ltd

.,2

1,7

41

.30

11

,89

3.3

5

Cla

ssic

Dis

till

eri

es

(Pvt)

Ltd

.1

5,4

55

.24

12

,89

3.5

16

,03

8.2

18

,61

9.5

7

Ran

diy

a (P

vt

) Ltd

.1

,03

8.5

4

Pere

cyl Ltd

..3

8,3

60

.63

70

4,8

52

.82

Tota

l96

0,10

0.81

2,00

9,84

8.58

1,81

6,58

5.31

509,

366.

391,

583,

853.

262,

621,

075.

782,

936,

887.

50

Ann

ex T

able

3:

Mol

asse

s A

rrac

k Pr

oduc

tion

200

5-20

11 Q

ty (

Proo

f Lt

rs)

Sour

ce: A

dmin

istr

atio

n R

epor

t of t

he E

xcis

e C

omm

issi

oner

Gen

eral

– v

ario

us is

sues

.

53

Annexure

Com

pany

2

005

2006

2

007

2008

2

009

2

010

2011

Dis

till

eri

es

Co

. o

f Sri

Lan

ka

Ltd

.2

,21

3,4

39

.26

3,4

75

,49

0.3

7 2

,50

2,5

27

.61

2,1

26

,13

8.7

11

,89

5,4

40

.15

1,9

03

,23

3.0

42

,15

3,2

11

.99

W.M

. M

en

dis

& C

o.

Ltd

.5

4,3

50

.71

76

,43

7.6

03

7,5

28

.78

66

,14

3.0

62

67

,13

7.0

04

73

,13

3.9

5

49

,07

5.3

5

Inte

rnat

ion

al D

isti

lleri

es

Ltd

.2

01

,64

9.1

95

58

,54

7.7

75

54

,02

6.5

04

41

,24

4.0

44

43

,62

3.0

14

33

,70

8.7

1

5

04

,77

1,.

08

Uva

Gle

n (

Pvt)

Ltd

.-

-6

59

.58

13

2.9

83

,52

1.2

43

,42

1.3

22

,53

1.1

2

Man

ori

Lan

ka

(Pvt.

) Ltd

.1

,98

6.8

01

,48

4.2

02

,11

4.3

11

,63

8.5

71

1,1

99

.16

8,9

57

.22

1,6

54

.21

Ro

ckla

nd

Dis

till

eri

es

Ltd

.3

40

,06

6.5

56

30

,93

2.2

7 3

15

,47

7.5

18

35

,84

5.3

71

,53

9,7

59

.84

1,4

64

,57

2.8

61

,15

3,7

71

.74

Nip

po

n E

xp

o L

td.

14

,31

0.9

01

0,3

51

.80

9,0

85

.32

6,1

44

.58

9,8

27

.10

10

,77

4.1

67

,98

4.0

2

Way

amb

a D

isti

lleri

es

(Pvt.

) Ltd

.-

--

Co

-op

era

tive D

isti

lleri

es

3,5

56

.93

7,1

25

.90

81

4.6

82

60

.04

1,3

06

.59

Ran

den

igal

a D

isti

llery

--

7,3

15

.57

5,1

02

.42

1,2

02

.31

1,1

82

.65

Sco

tlan

d D

isti

llery

10

,01

1.8

61

,00

4.8

5 8

,67

3.7

06

,55

4.5

45

7,2

40

.89

64

,32

5.9

78

8,1

12

.50

Hin

gu

ran

a D

isti

lleri

es

Co

., L

td.

3,4

73

.50

2,7

69

.10

3,0

55

.31

4,3

98

.82

16

,14

5.0

82

7,2

33

.11

24

,46

3.6

2

A.E

.F.

(Pvt.

) Ltd

.4

84

.00

-1

,43

7.6

13

78

.98

1,2

71

.27

Rio

Mar

keti

ng S

erv

ices

(Pvt.

) Ltd

.7

02

.10

--

Acm

e L

anka

Co

mp

any L

td.,

8,2

76

.60

18

,62

8.2

0 7

,96

6.6

14

,63

9.8

39

,76

2.5

36

3,7

80

.78

10

9,3

23

.68

Pere

cyl

Pvt.

Ltd

.-

18

,76

5.4

33

59

,40

4.8

84

80

,42

2.7

17

08

,21

6.5

9

Sri

Lan

ka

Dis

till

eri

es

Ltd

.5

19

.30

20

7.4

81

,56

8.9

51

.09

3.2

0

V &

A (

Pvt)

Ltd

.2

79

.25

Tota

l2,

852,

308.

384,

782,

772.

05 3

,469

,448

.52

3,49

9,14

1.24

4,61

4,53

9.63

4,93

7,92

0.93

5,60

5,39

1.75

Ann

ex T

able

4:

Coc

onut

and

Pr

oces

sed

Arr

ack

Prod

ucti

on 2

005-

2011

Qty

(Pr

oof

Ltrs

)

Sour

ce: A

dmin

istr

atio

n R

epor

t of t

he E

xcis

e C

omm

issi

oner

Gen

eral

– v

ario

us is

sues

.

54



Prod

uct:

Spe

cial

Arr

ack

2

005

20

06

2

007

2

008

200

9

20

10

201

1

Dis

till

eri

es

Co

. o

f Sri

Lan

ka

Ltd

. 2

6,7

48

,79

0.5

22

9,3

59

,60

8.3

43

4,7

50

,88

6.7

53

2,5

33

,07

0.7

62

8,2

16

,40

9.7

93

2,9

89

,27

6.5

63

5,6

63

,08

1.3

3

W.M

. M

en

dis

& C

om

pan

y

3

53

,93

1.0

0

5

85

,66

2.1

7

4

90

,87

6.0

04

86

,62

9.1

02

48

,99

8.2

91

46

,57

8.3

13

8,0

52

.53

Uva

Gle

n (

Pvt.

) Ltd

.

1

33

,04

3.0

3

1

43

,79

7.1

0

1

71

,37

3.7

31

11

,09

3.9

19

7,0

96

.37

99

,74

8.2

11

18

,20

4.0

9

Man

ori

Lan

ka

(Pvt.

) Ltd

.

1

12

,87

7.5

0

1

20

,56

6.0

0

1

36

,87

1.1

91

08

,64

0.6

17

8,7

13

.25

59

,75

3.6

69

,63

8.4

5

A.E

.F.

(Pvt.

) Ltd

.

3

18

,29

8.0

2

3

77

,19

7.0

2

3

28

,43

3.4

73

8,3

76

.32

13

4,2

97

.23

Ro

ckla

nd

Dis

till

eri

es

Ltd

.

1,0

06

,83

4.3

7

1,3

50

,42

1.3

9

1,8

58

,84

0.3

08

94

,84

0.3

81

08

,65

6.0

23

91

,71

7.1

91

2,2

98

.68

Rio

Mar

keti

ng (

Pvt.

) Ltd

.

56

,08

5.7

9

1

13

,90

2.5

7

1

17

,45

0.1

4

Ran

den

igal

a D

isti

lleri

es

Ltd

.

3

20

,99

2.7

0

5

07

,39

8.1

0

4

33

,48

0.4

22

93

,44

1.6

92

29

,17

4.3

21

2,2

86

.52

Acm

e L

anka

Co

mp

any L

td.

20

0,4

51

.30

30

1,2

21

.60

42

1,9

88

.00

38

8,9

05

.60

42

2,6

04

.77

38

9,8

52

.19

58

0,1

44

.00

Way

amb

a D

isti

lleri

es

Ltd

.

1

10

,82

2.9

0-

-

Pere

cyel C

om

pan

y (P

vt.

) Ltd

.

1

15

,76

4.3

4

1

07

,25

6.5

3

1

43

,26

9.9

12

74

,56

9.4

7

Sco

tlan

d L

td.

23

3,1

34

.02

26

5,5

24

.48

23

2,5

47

.71

16

7,0

77

.66

65

,29

5.1

51

50

,95

5.5

46

,29

5.8

0

Inte

rnat

ion

al D

isti

lleri

es

Ltd

.

2,4

36

,20

3.9

7

1,8

37

,94

0.0

0

2,0

23

,11

3.2

72

,57

6,5

94

.22

1,5

22

,60

4.0

82

,29

0,2

24

.52

2,6

99

,98

5.2

3

Nip

po

n E

xp

o L

td.

11

9,3

29

.40

13

7,2

89

.90

18

3,9

92

.29

13

8,8

43

.57

13

1,3

96

.41

12

2,7

08

.20

10

1,6

03

.64

Hin

gu

ran

a D

isti

lleri

es

Ltd

.

75

,49

6.7

0

1

60

,94

8.3

0

3

42

,09

3.8

23

92

,39

2.1

53

70

,14

9.8

64

64

,05

0.3

04

78

,16

0.0

0

Co

-op

era

tive D

isti

lleri

es

2

6,1

95

.72

5

0,8

64

.70

2

2,5

31

.89

3,4

60

.25

6,9

89

.57

2,6

55

.03

Glo

bal

Ble

nd

ers

& B

ott

lers

Ltd

.-

--

Cla

ssic

Man

ufa

ctu

rer

-

44

,07

7.6

1

26

,40

6.4

76

,42

8.9

52

3,1

89

.37

33

,06

6.7

41

,55

9.4

5

Nip

po

n L

anka

Ltd

.-

-

1

,83

4.8

31

1,6

27

.12

34

,86

9.9

2

Sri

Lan

ka

Dis

till

eri

es

Co

., L

td.

--

4,8

43

.33

2,4

89

.32

1,0

79

.55

58

.40

74

,90

7.7

0

Ran

diy

a M

arketi

ng S

erv

ice (

Pvt)

Ltd

1,5

16

.15

92

,32

1.0

11

32

,40

6.6

91

15

,91

9.3

1

V &

A (

Pvt)

Ltd

18

0,6

46

.40

61

,39

5.8

3

Tota

l

32

,368

,251

.29

35,4

63,6

75.7

9

41,

690,

833.

5238

,462

,614

.39

31,8

13,2

42.4

137

,694

,499

.388

41,0

78,4

02.4

7

Ann

ex T

able

5:

Spec

ial

Arr

ack

Prod

ucti

on 2

005-

2011

Qty

(Pr

oof

Ltrs

)

Sour

ce: A

dmin

istr

atio

n R

epor

t of t

he E

xcis

e C

omm

issi

oner

Gen

eral

– v

ario

us is

sues

.

55

Annexure

Man

ufac

turi

ng In

stitu

tion

2005

2

006

200

7

2

008

200

9

201

0 2

011

Eagl

e B

ottl

ed T

oddy

Man

u.

45

8,6

10

.00

47

3,8

55

.00

4

71

,92

0.0

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55.0

0474,1

95.0

0547,9

95.0

040,7

65.0

0

Sing

ha B

ottle

d To

ddy

Man

u.

7

09,0

83.7

5

8

89,1

13.7

5

663

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.00

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485.

6263

7,53

0.00

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7,20

0.00

Shooting

Star

Bottle

d T

oddy

Man

u.

27

2,4

60

.00

67

8,5

18

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5

59

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0555,7

95.0

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55.0

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0

Com

man

der

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d T

oddy

Man

u.

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48

8,3

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40

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Man

ori

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ka B

ottle

d T

oddy

Man

u.

82

3,5

67

.50

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5

1

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0906225.0

0

Gold

en E

agle

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u. M

adam

pe

29

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87

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8,0

51

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Thre

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u.

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Supre

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Man

u.

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Com

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d T

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Man

u.

21

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66

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36

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Pal

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per

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oddy

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u.

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51

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Way

amba

Super

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u.

4

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Gold

en E

agle

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oddy

Man

u. C

olo

mbo

4

5,4

20

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6

9,3

87

.50

22

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0

Rio

Mar

keting

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oddy

Man

u

4

37

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0

88

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Empir

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Man

u.

14

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63

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77

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. R. B

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u.

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sues

.

56



WHO Country Sales Per Cent Tax as a Per Cent of Retail Price ExciseRegion Tax/VAT Sales Stamps

Tax/VAT Beer Wine Spirits

EMR Venuzuela YES 14.50 - - - YES

Egypt YES - - - - YES

Isl. Rep. of Iran NO - - - - NO

Jordan YES 13.00 200.00 200.00 200.00 NO

EUR Armenia YES 20.00 20.00 20.00 20.00 YES

Austria YES 20.00 - 0.00 - NO

Azerbaijan YES 18.00 15.00 25.00 50.00 NO

Belarus YES 20.00 - - - YES

Bosnia and Herzegovina YES 20.00 13.00 3.30 22.35 YES

Bulgaria YES 20.00 5.80 9.40 27.70 YES

Croatia YES 22.00 25.00 0.00 53.00 YES

Czech Republic YES 5.00 0.00 NO

Denmark YES 25.00 34.20 17.60 41.50 YES

Estonia YES 18.00 13.60 13.00 52.00 YES

Finland YES 22.00 38.00 36.00 67.00 YES

France YES 16.90 8.80 3.10 33.20 YES

Georgia YES - - - - YES

Germany YES 16.00 6.60 0.00 13.78 YES

Greece YES 18.00 - 0.00 - YES

Hungary YES 30.00 20.00 40.00 27.00 YES

Iceland YES 24.50 64.00 58.00 80.00 NO

Israel YES 18.00 20.40 22.50 41.30 NO

Italy YES 20.00 - - - YES

Kazakaztan YES - 11.00 0.00 20.00 YES

Kyrgyzstan - 20.00 - 2.00 - YES

Latvia YES 18.00 11.00 16.90 15.00 YES

Lithuania YES 18.00 4.40 - 44.20 YES

Luxemburg YES 15.00 - 0.00 - NO

Malta YES 15.00 - 0.00 - YES

Netherlands YES 19.00 - 9.40 - NO

Norway YES 24.00 20.00 - 45.80 NO

Poland YES 22.00 - 14.00 - YES

Portugal YES 17.00 22.00 - 57.00 YES

Republic of Moldova YES 20.00 - - - YES

Romania YES 19.00 - - - YES

Russian Federation YES 20.00 - 3.00 - YES

Slovakia YES 23.00 4.00 25.00 35.00 YES

Slovenia YES - 7.50 - 35.00 NO

Spain YES 16.00 - 0.00 - YES

Sweden YES 25.00 6.18 33.80 67.10 NO

Switzerland YES 7.50 25.90 0.00 - NO

TFYR Mcedonia YES 19.00 - 0.00 21.00 YES

Turkey YES 18.00 15.00 - - YES

Turkmenistan YES 20.00 - 15.00 40.00 NO

Ukraine YES 17.50 10.00 50.00 85.00 YES

Annex Table 7: Excise Tax Cross-Country Comparison, WHO 2011

57

Annexure

United Kingdom YES - 20.00 - - NO

SEAR India - 10.00 12.10 - 40.60 YES

Indonesia YES 25.00 - - - YES

Nepal YES 20.00 40.00 - 40.00 YES

Sri Lanka YES 12.00 - - - -

Thailand YES 10.00 - - - YES

WPR Australia YES 14.00 24.00 25.00 50.00 NO

Cambodia YES 17.00 8.00 13.00 17.00 YES

China YES 16.00 8.00 10.00 25.00 NO

French Polynesia YES 5.00 38.00 41.00 63.00 NO

Japan YES - 46.50 - 22.80 NO

Lao PDR NO - 50.00 - - NO

Malaysia - - - - - NO

Micronesia (Fed. St.) YES 3.00 - - - NO

Mongolia YES 40.00 - - - NO

New Zealand YES 12.50 10.00 15.00 38.00 NO

Palau YES 4.00 10.00 - - NO

Philippines YES 10.00 48.00 44.00 33.00 NO

Republic of Korea YES 10.00 - - - NO

Singapore YES 3.00 - - - NO

Vietnam YES 10.00 - - - YES

WHO Country Sales Per Cent Tax as a Per Cent of Retail Price ExciseRegion Tax/VAT Sales Stamps

Tax/VAT Beer Wine Spirits

Contd.....Annex Table 7/-

Source: WHO 2004.

Documents

State of the Sri Lankan Alcohol Industry and Analysis of ... · State of the Sri Lankan Alcohol Industry and Analysis of Governing Policies iv Executive Summary The main objective