Harry J decries step-motherly treatment to coconut arrack industry

• Says exorbitant pricing structure makes coconut arrack expensive; warns of product going out of market if no action taken
• Calls for review of existing retail licence system as it is heading for gradual monopoly, paving the way for bootleggers to sell illegal product with ease
• Warns illegal and illicit liquor industry thriving despite health hazards and loss of tax revenue to State
• Renews call for revision of over 100 years old Excise Ordinance

Distilleries Company of Sri Lanka (DCSL) Chairman and business leader Harry Jayawardena has decried what he called as “step-motherly” treatment to the coconut arrack industry and warned of serious health and tax revenue issues if the Government fails to urgently address measures to nab the thriving illegal and illicit liquor industry.

The plight of the legitimate industry players paying taxes and complying with other requirements has been reinforced by Jayawardena in the Chairman’s Review of DCSL’s Annual Report for 2019/20 released last week.

During the year, DCSL turnover of the company remained unchanged at Rs. 82 billion but Profit After Tax improved by 7% to Rs. 5.8 billion as against FY19. The company also contributed Rs. 58 billion as taxes to the State coffers in FY20.

Jayawardena, in his review, reiterated that duplicated, adulterated and artificial toddy continue to be on the rise. “Large quantities are manufactured daily. Today, it is an industry by itself formed into a cottage industry dominated by a section of mudalalis. The proof is that the situation has multiplied by 20 times over what it has been for years and spread over the whole island,” he said. 

He noted that recent raids made by the Department of Excise and other enforcement authorities is proof that this situation exists. “We highlighted this menace but many people are conniving with some officers among regulators to avoid detection. As soon as one plant is detected, it will start running under a different name,” revealed Jayawardena.

Reiterating the dangers of artificial toddy, the DCSL Chief said it is a huge health hazard for consumers as poisonous products, not suitable for human consumption, and will create an unhealthy nation, with all the consequences that entails.

“The Government is crying foul because of low tax income from the Excise Department. If they control this situation, large revenues could be derived from the industry,” Jayawardena pointed out. 

He said the recent publicity has drawn attention to moonshine being produced in luxurious houses without the knowledge of the enforcement authorities. 

“Action should be taken to control this situation as it has reduced legal alcohol volumes,” he emphasised. 

Jayawardena welcomed the Government granting permission to the STF and armed forces to monitor this illegal liquor industry, and more of such detections have been made in the recent past compared to previous years, and thereby there had been somewhat of a dip in the illegal activity.

Jayawardena decried the step-motherly treatment faced by the coconut arrack industry. “With the prevailing exorbitant pricing structure of coconut arrack, sales volumes are shrinking daily. Today, 100% coconut products are out of reach of the consumer due to prevailing taxes,” DCSL Chief said. 

“The Government must seriously look into this matter to reduce prices in order to divert some of the ENA (extra neutral alcohol) customers to coconut products. We fear the real coconut arrack will soon be out of the market if immediate action is not taken,” warned Jayawardena. 

He also said that the Government should also look into the existing retail licence system, as it is heading for a gradual monopoly, paving the way for bootleggers to sell their illegal products with ease. 

He said that a handful of people control half of the retail licences for liquor (FL4 licence) granted in the country. “They have outlets to sell illegal alcohol along with legal alcohol. This practice should be stopped forthwith,” Jayawardena added. 

He said DCSL, since the new management in 1991, has strived to give the Sri Lankan consumer only the very best products. “We have always observed every Government regulation, paid every tax, excise duty and all other levies imposed judiciously, without exception. Unfortunately, the same cannot be said for all our competitors and the illegal and illicit liquor industry – for this is now an industry by itself,” he said. 

“This uneven playing field mainly affects lower-end consumers who, due to economic reasons and high taxes, are forced to purchase illegal or illicit products on which such levies have not been paid,” he added.

It was pointed out that although the purchasing power of the customers is diminishing by day, the consumers still patronise the legal products on which all legal levies have been paid. “If this can be delivered, then both the consumer and the country will benefit,” he added. 

DCSL Chief also reiterated the need to revise the Excise Ordinance, which he said is outdated and does not meet the current requirements of the industry and the country. “Surely an ordinance that is over 100 years old needs revision and changed to make it easier for the industry to perform in line with modern developments,” Jayawardena added.