New Lion Brewery chief makes strong case for pragmatic policy framework for alcobev industry

•  Calls for more liquor outlets that sell legal products 
• Says short-term goal should be to eliminate illegal liquor
• And long-term goal to reduce per capita consumption of liquor

The new CEO at Lion Brewery Ceylon PLC recently urged the need for drastic policy changes over consumption-killing taxes and the other restraints that prevent the legal alcoholic beverage (alcobev) industry from expanding its reach, which effectively push people towards illicit liquor, depriving the government of billions of rupees in tax revenues. 

According to Dr. Rajiv Meewakkala, who succeeded long-serving Suresh Shah, on average, one liquor outlet serves a vast 23.21 square kilometres in Sri Lanka, with distance increasing further outside the Western province. 
The worst is found in the Northern province, where one outlet serves people in an 80 square kilometre area, making it much easier for a group of people to get-together and distil themselves at their own backyard, which is an illegal act.  

“Clearly, the industry needs an improved policy framework to govern the production and sale of alcohol in the country, underscored by the need to curb the production, sale and consumption of illicit alcohol,” Meewakkala said in his annual review of operations to the company’s shareholders.  

Sri Lanka, with a landmass of 65,000 square kilometres, has only 2,800 licensed liquor outlets for a population of 21 million people, making it a fertile ground for the illicit liquor industry.  Sri Lankan law enforcement agencies were seen raiding, almost daily, many illicit distilleries, which in fact gained in frequency during the lockdowns. The mushrooming of illegal distilleries was largely caused by the closing down of the legal liquor outlets, citing COVID-19, although epidemiology has never shown any links between the virus and alcohol consumption. During the most recent economic restrictions, some of which still continue, the legal liquor industry became the main target of the policymakers, often nudged by the bureaucrats to ensure they remain shuttered, perhaps forgetting it is one of the top contributors to the state coffers to pay their salaries.  “Allowing more outlets would generate greater revenue for state coffers while ensuring that people in more remote areas could easily access legal products without being relegated to drinking illicit liquor,” Meewakkala added.  According to statistics, Meewakkala noted that the alcobev sector continues to be dominated by the informal sector, which employs illicit means of gaining market share, which in turn results in the state losing tax revenue.  “Unfortunately, the government policy over the years has pushed consumers towards illicit liquor,” he said. Due to social and religious reasons, consumption of liquor is largely frowned upon and is treated as almost a taboo subject in Sri Lanka. This attitude has caused numerous obstacles to the country’s legal liquor industry, which as an unintended consequence has led to a thriving illegal liquor industry, which pays no taxes and produces a much harmful product to human health.   Proposing what could be a blueprint for a potential policy framework, Meewakkala said in the short term the objective must be to eliminate illicit alcohol, which in fact happens invariably through creating affordability, increased availability and access to legally brewed beer and legally distilled spirits.  “In the longer term, the objective must shift to reducing the per capita consumption of pure alcohol through moderation and lower alcohol products.   A pragmatic policy mix would ensure a steady revenue stream for the government, whilst ensuring affordability to consumers. We remain hopeful that the government will implement a reasonable tax structure,” Meewakkala noted.