By Madhusha Thavapalakumar
The implementation of an alcohol sticker requirement that was put off by the Government due to intense industry pressure has made a comeback during a meeting last week, angering stakeholders.
As exclusively reported by The Sunday Morning Business on 25 August, owing to the threats of a closure of operations by local alcohol manufacturers, particularly the Distilleries Company of Sri Lanka PLC (DCSL) and Lion Brewery PLC, the two biggest hard liquor and beer manufacturers respectively, the Government was forced to postpone the implementation of the law which was initially scheduled to come into effect from 22 August.
Responding to these threats, in a meeting on 13 August, the Ministry of Finance and the Department of Excise assured the industry that a digital solution would be provided as the manual pasting of stickers consumes more time and has high labour costs, which the Government was sympathetic towards at that point.
Due to the decision to shift to a digital solution, manufacturers were also assured by Minister of Finance Mangala Samaraweera that the previously awarded tender for the manual pasting of stickers would be changed.
However, during a meeting last week on 23 September chaired by Treasury Deputy Secretary A.K. Seneviratne, the Ministry of Finance has compelled stakeholders to comply with the physical and manual pasting of stickers within three months’ time, The Sunday Morning Business reliably learnt.
In the meeting, it was noted that based on a technical committee report done recently, the Department of Excise decided to implement the requirement for a foolproof sticker instead of a digital authentication code, and a digital option was not discussed at all. It should also be highlighted that no changes were made to the tender despite the earlier promise.
In response, the industry vehemently expressed their opposition and requested for a grace period of one year to import the required machinery to adhere with the requirement.
Reliable sources indicated that several deadlines for implementation were discussed but no agreement was reached, and the Chair of the meeting assured the industry that he would get back with a date following discussions with Minister Samaraweera.
However, The Sunday Morning Business reliably learnt that the industry would not agree to any deadline of less than 12 months and that manually pasting the stickers would be out of the question even if more than a year was provided.
Sources questioned whether these manual stickers would in fact ensure credibility as there was a recent incident where two bottles of imported liquor had foolproof stickers with the same pin number and, most importantly, the supplier of these duplicated stickers was the one to which this new tender has also been awarded.
Sources added that even though the industry welcomes the new sticker requirement, it is extremely unhappy about the Government’s decision to come back to the initial discussion of manual pasting and trying to forcibly implement it, regardless of continuous lobbying by stakeholders.
On 20 June, the Finance Ministry issued Excise Notification No. 04/2019 under the Extraordinary Gazette No. 2128/30, stating that all liquor manufacturers would be required to paste a “foolproof” sticker on all bottles and cans, effective from 20 August.
As exclusively reported by us, if the Government proceeded with the new requirement, the Distilleries Company of Sri Lanka PLC (DCSL) and Lion Brewery PLC threatened that they would shut down operations.
As these new stickers were initially set to be pasted manually, the foremost problem for manufacturers was that the speed of bottle manufacturing would be too rapid for the stickers to be pasted manually.
In addition to this, the industry was worried about the insufficient time provided to comply with the requirement and the additional costs involved in the printing of new stickers, which amounts to Rs. 2 per can or bottle.
The companies were also worried that the Gazette Notification would affect sales, as concerned consumers showed reluctance to purchase existing stocks in the market which do not have the new stickers.
Realising the technical issues behind the implementation, industry leaders including Lion Brewery and DCSL sent letters to the Ministry of Finance and the Department of Excise informing them of their intention to shut down operations if they went ahead with this requirement.
The implementation was put on hold until the Department of Excise submitted an expedited digital solution to the Ministry of Finance as an alternative to pasting stickers manually.
Speaking to The Sunday Morning Business last month, an official from the Department of Excise noted that the department was looking for technologies available in the market that manufacturers could affix with existing technologies at their manufacturing facilities. However, now the Government has come back to its earlier stance of requiring manual stickers.
The sticker requirement, which had been in the pipeline for months, received Cabinet approval recently, allowing it to proceed to obtain parliamentary approval. One of the main aims of the new requirement was to curb growing illicit liquor production in the country that reportedly causes billions in losses per annum to government revenue.
The Government expects to add Rs. 40 billion per annum to excise revenue under this sticker regime. According to the Ministry of Finance, the excise revenue target in 2019 was Rs. 130 billion, but it had only reached Rs. 68 billion as at end-July this year. The Department of Excise is also optimistic that this new sticker would result in better excise revenue in the second half of 2019 compared to the first half.
The Ministry said that the Department of Excise conducted over 49,000 raids in 2018 and received Rs. 253 million in fines due to penalties of the raids.
As exclusively reported by The Sunday Morning Business on 25 August, owing to the threats of a closure of operations by local alcohol manufacturers, particularly the Distilleries Company of Sri Lanka PLC (DCSL) and Lion Brewery PLC, the two biggest hard liquor and beer manufacturers respectively, the Government was forced to postpone the implementation of the law which was initially scheduled to come into effect from 22 August.
Responding to these threats, in a meeting on 13 August, the Ministry of Finance and the Department of Excise assured the industry that a digital solution would be provided as the manual pasting of stickers consumes more time and has high labour costs, which the Government was sympathetic towards at that point.
Due to the decision to shift to a digital solution, manufacturers were also assured by Minister of Finance Mangala Samaraweera that the previously awarded tender for the manual pasting of stickers would be changed.
However, during a meeting last week on 23 September chaired by Treasury Deputy Secretary A.K. Seneviratne, the Ministry of Finance has compelled stakeholders to comply with the physical and manual pasting of stickers within three months’ time, The Sunday Morning Business reliably learnt.
In the meeting, it was noted that based on a technical committee report done recently, the Department of Excise decided to implement the requirement for a foolproof sticker instead of a digital authentication code, and a digital option was not discussed at all. It should also be highlighted that no changes were made to the tender despite the earlier promise.
In response, the industry vehemently expressed their opposition and requested for a grace period of one year to import the required machinery to adhere with the requirement.
Reliable sources indicated that several deadlines for implementation were discussed but no agreement was reached, and the Chair of the meeting assured the industry that he would get back with a date following discussions with Minister Samaraweera.
However, The Sunday Morning Business reliably learnt that the industry would not agree to any deadline of less than 12 months and that manually pasting the stickers would be out of the question even if more than a year was provided.
Sources questioned whether these manual stickers would in fact ensure credibility as there was a recent incident where two bottles of imported liquor had foolproof stickers with the same pin number and, most importantly, the supplier of these duplicated stickers was the one to which this new tender has also been awarded.
Sources added that even though the industry welcomes the new sticker requirement, it is extremely unhappy about the Government’s decision to come back to the initial discussion of manual pasting and trying to forcibly implement it, regardless of continuous lobbying by stakeholders.
On 20 June, the Finance Ministry issued Excise Notification No. 04/2019 under the Extraordinary Gazette No. 2128/30, stating that all liquor manufacturers would be required to paste a “foolproof” sticker on all bottles and cans, effective from 20 August.
As exclusively reported by us, if the Government proceeded with the new requirement, the Distilleries Company of Sri Lanka PLC (DCSL) and Lion Brewery PLC threatened that they would shut down operations.
As these new stickers were initially set to be pasted manually, the foremost problem for manufacturers was that the speed of bottle manufacturing would be too rapid for the stickers to be pasted manually.
In addition to this, the industry was worried about the insufficient time provided to comply with the requirement and the additional costs involved in the printing of new stickers, which amounts to Rs. 2 per can or bottle.
The companies were also worried that the Gazette Notification would affect sales, as concerned consumers showed reluctance to purchase existing stocks in the market which do not have the new stickers.
Realising the technical issues behind the implementation, industry leaders including Lion Brewery and DCSL sent letters to the Ministry of Finance and the Department of Excise informing them of their intention to shut down operations if they went ahead with this requirement.
The implementation was put on hold until the Department of Excise submitted an expedited digital solution to the Ministry of Finance as an alternative to pasting stickers manually.
Speaking to The Sunday Morning Business last month, an official from the Department of Excise noted that the department was looking for technologies available in the market that manufacturers could affix with existing technologies at their manufacturing facilities. However, now the Government has come back to its earlier stance of requiring manual stickers.
The sticker requirement, which had been in the pipeline for months, received Cabinet approval recently, allowing it to proceed to obtain parliamentary approval. One of the main aims of the new requirement was to curb growing illicit liquor production in the country that reportedly causes billions in losses per annum to government revenue.
The Government expects to add Rs. 40 billion per annum to excise revenue under this sticker regime. According to the Ministry of Finance, the excise revenue target in 2019 was Rs. 130 billion, but it had only reached Rs. 68 billion as at end-July this year. The Department of Excise is also optimistic that this new sticker would result in better excise revenue in the second half of 2019 compared to the first half.
The Ministry said that the Department of Excise conducted over 49,000 raids in 2018 and received Rs. 253 million in fines due to penalties of the raids.