A Review On Palm Wine

Research Studies: Working Paper Series No.
19
December 2013
State of the Sri Lankan Alcohol Industry and

Analysis of Governing Policies
G.D. Dayaratne
INSTITUTE OF POLICY STUDIES OF SRI LANKA

100/20, Independence Avenue, Colombo 7, Sri Lanka
Research Studies: Working Paper Series No.19
December 2013
State of the Sri Lankan Alcohol Industry

and Analysis of Governing Policies
(Printed copy)
G.D. Dayaratne
INSTITUTE OF POLICY STUDIES OF SRI LANKA

Copyrig ht C Dec em ber, 2013
Institute of Policy S tudies of Sri L ank a
National L ibra ry of Sr i La nka-Catalog uing -In-Publication Da ta
Da yara tne, G. D.,

S ta te of the S ri Lank an Alcohol Indu stry a nd Analys is of Gove rning
Policies / G. D. Da yara tne .- Colombo : Institute of Policy Studie s
of Sri L anka , 2013
70p. ; 28 cm . .- (Working Pa per Series: No.19)
ISB N 978-955-8708-78-1
i. 338.47 6631095493 DDC23 ii. Title

iii. Series
1. Alc ohol Industry – Sri Lank a
ISBN 978-955 -8708-78-1
Pric e
Pl eas e address o rd ers to:

In stitute o f Po licy Stu dies of Sri Lan ka
10 0/ 20, Indepen den ce Avenu e, Colom bo 7, Sri Lanka
Tel : +94 11 2143 10 0 Fax: +94 11 26 650 65
E-m ail: i ps@ips.lk
Websi te: ww w.ip s.lk
Blo g: ‘Tal ki ng Eco nom ics’ – h ttp: //ip slk.bl ogsp ot.co m
Tw itter: ww w.twi tter.com /TalkEcon om icsSL
The views expressed are those of the author and do not necessarily represent those of the Institute of Policy
Studies of Sri Lanka.
Acknowledgements
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......................................................................................4
3.1 DCSL.............................................................................................................. 6
3.2 ID Lanka Ltd....................................................................................................6
3.3 W. M. Mendis & Company Ltd.........................................................................7
3.4 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 .................................... 12
7.1 Trend in Liquor Production.......................................................................... 13
7.2 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........................................................................................................... 25
12.1 Tax on Unrecorded Alcohol.......................................................................... 32
13. Tax on Unrecorded Alcohol.................................................................................. 32
13.1 Regulating Physical Availability ................................................................... 35
13.2 Modifying the Drinking Context.....................................................................36
13.3 Drink-driving ............................................................................................... 38
13.4 Regulating Alcohol Promotion...................................................................... 39
14. Emergent Policy Issues.......................................................................................... 42
15. Way Forward and Conclusion ............................................................................. 44
15.1 Way Forward ............................................................................................... 44
15.2 Conclusion....................................................................................................45
16. References............................................................................................................. 49
Annexure.....................................................................................................................51
i
State of the Sri Lankan Alcohol Industry and Analysis of Governing Policies
Identification of the Poor in Sri Lanka
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 Spending
Unit 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
ii
Acknowledgements
Acknowledgements
The author wishes to express sincere thanks to Saman Kelegama, Executive Director, IPS, for
overall 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 her
formatting assistance in finalizing the paper for publication.
iii
Executive Summary
The main objective of this study is to formulate a balanced policy option for decision makers
as Sri Lanka never had a comprehensive alcohol policy, inspite of continuity of enhancing
state revenue from legal alcohol. This study reviews the opinions of a cross- section of
stakeholders from the industry, wholesalers, retailers, illicit brewers and producers, moderate
drinkers, law enforcement officials, government officials and religious dignitaries , to develop
a 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 a
useful ally in combating the ill-effects of incorrect and ineffective policies and therefore, an
attempt has been made to equip decision-makers to make informed policy choices in light of
the current situation on alcohol production, sales, and consumption in the country.
As well as having psychoactive properties, alcoholic beverages are also regarded as

commodities. The production and sale of alcoholic beverages, together with the ancillary
industries, are important parts of the Sri Lanka economy by providing employment for many
people, income for alcohol producing companies and substantial tax revenues to government.
These economic and fiscal interests are often important determinants of policies that can be
seen as barriers to public health initiatives. In the Sri Lankan context, recognition of public
interest 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 these
are addressed by popular policies to an extent not possible to achieve expected results. In Sri
Lanka, declaration on excessive policies while depending on industry earnings to supplement
the state revenue, has given rise to conflicting and confusing issues and challenges that should
be met appropriately by policy makers and the civil society, and incorporated into policy
revisions on par with world best practices.
The Sri Lankan alcohol industry as well as the consumption of alcohol has reached a new
height 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 produced
maintained an increasing trend. Also, the production and importation of nearly all forms of
liquor and spirit have greatly increased despite the 'Mathata Thitha' alcohol restraining policies
introduced in 2005.
In the world over, taxation is the foremost mechanism in place to regulate the alcohol industry
and the market. But in Sri Lanka taxation policies have not been effective to discourage or
modify the drinking culture. As the population grows at a decreasing rate it appears that the
cohort of elderly age groups is expanding and more of them are entering into the band of
drinkers boosting the liquor consumption. Also, excessively restrictive excise laws have led to
a thriving of the illicit liquor industry in the country. Existing taxes are seen as being regressive
as the poorer folk have been forced to pay a higher proportion of their income in the form of
iv
Executive Summary
taxes. Although alcohol taxation, accounts for a considerable proportion of government tax
revenue, reducing consumption should be dealt with measures that influence the price of
alcohol. In this context,taxation according to alcohol content allows consumers to choose
products with a lower price with low alcohol content, continue to generate high government
revenue, and promote the production of low alcohol beverages.
Among some measures adopted by the government such as the ban on advertising of alcohol
in the media, prohibition of the sale of liquor in close proximity to religious places and places
where young adults congregate could be valued as an ethical and religious consideration but
doesn't have a great impact on the drinking pattern. Drunken driving and other offences such
as violence under the influence of alcohol are grave issues that are yet to be addressed despite
the legal measures in place.
The highly politicized nature of the illegal alcohol industry counteracts any measures taken to
right track the drinking habits as politicians1 are often correctly or incorrectly considered as
being involved in production and violating customs laws when importing input requirements
such as spirit for producing alcohol. The lack of seriousness and commitment when regulating
the alcohol industry and the lackadaisical attitude of some law enforcement officials in enforcing
the law, erode the justification of any effort to modify the drinking culture. The attempt to
restrain (Mathata Thitha) the physical availability of alcohol is undermined by issuing more
and 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 or
controlled amounts of alcohol needs to be encouraged by offering low taxation on soft alcohol
as practised in Western Europe, as this is more realistic than encouraging complete abstinence
or avoidance.
The issues of illegal alcohol consumption and harm caused under the influence of low quality
alcohol are problems that need to be addressed. In this task the government has a responsibility
to explore strategies to prevent people from indulging in consuming harmful illicit brew mainly
by specific sub-populations.
It is in this context, that the author attempts to discuss the misconceptions on the legal alcohol
trade and address the issues related to the illicit alcohol industry after assessment of the ground
reality.
1
http://www.dailymirror.lk/opinion/172-opinion/35090-editorial-mathata-thitha-cheers-or-jeers-n.html.
v
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Executive Summary
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nra;ag;gl;l kJghdj;jpdsT mjpfupj;j Nghf;fpNy fhzg;gl;lJ. mj;Jld; rfy tpjkhd
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.
viii
Executive Summary
cyfshtpa uP j papy; tupapayhdJ kJghdj; njhopw; W iw kw; W k; re; i jia

xOq; F gLj; J k; Kjd; i kahd KiwikahFk; . vdpDk; ,yq; i fapy; tupapay;
nfhs;ifahdJ kJg;ghtidf; fhyhrhuj;ij ke;jg;gLj;Jk; my;yJ rPu;gLj;jf; $ba
nraw;wpwDilajhff;; fhzg;gltpy;iy. rdj;njhif Fiwe;j tPjj;jpy; mjpfupg;gjdhy;
taJ Kjpu;e;Njhupd vz;zpf;if ngUFtJld; mtu;fSs; mjpfkhNdhu; kJghdg;
ghtidahsu; Fohj;jpDs; Eiofpd;wdu;. mj;Jld; mjpfkhd fl;Lg;ghLfSlhd rl;lq;fs;
ehl;bd; rl;tpNuhj kJghd njhopw;Wiwf;F ,l;Lr; nry;fpd;wJ. fhzg;gLk; tupfshdit
Viofs; mtu;fsJ tUkhdj;jpy; mjpfkhd njhifia tupahfr; nrYj;Jtij
typAWj; J k; Rikahff; fhzg; g Lfpd; w J. kJghdtupahdJ murhq; f j; j pd; tup
tUkhdj;jpy; Fwp;g;gplj;jf;f gq;F tfpj;j NghjpYk; ghtidf;FiwthdJ kJghd
tpiy mjpfupg;Gf;F ,l;Lr; nry;fpd;wJ. ,e;jr; #oypy; tupapayhdJ Efu;NthUf;F
Fiwe;j tpiyapy; Fiwe;j mw;fNfhy; cs;slf;fj;jpidf; nfhz;l kJghdj;jpidj;
njupT nra;a toptFg;gJld; cau; mur tUkhd <l;liy njhlUtjhfTk; Fiwe;j
mw;fNfhy; cs;slf;fj;jpyhd kJghd cw;gj;jpia Cf;Ftpg;gjhfTk; mikAk;.
murhq;fj;jpdhy; gad;gLj;jg;gLk; rpy eltbf;iffshd Clfj;Jiwapy; kJghd

tpsk;guj;jpw;fhd jil> kjtopghl;Lj;jyq;fs; kw;Wk; ,isQu;fs; $Lk; ,lq;fSf;F
mUfpy; kJghdk; tpw;gid nra;tJ jilnra;ag;gLjy; Nghd;wit ,d xOf;f kw;Wk;
rka <LghLfshff; kjpf;fg;gl;l NghjpYk; kJghdg; ghtidg; Nghf;fpy; vt;tpj ghupa
ghjpg;igAk; Vw;gLj;jtpy;iy. FbNghijapy; thfdk; kw;Wk; kJ Nghijapd; fhuzkhf
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.
rl;ltpNuhj kJghdj; njhopw;WiwhdJ mjpfsT murpay; kag;gLj;jg;gl;Ls;sJ.

murpay;thjpfs; rl;luPjpahfTk; rl;ltpNuhjkhfTk; kJghdk; jahupg;gjw;fhd ];gpupl;
Nghd;w nghUl;fspd; cw;gj;jp kw;Wk; ,wf;Fkjp nra;ifapy; Rq;fr; rl;lq;fis kPwp
<LgLtjhff; fUjg;gLfpd;wJ. kJj;njhopw;Wiw kw;Wk; rl;lj;ij nraw;gLj;Jtjpy;
rl;l mKyhf;fy; mjpfhupfspd; cj;Ntfkw;w Nghf;fpdhy; kJghdf; fyhrhuj;ij
khw;w KbahJ. “kJtpw;F Kw;Wg;Gs;sp” vDk; kJ xopg;G epfo;r;rpahdJ ngsjPf
uPjpahf murpay; nry;thf;fpdhy; kJghdr; rpy;yiw tpw;gidia epiyaq;fis
Nkd;NkYk; Muk;gpg;gjw;fhd mDkjpg; gj;jpuq;fis mtu;fNs tpepNahfpf;Fk; NghJ
kjpg;gpof;fpd;wJ.
Nkw;F INuhg;gh Nghd;W nkd;ikahd mw;fNfhypid cw;gj;jp nra;tjw;F tupr;

rYif toq;fp Cf;Ftpg;gjd; %ykhfTk; Fbg;gof;fj;ij khw;w KbAk;. Vnddpy;
,J KOikahd jtpu;g;G my;yJ jtpu;j;jiy tpl ajhu;j;jkhdjhFk;.
rl;ltpNuhj kJghdg; ghtid kw;Wk; Mgj;J kw;Wk; juq;Fiwe;j kJghdq;fs;
Nghd; w it milahsq; f hzg; g l Ntz; b a gpur; r pidfshFk; . ,e; j Ntiyapy;
murhq;fj;jpw;F kf;fs;; Mgj;J kpf;f rl;ltpNuhj kJghdq;fis EfUtjpypUe;J
ghJfhg;gjw;fhd je;jpNuhghaq;fisj; NjLk; flikAk; nghWg;Gk; cs;sd.
,e;j epiyikapy; vOj;jhsu; rl;ltpNuhjkhd kJghd tpw;gid kw;Wk; rl;ltpNuhjkhd

kJghd njhopw;WiwapYs;s jtWfis ajhu;j;jj;jpd; mbg;ggilapy; fye;jhNyhrpf;f
Kw;gLfpd;whu;.
ix
Introduction
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
1
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.
2
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.
3
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.
4
Key Players in the Industry
Figure 3.1
Share of Major Arrack Producers in 2011: Total Production
46.9 ml Proof Litres
Source: Commissioner General of Excise, Administration Report 2011.
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).
Figure 3.2
Percentage Share of Arrack Production by Major
Producers 2005-2011
100%
n
io
t 90%
c
Percentage share of Arrack production
u
d 80%
o
r
P
k 70%
c
rar 60%
A
f
o 50%
er
a
h 40%
S
e 30%
g
ta
n 20%
e
cr
e
P 10%
0%
2005 2006 2007 2008 2009 2010 2011
DCSL W.M.Mendis Rockland ID Lanka Acme Lanka All others
Source: Commissioner General of Excise, Administration Reports 2005- 2011.
5
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 Ltd

Established 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.
6
Annexure
Figure 3.3
DCSL 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.
7
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 1 Photo 2
At dawn, A ‘Tapper’ Moves from Tree to Placing the Clay Pot under the Opened
Tree Along Connecting Ropes Flower to Draw Nectar
8
Arrack Production Profile of Major Producers
Photo 3
Nectar 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 5.1
Molasses 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.
9
Table 5.2
Coconut 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 5.3
Special 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 5.4
Beer 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 5.1
Percentage Share of Beer Producers 2011 (Litres)
10
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:
11
• The partition of coconut estates in the coastal region from Panadura to Beruwala has greatly
affected 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 selling
nuts.
• The distillery owners have refused to give a higher rate for a litre of toddy. As a result, toddy
contractors 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 higher
wage 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.
12
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 7.1
Production of Arrack, Beer and Toddy 2001-2011
Source: IPS Alcohol Data Base.
13
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 which
caused 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.
14
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.
Figure 7.2
Alcohol Usage by Population in Selected District 2012

Hambantota, Matara, 31.3%
29.3%
Trincomalee, Colombo, 42.8%

43.5%
Gampaha, 33.3%
Polonnaruwa,
38.5%
Galle, 40.1%
Jaffna, 30.0%
Kegalle, 29.0%
Batticaloa, 31.6%
Kandy, 33.8% Anuradhapura,
38.0%
Source: DCSL, ID Lanka Ltd.
15
National Drug Control Board. A Handbook of Drug Abuse Information – 2011.
15
Table 7.1
Recorded 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.
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
16
Shashreeka Abeysinghe, Investment Analyst TKS Research.
16
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.
17
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.
18
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.
Table 9.1
Average Expenditure for One Month on Alcoholic Beverage per
Spending Unit by Income Group
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 30000
Toddy 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
Source: Central Bank Consumer Finance Survey 2003/2004.
19
Figure 9.1
Monthly Expenditure on Liquor by Income Group-Rs.
Source: Central Bank Consumer Finance Survey 2003/2004.
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.
Table 9.2
Average Monthly Expenditure on Liquor by Household and by Person Rs.
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
Source: Department of Census and Statistics, Household Survey on Income and Expenditure in 2009.
20
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.
21
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.
22
Revenue from Liquor
Figure 10.1
Number 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.
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
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.
23
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
Identification
Year Fiscal Position Report 2013. of the Poor in Sri Lanka
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).
Figure 11.1
Total Tax Revenue, Excise and Liquor Revenue 2005-2012 (Rs. bn.)
Source: Central Bank Annual Report 2011, 2012.
Figure 11.2
Revenue from Liquor as a Percentage of GDP 2005-2012
Source: Central Bank Annual Report 2005-2012.
24
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.
25
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

Identification is described
of the Poor in Sri Lanka 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.
26
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.
27
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 beIdentification of the Poor in
added to accommodate Sri Lanka
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
28
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.
29
Table 12.1
UK Excise Duty Rates from 2000-2013 British Pounds ( £)
Date of Change Wine 5.5-15% Sprit 37.5% Beer 1 % Abv Beer 4% Abv
AbvIdentification
75 cl Bottle of the70 cl Bottle
Poor in Sri Lanka 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
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 12.2
Sri 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.
30
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 %.
31
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.
32
Need of a Comprehensive Alcohol Policy
Table 13.1
Number of New Liquor Licences Issued 2005-2011
Year 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.
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
33
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.
34
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-related
Problems 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: A
Longitudinal 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. Prev
Sci. 2001; 2:123–34.
35
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-
36
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.
37
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.
38
Table 13.2
Drunk Driving Laws by Country
Country BAC Percentage Penalty
China 0.02% (CNY 200–500 fine, 1–3 months licence

suspension); 0.08% (up to 15 days prison, 3–6
months 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 Driving
Improvement Course.
Japan 0.03% Regardless of alcohol readings, police may also

determine the driver to be “driving drunk,” which is
punished more severely than exceeding the designated
alcohol 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 Mofussil

police stations and tested. using breath analyser. In most
towns 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 by

police the driver is produced before the closest
government medical officer who examines and
determines whether the driver is under influence. If the
driver refuses examination by the medical officer he is
considered to have been under influence by default.
Source: International Centre of Alcohol Policy 2006, Blood Alcohol Concentration Limits Worldwide, ICAP Washington D.C.
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,
39
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.
40
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
41
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 of
alcohol 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.
42
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.
43
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 want
to drink to guide them into drinking what is less harmful, and drink the way it is less
so.
• Re-evaluate the credibility of the licence holders to sell liquor before renewal of
their 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 outlets
per 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.
44
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 Alcohol
Policy" followed by an Action Plan.
• Establish an advisory panel including representatives from the alcohol industry, to partner a
campaign aimed at alcohol misuse, and illicit alcohol. There is a need to set out ethical
principles and goals that the country can use to develop a comprehensive alcohol policy and
programmes.
• 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 for
government, 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 the
consequences on the health and well-being of individuals, families and communities. Gov-
ernment should work on public education with experts from across the medical, alcohol
policy, and research community. The industry should be included as a partner.
• Policy should combine with an effective enforcement mechanism to combat illicit liquor to
curb alcohol abuse. A public health approach should be planned out with a coordinated
range of measures covering supply side controls of illicit alcohol, and initiative to target
specific 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 legal
drink drive alcohol level would save many lives.
• Develop a taxation policy that ensures a real price of alcohol and taxation based on volume
of alcohol and to arrest the expansion of illicit alcohol. Reduction in alcohol tax observed in
developed countries should be studied against taxation and rigorous rules governing the legal
alcohol 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.
45
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.
46
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;
47
• 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.
48
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50
Annex Table 1 : The Quantities of Liquor Manufactured (Qty Proof Ltrs) 2005-2011
Type 2005 2006 2007 2008 2009 2010 2011
Molasses Arrack 960,100.81 2,009,848.58 1,816,585.66 509,366.39 1,583,853.26 2,621,075.78 2,936,887.50

Coconut and Processed Arrack 2,852,309.30 4,782,772.05 3,469,448.01 3,499,141.24 4,614,539.63 4,937,920.93 5,605,391.75
Special Arrack 32,368,251.29 35,463,676.52 41,690,834.32 38,462,614.39 31,813,242.410 37,694,499.38 41,078,402.47
Country made foreign liquor 2,276,330.20 2,684,459.79 2,950,958.01 3,324,862.30 3,027,908.76 4,007,107.76 4,166,810.17
Malt liquor (Beer) alcohol per cent below 5per cent 29,330,563.87 24,797,350.85 19,953,174.31 16,701,601.62 12,847,504.09 15,303,369.10 14,409,672.79
Malt liquor (Beer) alcohol per cent above 5per cent 22,218,369.78 22,026,795.48 29,582,116.86 40,755,211.73 42,697,462.49 56,100,775.92 73,090,194.87
Wine 6,317,075 10,894.93 45,172.87 7,145.73 6,261.85 8,523.09 35,644.00
Bottled Toddy 4,716,896.50 8,330,944.36 6,463,970.63 5,334,263.20 4,272,662.37 5,658,214.64 5,805,331.20
Denatured Spirits 34,529.00 18,480.50 32,560.50 0 0 0 0
Total 94,763,667.81 100,125,223.05 106,004,821.16 108,594,206.60 100,863,434.86 126,331,486.60 147,128,334.75
Source: Administration Report of the Commissioner General of Excise - various issues.
Annex Table 2: Revenue from Liquor Manufactured (Rs) 2005-2011
Type 2005 2006 2007 2008 2009 2010 2011
Molasses Arrack 383,352,982.87 816,121,853.34 823,270,765.90 264,985,705.20 949,329,809.76 1,729,711,276.56 2,566,431,488.24

Coconut and Processed Arrack 1,074,806,717.21 1,905,371,257.56 1,565,684,417.39 1,825,493,217.62 2,744,353,884.83 3,257,856,436.66 4,902,477,700.21
Special Arrack 11,915,918,259.35 14,265,825,946.45 17,389,241,185.51 20,053,314,107.13 19,012,844,171.17 24,701,129,159.63 35,874,032,176.63
Country made foreign liquor 1,125,769,382.37 1,424,917,339.97 1,714,991,346.60 2,181,802,798.64 2,198,455,422.61 3,178,231,698.99 4,228,465,959.46
Malt liquor (Beer) alcohol per cent below 5per cent 834,716,576.26 929,900,656.69 750,029,269.86 672,989,283.92 616,680,196.08 854,015,587.90 1,172,122,143.74
Malt liquor (Beer) alcohol per cent above 5per cent 986,071,522.76 1,178,433,557.93 1,586,274,110.38 2,299,385,325.6 2,732,637,599.36 4,072,386,176.93 7,092,064,063.81
Wine 1,411,473.12 2,009,643.00 2,703,916.10 2,700,597.93 2,781,330.27 4,312,461.87 4383958.14
Bottled Toddy 1,192,630.30 815,690.65 47,712,590.80 53,342,632.00 42,726,623.75 56,582,146.45 58,053,312.00
Denatured Spirits 103,271.00 83,162.25 167,272.50 0 0 0 0
Total Duty on Liquor Manufactured (Rs) 16,323,342,815.24 20,523,479,107.84 23,880,074,875.04 27,354,013,668.0428 ,299,809,037.83 37,854,224,944.99 55,898,030,802.23
Source: Administration Report of the Commissioner General of Excise - various issues.

Annexure
51
52
Annex Table 3: Molasses Arrack Production 2005-2011 Qty (Proof Ltrs)
Company 2005 2006 2007 2008 2009 2010 2011
W.M. Mendis & Co., Ltd. 222,840.00 222,751.20 329,370.00 290,941.3 310,834.36 185,899.11 212,103.11
International Distilleries Ltd. 538,648.55 1,328,273.47 1,413,535.02 101,446.93 1,201,097.33 2,321,444.20 1,937,130.33
Uva Glen (Pvt.) Ltd. 40,983.00 82,767.10 25,225.28 28,039.93 2,787.11 4,717.39 4,518.49
Manori Lanka (Pvt.) Ltd. 10,045.20 8,428.00 5,007.87 7,300.06 17,953.45 34,887.41 9,448.34
Rio Marketing (Pvt.) Ltd. 4,656.98 10,125.24 2,377.44
Randenigala Distilleries 4,534.40 9,927.90 29,449.76 25,049.06 14,193.59 6,236.01
Hingurana Distilleries Company 44,145.70 76,753.00 11,619.94 24,947.46 23,055.37 21,614.61 2,444.76
Thikkam Distilleries Company 44,938.90 43,078.90
Walikamum Distilleries 14,584.40 189,528.67
Nippon Expo 1,048.41 902.13 1,534.07
Acme Lanka Pvt. Ltd. 6,900.00 15,455.24
Scotland Distilleries Co., Ltd.. 3,987.90 3,672.00
Varani 1,046.07 21,747.62
Sri Lanka Distilleries Ltd., 21,741.30 11,893.35
Classic Distilleries (Pvt) Ltd. 15,455.24 12,893.51 6,038.21 8,619.57
Randiya (Pvt ) Ltd. 1,038.54
Perecyl Ltd.. 38,360.63 704,852.82
Total 960,100.81 2,009,848.58 1,816,585.31 509,366.39 1,583,853.26 2,621,075.78 2,936,887.50
Source: Administration Report of the Excise Commissioner General – various issues.

Annex Table 4: Coconut and Processed Arrack Production 2005-2011 Qty (Proof Ltrs)
Company 2005 2006 2007 2008 2009 2010 2011
Distilleries Co. of Sri Lanka Ltd. 2,213,439.26 3,475,490.37 2,502,527.61 2,126,138.71 1,895,440.15 1,903,233.04 2,153,211.99
W.M. Mendis & Co. Ltd. 54,350.71 76,437.60 37,528.78 66,143.06 267,137.00 473,133.95 49,075.35
International Distilleries Ltd. 201,649.19 558,547.77 554,026.50 441,244.04 443,623.01 433,708.71 504,771,.08
Uva Glen (Pvt) Ltd. - - 659.58 132.98 3,521.24 3,421.32 2,531.12
Rockland Distilleries Ltd. 340,066.55 630,932.27 315,477.51 835,845.37 1,539,759.84 1,464,572.86 1,153,771.74
Nippon Expo Ltd. 14,310.90 10,351.80 9,085.32 6,144.58 9,827.10 10,774.16 7,984.02
Wayamba Distilleries (Pvt.) Ltd. - - -
Co-operative Distilleries 3,556.93 7,125.90 814.68 260.04 1,306.59
Randenigala Distillery - - 7,315.57 5,102.42 1,202.31 1,182.65
Scotland Distillery 10,011.86 1,004.85 8,673.70 6,554.54 57,240.89 64,325.97 88,112.50
Hingurana Distilleries Co., Ltd. 3,473.50 2,769.10 3,055.31 4,398.82 16,145.08 27,233.11 24,463.62
A.E.F. (Pvt.) Ltd. 484.00 - 1,437.61 378.98 1,271.27
Rio Marketing Services (Pvt.) Ltd. 702.10 - -
Acme Lanka Company Ltd., 8,276.60 18,628.20 7,966.61 4,639.83 9,762.53 63,780.78 109,323.68
Perecyl Pvt. Ltd. - 18,765.43 359,404.88 480,422.71 708,216.59
Sri Lanka Distilleries Ltd. 519.30 207.48 1,568.95 1.093.20
V & A (Pvt)Ltd. 279.25
Total 2,852,308.38 4,782,772.05 3,469,448.52 3,499,141.24 4,614,539.63 4,937,920.93 5,605,391.75

Annexure
53
54
Annex Table 5: Special Arrack Production 2005-2011 Qty (Proof Ltrs)
Product: Special Arrack 2005 2006 2007 2008 2009 2010 2011
Distilleries Co. of Sri Lanka Ltd. 26,748,790.52 29,359,608.34 34,750,886.75 32,533,070.76 28,216,409.79 32,989,276.56 35,663,081.33
W.M. Mendis & Company 353,931.00 585,662.17 490,876.00 486,629.10 248,998.29 146,578.31 38,052.53
Uva Glen (Pvt.) Ltd. 133,043.03 143,797.10 171,373.73 111,093.91 97,096.37 99,748.21 118,204.09
A.E.F. (Pvt.) Ltd. 318,298.02 377,197.02 328,433.47 38,376.32 134,297.23
Rockland Distilleries Ltd. 1,006,834.37 1,350,421.39 1,858,840.30 894,840.38 108,656.02 391,717.19 12,298.68
Rio Marketing (Pvt.) Ltd. 56,085.79 113,902.57 117,450.14
Randenigala Distilleries Ltd. 320,992.70 507,398.10 433,480.42 293,441.69 229,174.32 12,286.52
Acme Lanka Company Ltd. 200,451.30 301,221.60 421,988.00 388,905.60 422,604.77 389,852.19 580,144.00
Wayamba Distilleries Ltd. 110,822.90 - -
Perecyel Company (Pvt.) Ltd. 115,764.34 107,256.53 143,269.91 274,569.47
Scotland Ltd. 233,134.02 265,524.48 232,547.71 167,077.66 65,295.15 150,955.54 6,295.80
International Distilleries Ltd. 2,436,203.97 1,837,940.00 2,023,113.27 2,576,594.22 1,522,604.08 2,290,224.52 2,699,985.23
Nippon Expo Ltd. 119,329.40 137,289.90 183,992.29 138,843.57 131,396.41 122,708.20 101,603.64
Hingurana Distilleries Ltd. 75,496.70 160,948.30 342,093.82 392,392.15 370,149.86 464,050.30 478,160.00
Co-operative Distilleries 26,195.72 50,864.70 22,531.89 3,460.25 6,989.57 2,655.03

Global Blenders & Bottlers Ltd. - - -
Classic Manufacturer - 44,077.61 26,406.47 6,428.95 23,189.37 33,066.74 1,559.45
Nippon Lanka Ltd. - - 1,834.83 11,627.12 34,869.92
Sri Lanka Distilleries Co., Ltd. - - 4,843.33 2,489.32 1,079.55 58.40 74,907.70
Randiya Marketing Service (Pvt)Ltd 1,516.15 92,321.01 132,406.69 115,919.31
V & A (Pvt) Ltd 180,646.40 61,395.83
Total 32,368,251.29 35,463,675.79 41,690,833.52 38,462,614.39 31,813,242.41 37,694,499.388 41,078,402.47

Annex Table 6: Bottled Toddy Production 2005-2011 (Qty-Ltrs)
Manufacturing Institution 2005 2006 2007 2008 2009 2010 2011
Eagle Bottled Toddy Manu. 458,610.00 473,855.00 471,920.00 477,255.00 474,195.00 547,995.00 40,765.00
Singha Bottled Toddy Manu. 709,083.75 889,113.75 663,350.00 636,485.62 637,530.00 764,590.00 727,200.00
Shooting Star Bottled Toddy Manu. 272,460.00 678,518.75 559,110.00 621,540.00 555,795.00 467,955.00 515,215,00
Commander Bottled Toddy Manu. 282,443.75 488,385.00 240,005.00 117,615.00 101,040.00 139,525.00 35,310.00
Manori Lanka Bottled Toddy Manu. 823,567.50 1,013,993.75 1,102,028.75 1,121,925.00 982,500.00 926,220.00 906225.00
Golden Eagle Toddy Manu. Madampe 292,787.50 738,051.25 421,750.00 117,040.75 8,530.00 7,181.00
Three Lions Toddy Manu. 354,748.75 361,086.88 196,641.25 119,735.20
Supreme Bottled Toddy Manu. - - -
New Commando Bottled Toddy Manu. 218,166.88 801,236.25 325,321.50 6,141.25 113,989.25 135,145.00 134,090.00
Chanknai Palmyra Development Co-operative 125,218.50 101,038.75 82,391.25 40,757.50 27,753.75 48,136.87 38,275.62
Horse Power Bottled Toddy Manu. 361,307.50 732,651.25 657,041.25 381,395.00 416,070.00 416,355.00 452,730.00
Wayamba Super Bottled Toddy Manu. 40,155.00 549,107.50 448,620.00 541,055.00 557,585.00 626,690.00 665,665.00
Golden Eagle Bottled Toddy Manu. Colombo 45,420.00 69,387.50 22,385.00 1,2440.00 156,390.00 160580.00
Rio Marketing Bottled Toddy Manu 437,896.00 88,909.38 -
Empire Bottled Toddy Manu. 142,341.25 190,263.75 77,256.00 24,185.00 2,275.00 7,300.00
T. S. R. Bottle Toddy Manu. 103,255.00 800,852.50 1,140,345.00 915,540.00 883,530.00 575,385.00 81,695.00
Super Star Bottled Toddy Manu. 12,202.00 305,276.86 30,975.00
Payagala Pirisidu Coconut Toddy Manu. 37,233.13 24,781.25 -
Palmyra Toddy- Uyilankulam Co-operative - 24,435.00 - 2,709.75
Maipay Bottled Toddy Manu. - - 12,455.63 17,063.75 19,038.75 27,235.00 28,438.75
Thelippalei Bottled Toddy Manu. - - 12,375.00 11,062.50 15,127.50 21,336.52 18,845.62
A.M.P. Bottled Toddy Manufacturing 106,538.12 323,929.37 202,017.50 25,481.25
New . T.S. R. Bottle Toddy Manu. 59,310.00 131,100.00 220,365.00 28,190.50
Atchchuvely Bottled Toddy Manufactory 4,468.75 8,500.00 9,042.50 13,207.50
Nemta Bottle Toddy Production 33,215.00 06,570.00
Point Pedro Palm Development Co-operative 907.50 6,819.37 12.168.12
11Chavakacheri Palm Development Co-operative 1750.00 24,074.37 46,211.250
Pandathiruppu Palm Deelopment Co-operative 12,356.25 56,663.12 59,052.50
Nemta Bottled Toddy Manufacturing 212,505.00
Kondavil Palm Development Co-operative 3,268.75 14,106.25
Kayts Palm Development Co-operative 14,070.62 14,459.37
Jaffna Palm Development Co-operative 11,633.75 12,798.12
Kareinagar Palm Development Co-operative 11,508.12 21,146.25
Karaveddy Palm Development Co-operative 4,668.75 10,191.87
Chunnakam Palm Development Co-operative 14,138.37 15,184.00
Welanai Palm Development Cooperative 3,523.75
Kopai Palm Development Cooperative 3,708.75
Ariyalei Palm Development Cooperativ 3,253.75
Kodikaman Palm Development Cooperativ 4,053.75
Camal Bottled Toddy Manufactory 7020.00
Total 4,716,896.50 8,330,944.36 6,463,970.63 5,334,263.200 4,272,662.37 5,658,214.64 5,805,331.20

Annexure
55
Annex Table 7: Excise Tax Cross-Country Comparison, WHO 2011
WHO Country Sales Per Cent Tax as a Per Cent of Retail Price Excise
Region Tax/VAT Sales Stamps
Tax/VAT
Identification of the Poor Beer
in Sri Lanka 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
56
Annexure
Contd.....Annex Table 7/-
WHO Country Sales Per Cent Tax as a Per Cent of Retail Price Excise
Region Tax/VAT Sales Stamps
Tax/VAT Beer Wine Spirits
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
Source: WHO 2004.
57

A Review On Palm Wine

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Research Studies: Working Paper Series No.

State of the Sri Lankan Alcohol Industry and

INSTITUTE OF POLICY STUDIES OF SRI LANKA

State of the Sri Lankan Alcohol Industry

INSTITUTE OF POLICY STUDIES OF SRI LANKA

National L ibra ry of Sr i La nka-Catalog uing -In-Publication Da ta

Da yara tne, G. D.,

i. 338.47 6631095493 DDC23 ii. Title

1. Alc ohol Industry – Sri Lank a

ISBN 978-955 -8708-78-1

Pl eas e address o rd ers to:

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

Identification of the Poor in Sri Lanka

Finally, the author wishes to thank the Commissioner General of Excise, D. G. M. V.

As well as having psychoactive properties, alcoholic beverages are also regarded as

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2. History of Sri Lanka Alcohol Industry

3. Key Players in the Industry

Source: Commissioner General of Excise, Administration Report 2011.

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

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

3.2 ID Lanka Ltd

3.3 W.M.Mendis & Company Ltd

3.4 Rockland Distilleries (Pvt) Ltd

4. Sri Lanka Alcohol Brand Name " Arrack"

5. Arrack Production Profile of Major Producers

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

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

6. Toddy Tapping Industry

7. Liquor Production and Consumption Trend in Sri Lanka

7.1 Trend in Liquor Production

Source: IPS Alcohol Data Base.

7.2 Trend in Liquor Consumption

Trincomalee, Colombo, 42.8%

Source: DCSL, ID Lanka Ltd.

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

9. Household Expenditure on Alcohol Consumption

Alcoholic beverage Income Group (average) One Month Income

Source: Central Bank Consumer Finance Survey 2003/2004.

Source: Central Bank Consumer Finance Survey 2003/2004.

10. Illicit Alcohol

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

11. Revenue from Liquor

Source: Central Bank Annual Report 2011, 2012.

Source: Central Bank Annual Report 2005-2012.

12. Excise Taxes

The effect of price changes on alcohol consumption

Beer( Alcohol+5%) Lit 43.50 48.50 53.50 53.50 54 64 64 74 79 96

Source: Excise Commissioner General’s Administration Reports Various Years.

12.1 Tax on Unrecorded Alcohol

13. Need of a Comprehensive Alcohol Policy

13.1 Regulating Physical Availability

13.2 Modifying the Drinking Context

Country BAC Percentage Penalty