Sri Lanka’s demand for legal booze drops by 30 percent
ECONOMYNEXT – Sri Lanka’s economic crisis has taken its toll on the demand for legally produced alcohol, the Committee on Public Finance (COPF) revealed. Demand for liquor has dropped by 30 percent due to price increases and economic hardships which in turn is adversely affecting government revenue, an official said.
COPF chairman MP Anura Priyadharshana Yapa speaking to EconomyNext on Friday June 24 said: “Direct tax volume has gone down and this will be a big issue for the country.”
Direct taxes are a main source of government revenue and they are used for the payment of salaries, immediate monthly treasury payments and other government expenditure, he said.
An industry representative from a prominent distillery told EconomyNext that, due to demand decreasing, the monthly excise duty paid to the government which used to be approximately 9 billion rupees had reduced by 24.8 percent to to 6.7 billion rupees in May 2022.
Media Spokesperson for the Excise Department Kapila Kumarasinghe said: “Current price levels are far above those seen in the recent pass. Due to the hampering cash flow, we can assume that the demand for non-essentials goods will go down.”
Due to instability in factors of production, the industry has undergone three price revisions. Disposable income earned by consumers is also insufficient to fulfill recreational needs, prompting people to resort to cheaper and illicit alternatives.
“From overall alcohol consumers, 55 percent consume legal alcohol and 45 percent resort to illicit alcohol. Considering the price increments and standstill wages and salaries, this ratio will soon change with about 70 percent consuming illegal alcoholic beverages,” an industry source said.
Meanwhile, production costs and raw materials costs have increased. The industry has also been massively hit by Sri Lanka’s fertilizer crisis which has impacted the supply of the principal ingredient ethanol. Ethanol would previously retail at 500 to 600 rupees, but due to the fertilizer crisis inadequate domestic ethanol is being produced due to low harvests of sugar cane and corn.
Prominent local manufactures have urged the government to enable the importation of ethanol to cater even to the lower demands, as significant scarcity of ethanol hits the industry.
Price revisions to alcohol and cigarettes were made effective from June 1, and locally produced liquor by the Distilleries Company of Sri Lanka (DCSL) were revised.
The price of the widely consumed 750 milliliter Extra Special Label increased by 680 rupees, making the retail price 2,500 rupees per bottle. Locally manufactured beer containing 450 milliliters also rose by 30 rupees, with the market price at 330 rupees. A a single cigarette rose by 5 rupees, the market price being between 50 to 85 rupees. (Colombo/Jun24/2022)
