- India becomes first in South Asia
- Tax revenue will boost state income
- Excise Department stands firm
By Uwin Lugoda
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in cities like Ranchi and states like Jharkhand, Indian restaurant aggregators and food delivery apps like Zomato and Swiggy began door-to-door deliveries on 21 May.[/caption]
India is still in lockdown due to the rapidly rising number of Covid-19 cases observed in the country. The resultant lack of mobility has led to exponential growth in delivery services for food, beverages, and essentials, among other things. However, alcohol was not part of these delivery services – that is, until last week.
On 24 May, several Indian states opted to allow the country's liquor industry to resume sales, which had been stopped for weeks, via home deliveries. The state governments of urban districts like New Delhi and states like Odisha decided to allow the delivery of both Indian and foreign liquor and beer. These governments came to this decision after seeing the impact of the pandemic on the industry which directly affects the states’ annual revenue earned via excise duty on liquor.
Sri Lanka's liquor industry also experienced a similar impact during the country's lockdown period, and is yet to fully recover, even though several restrictions have been eased, allowing the sale of alcohol. This impact was especially felt during the month of April, when the industry lost its annual Sinhala and Tamil New Year and Easter sales. The collective sales during this period usually bring in a significant amount in revenue for the industry, similar to that of Christmas; the industry estimated that this year’s loss could be in the billions.
Speaking to The Sunday Morning Business, an official from a renowned liquor manufacturer stated that the company had lost sales to the value of about Rs. 3 billion, which they were expecting to make during this festive season.
“We had high hopes for this (Sinhala and Tamil) New Year. We wanted better sales than last New Year and we were prepared for this season. Last year, the Easter Sunday attacks had an impact on our end-April sales, which was a considerable loss,” the official added.
The official also stated that this will also lead to a loss in revenue for the local Government, given that over 70% of the company’s revenue is settled as taxes.
Furthermore, an official from an established distillery stated that the company is estimating a loss of over Rs. 5 billion due to the halt in liquor sales during this season.
The company had bigger plans for the New Year, and wanted to pick up the liquor sales that dropped in 2017 and continue to stagnate as a result of the tax relief given to soft liquor in the Budget 2018, the official noted.
Experiencing such an impact, and seeing as to how other non-essential food and beverage sectors have begun door-to-door deliveries in order to reduce the impact on their sales, many have asked why the local liquor industry does not adopt a similar strategy.
Current impact
In conversation with The Sunday Morning Business, an official of an established alcohol manufacturer stated that wine stores, bars, and restaurants in the industry's biggest districts are still closed, leading to lower volumes of sales than usual.
Even with major supermarket chains in the country being open, the contribution is only about 5% of total alcohol sales in the country, while wine stores and local bars and restaurants contribute the rest, the official said.
"Out of the supermarkets, only 67 Cargills outlets, 18 Keells outlets, 14 Laughs outlets, and 12 Arpico outlets have licences for the sale of alcohol. Because of this, those sales do not even contribute 5%."
The official stated that wine store customers might have transitioned to these supermarkets, but due to the limited number of outlets, their impact is negligible. The official added that the industry is also being affected by products not reaching outlets in certain regions, especially in the rural areas, in turn creating a gap in distribution.
"If you take a look at the liquor licenses, the total off-premise licenses which are given to bars and wine stores are about 1,200, and licenses given to restaurants amount to around 1,500. All of these places are closed in Colombo and other parts of the Western Province, therefore we are not getting the full flow of sales volume."
The Indian example
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Indian states like Haryana and Odisha have enabled consumers to place orders for alcohol either over the phone, through text, WhatsApp, email, or other online platforms.[/caption]
Indian states like Haryana and Odisha have enabled consumers to place orders for alcohol either over the phone, through text, WhatsApp, email, or other online platforms. The deliveries are then set to arrive at the consumer’s doorstep within six hours.
A statement released by the Odisha State Government explained that buyers will have to shell out more money to buy liquor, compared to pre-lockdown, as they plan on charging a special Covid fee, and have increased the maximum retail prices of the bottles by 50% from the 2019/20 rates. Apart from this, the consumers are also expected to pay the delivery charge separately, which is not supposed to exceed INR (Indian rupees) 300.
The State Government explained that this additional revenue generated from the Covid fee will be spent in the treatment of patients suffering from the virus and other related activities.
Retailers in the state are allowed to directly deliver alcohol to buyers and also through other food aggregators and delivery service providers. However, the delivery agents engaged by the retailers will need to have a “no objection” certification from the Excise Commissioner of Odisha.
"The liquor outlets will have to prominently display their phone, mobile, and WhatsApp numbers as well as email IDs and UPI (Unified Payments Interface) details for receiving orders and facilitating digital payments," said the Indian Excise Department in a media statement.
However, outlets in shopping malls and other containment zones are not allowed to make door-to-door alcohol deliveries.
Home deliveries are set to be allowed between 7 a.m. and 6 p.m. daily. The retailers and other agencies involved in home deliveries have to abide by the legal provisions which include a maximum order of two-and-a-half litres of Indian-made/foreign liquor and five litres of beer. The State also plans to develop an appropriate mechanism to enforce the legal age of drinking and other restrictions imposed by laws in the region.
The Liquor Traders Association of Odisha also released a statement that they welcomed this new initiative as it prevents the overcrowding aspect of over-the-counter sales.
Despite this, other parties such as Odisha Congress President Niranjan Patnaik termed the initiative regressive in a media statement.
He explained that this was a huge opportunity to ensure people quit the habit of drinking alcohol and therefore the Government should not have allowed liquor sales until the lockdown was completely lifted.
Elsewhere in cities like Ranchi and states like Jharkhand, Indian restaurant aggregators and food delivery apps like Zomato and Swiggy began door-to-door deliveries on 21 May.
“By enabling home delivery of alcohol in a safe and responsible manner, we can generate additional business for retail outlets while solving the problem of overcrowding," said Swiggy Vice President – Products Anuj Rathi in a statement made to media.
Swiggy had been in talks with several Indian state governments for home delivery of alcohol from local licensed retailers since 13 May. Afterwards, the company partnered with regional retailers and has trained their delivery partners online, to ensure that they abide by the Government’s recommended protocols.
The app has introduced measures such as mandatory age verification and user authentication to fulfil orders. Customers can instantly verify their age by uploading a picture of their valid government ID, followed by a selfie. Additionally, in order to limit the quantity of alcohol being ordered, the app has introduced a OTP (one-time password) which will be carried with every order, that needs to be provided at the time of delivery.
Zomato soon joined the initiative as well, delivering liquor within the approved states between 9 a.m. and 6 p.m. as per the state authorities’ instructions. The app is set to only include licensed alcohol retailers who have opted for the service and are able to complete deliveries within 60 minutes.
It has also introduced a new feature called Zomato Wine Shops where customers can reserve the alcohol of their choice.
The service is currently available in Indian cities like Ranchi and Bhubaneswar, and states like Jharkhand and Odisha; it is set to soon reach the cities of Rourkela, Balasore, Balangir, Sambalpur, Berhampur, and Cuttack.
Excise stance
According to Sri Lanka’s Deputy Excise Commissioner Kapila Kumarasinghe, this kind of initiative is not practical in the Sri Lankan market, and therefore the Excise Department has already instructed leading supermarkets and manufacturers on the non-feasibility of the initiative. He explained that such an initiative will go not only against the entire Excise Ordinance, but also the provisions given in the NATA (National Authority on Tobacco and Alcohol) Act.
"The Government will not compromise on all the access-control techniques which are currently in operation throughout the country. These have been incorporated into excise laws after more than 25 amendments due to the pressure and resistance shown by interest groups in Sri Lanka, in order to control the flow of liquor within the country."
Kumarasinghe stated that the e-sale and delivery of liquor may adversely affect access control techniques and measures by the Government. These techniques come in accordance with WHO (World Health Organisation) guidelines, which recommend countries put as much access control needed to regulate the consumption of alcohol.
He listed out several excise laws that may be violated if the e-sale and delivery of liquor was approved. These included violations of hours of sale, place of sale, types of liquor to be sold, age restrictions, transport restrictions, and proximity laws to schools and temples.
Response from the industry
Seeking the industry’s view on the matter, The Sunday Morning Business sought the opinion of an established alcohol manufacturer in Sri Lanka. They stated that the current excise laws were first written in 1912 and so are very outdated and do not suit the current requirements of the world.
They explained that everything, from the product range listed to the definitions of the products, and even certain licencing models, are not up to date and not clearly defined.
"There are so many grey areas in the current excise laws, because it is not taking a holistic approach; only a few random changes have been made here and there, but that has just further complicated things."
According to them, the current excise regulations only define four key areas of manufacturing, possession, transportation, and selling, with minor focus on consumption. They went on to state that they are trying to define online sales within the lines of these laws, and worry that the laws will not be enforced appropriately in the online setting.
However, the official explained that these issues will be solved if online sales are limited to only licensed outlets and there is a way to verify the buyer’s age. They suggested that to avoid giving minors access to alcohol through these deliveries, there should be a two-step verification process.
"The first step in the verification process should happen when the order is placed, where the consumer gives their ID number to the seller. The second step should happen upon delivery of the product, where the delivery partner has to check if the ID matches the buyer and take a snapshot of it to confirm with the seller. This way, the process will comply with the current laws."
Furthermore, they stated that the limited access to alcohol through legal means and the restrictions placed on it is one of the reasons the country's illicit alcohol sales are rapidly growing. They explained that the total government excise revenue is between Rs. 120-130 billion per year, out of which only 60% is contributed from legitimate sales volumes, while the other 40% is from illicit products.
WHO stats from the last 10 years show that Sri Lanka's illicit alcohol trade has grown by around 300% while the legal alcohol trade has only grown by 50%. The official attributes these stats to the limited access to legal alcohol compared to the illicit products, and the price difference between the two since the product that is legally sold is taxed. The officials stated that the sale of illicit alcohol increased in the last two months due to the lack of availability of alcohol through legal means.
They went on to say that this also has an indirect effect on illegal drug usage in the country, as some synthetic drugs are cheaper than legal alcohol and almost impossible for the authorities to trace.
"People go for illegal products because the regulations are only enforced on the legal ones and not the illegal ones, making these cheaper and easier to access."
Referring to a statement made by Deputy Excise Commissioner Kumarasinghe on the lack of excise revenue and the loss experienced during these months due to the excise tax being a production tax and not a sales tax, the officials explained that there has not been a sale for the last two months and that the current volumes they hold will not be consumed; the production of alcohol from manufacturers is low, which will in turn affect the future excise revenue too.
"The Excise Department keeps the regulations grey; these are not exposed to the world and they do not take new initiatives to change the existing laws to suit the current context. This has led to the corruption of the whole system. They do not even study how other countries have addressed the situation."
However, all said and done, what is clear is that Sri Lanka is still a long way away from activating a delivery mechanism for alcohol.
