• Tainted by scandals in Kenya, India
• Govt. says too late to cancel
• Industry not consulted before awarding tender

By Madhusha Thavapalakumar A company with a history of corruption in foreign markets has been awarded the tender for printing foolproof stickers for local liquor products despite strong industry opposition. The Sri Lankan Government has repeatedly chosen to continue working with this company, which was initially awarded the tender in 2016, without consulting stakeholders. The Sunday Morning Business learnt that the Indian company, Madras Security Printers (MSP), was involved in two scandals in India and Kenya, in 2017 and 2018, respectively. The foolproof sticker is a new requirement introduced by the Ministry of Finance and the Department of Excise to curb the mushrooming illicit liquor production in the market and reducing the loss in state revenue caused by it. MSP was awarded the project in 2017 and continues to hold it despite the above scandals coming to light. In its home country of India, MSP was awarded the Aadhaar card project, along with other parties. Aadhaar is a 12-digit unique identification number that can be obtained voluntarily by the residents of India, based on their biometric and demographic data. The number is issued by the Unique Identification Authority of India (UIDAI). Even though the number is given by UIDAI, information collection and biometric capturing are done by enrolment agencies, most of which are private firms hired by UIDAI. However, in 2017, UIDAI suspended six enrolment agencies, including MSP, for taking bribes to submit information given by the people, although the Aadhaar programme was supposed to be free of cost to the public. MSP is also alleged to have colluded with Kenya Bureau of Standards (KEBS) and in June last year, counterfeited labels on thousands of bags of sugar in the local market which were completely unfit for human consumption. Soon after the illicit trade came to light, the Consumers Federation of Kenya sought the immediate cancellation of the tender awarded to MSP to produce certification labels and also sacked senior officials of KEBS. However, MSP denied the allegations and noted that the fake stickers had not originated from the company. MSP dealings in SL In addition to this, reliable sources pointed out a recent local incident, where two imported liquor bottles had stickers with the same pin number – the stickers were printed by MSP. Even though the initial announcement to comply with the sticker requirement was made to the industry early this year, the tender for sticker printing was initially floated in 2016 and was awarded to MSP. However, due to several shortcomings pointed out by the Procurement Appeal Board at the Presidential Secretariat, the tender was recalled in 2017. It was re-awarded to MSP, without industry consultation, on both occasions. Interestingly, on both occasions, the Technical Evaluation Committee (TEC) had recommended MSP be awarded the project. MSP, which bid $ 3.19 per 1,000 stickers in the first tender, bid $ 2.80 higher in the second tender, while another bidder proposed $ 4.57 per 1,000 stickers. The second tender was also speculated to have been cancelled due to allegations of a biased tender procedure. The Sunday Morning Business spoke to Treasury Deputy Secretary A.K. Seneviratne to determine the reasons behind the Government’s decision to continue with MSP. Seneviratne noted that while no payments were ever made to MSP, the Government is not in a position to call off the tender as it has been two years since the tender was awarded. Therefore, the Government may be forced to pay a penalty in case of cancellation. “We can’t cancel the tender now. We have signed the contract for a period of five years. We are going to go ahead with the manual sticker anyway,” Seneviratne noted. Industry concerns The implementation of the requirement of foolproof stickers on local liquor products had been in the pipeline for years, but was initially announced to the industry on 2 January this year. The Ministry of Finance asked the industry to comply with the requirement by the first week of February and promised to share sample stickers and details of applicators within two to three days of the meeting. However, the Ministry failed to provide the sample stickers within the promised timeline, only doing so on 23 January, while details of applicators were shared only on 19 February. The Sunday Morning Business reliably learnt that the industry was not provided any information pertaining to the sticker specifications, neither on paper quality nor the expected standard, and the printed stickers had not reached Sri Lanka even by 23 January, which was when the samples were handed over. Moreover, even the Department of Excise was unaware of the technical specifications. Industry sources told us that the stickers selected by the Government were just normal paper stickers that could easily be duplicated by anyone, and the glue provided to paste the sticker was also basic glue. The machine suppliers in Sri Lanka, who were also present at the 23 January meeting, communicated to the Commissioner General of Excise that Sri Lanka does not have compatible machines to produce the stickers; therefore, the industry was left with no option but to comply with the Ministry’s requirement. During these meetings, the industry was asked to pay Rs. 5 per sticker and also to paste them manually on each liquor bottle or can. In response, the industry questioned as to what the price of the sticker was, as the bid placed by MSP during the second tender was a little over Rs. 1,000 for 1,000 stickers, which meant the price of one sticker was around Rs. 1. Following continuous questions on this price anomaly, the Ministry of Finance brought down the price of one sticker to Rs. 2 from the original Rs. 5. However, the industry still complained about the insufficient time period given to comply with the requirement and the difficulty of manually printing of the stickers. After the alcohol industry voiced its concerns, assurance was provided by the Ministry of Finance that it would not proceed with the new law without further stakeholder consultation. However, on 20 June, the Finance Ministry issued Excise Notification No. 04/2019 under the Extraordinary Gazette No. 2128/30, stating that all liquor manufacturers would be required to paste a “foolproof” sticker on all bottles and cans, effective from 20 August. Prior to the issuance of this Gazette, the stakeholders were not consulted as promised, The Sunday Morning Business reliably learnt. Following the issuance of the Gazette, as exclusively reported by The Sunday Morning Business on 25 August, local alcohol manufacturers, particularly the Distilleries Company of Sri Lanka PLC (DCSL) and Lion Brewery PLC, the biggest hard liquor and beer manufacturers, respectively, threatened that they would close down their operations if the Government went ahead with the requirement. According to industry sources, the foremost problem for manufacturers was that the speed of bottle manufacturing would be too rapid for the stickers to be pasted manually. Soon after the threats, the Ministry of Finance conducted a meeting with the industry on 13 August, where Minister Mangala Samaraweera assured, once again, that they would not implement the requirement until they finalise a digital solution for the issues and, thereby, also promised to change the company that was awarded the tender of the project, which was MSP. However, the Ministry of Finance conducted a meeting on 23 September with stakeholders, without Minister Samaraweera, and asked the industry to comply with the manual pasting requirement within three months, without making any changes to the tender company and the implementation method. Treasury Deputy Secretary Seneviratne chaired the last meeting. So far, no changes have been made pertaining to this decision, but the Ministry hopes to provide a a grace period of one-year to the industry as requested, according to Seneviratne.