In recent years, Sri Lanka has struggled with a concerning surge in illicit liquor consumption, particularly within impoverished communities. The imposition of hefty taxes on legal liquor has inadvertently fuelled this trend, pushing vulnerable groups toward illicit sources.
As April approached – a month notorious for heightened illicit liquor activities – the Excise Department had intensified its efforts to curb the distribution and consumption of illegal substances.
Speaking to The Sunday Morning, Deputy Commissioner of Excise C.J.A. Weerakkody said: “From 1 April, we have mandated special raids conducted by provincial excise commissioners throughout the month, targeting illicit liquor and narcotic drugs.”
These raids encompass licensed premises as well, aiming to detect any untaxed liquor.
“We remain vigilant, especially during this season when illicit liquor consumption tends to spike,” he emphasised.
When asked about the surge in illicit liquor consumption, Weerakkody highlighted a concerning trend of increased narcotic drug usage among the youth, particularly citing the prevalence of the dangerous drug crystal methamphetamine or ice.
“In April, during the seasonal peak, illicit liquor consumption increases and illegal, untaxed liquor infiltrates the market, sometimes even being advertised on the internet. We have instructed the public not to purchase any liquor from unlicensed premises, as we cannot guarantee the safety or quality of such products. It is imperative to obtain liquor only from licensed premises, as that is where we can ensure reliability and adherence to regulations,” he said.
He warned against purchasing liquor from unlicensed sources, stressing the importance of obtaining it solely from authorised premises to ensure safety and quality.
Addressing excise revenue, Weerakkody revealed a notable uptick in the first quarter of the year until 1 April.
“We’ve witnessed a remarkable 24.1% increase compared to the same period last year,” he affirmed.
Public health concern
According to the latest available statistics from the Epidemiology Unit of the Health Ministry, it has been revealed that 40% of all alcohol consumed by Sri Lankans is illicit, posing significant health risks due to its toxicity.
In Sri Lanka, the toll of alcohol-related harm is profound, with 4,201 deaths per 100,000 individuals attributed to non-communicable diseases and injuries yearly.
In 2016, alcohol-related fatalities per 100,000 of the population included 2,880 deaths attributed to liver cirrhosis, 675 deaths resulting from road traffic accidents, and 649 deaths linked to cancer, as revealed by the Epidemiology Unit.
As per data from the unit, alcohol consumption stands as a root cause and exacerbating factor for numerous diseases and injuries, resulting in three million fatalities worldwide annually.
Alcohol use imposes substantial economic losses amounting to Rs. 241 billion annually, equivalent to 1.5% of the country’s Gross Domestic Product (GDP).
Regarding direct costs linked with alcohol consumption, both governmental and non-governmental spending on healthcare constitute 26% and 13%, respectively. Moreover, indirect costs such as absenteeism and presenteeism each represent 2%, while the decline in the labour force accounts for 57% of the total.
These figures underscore the urgent need for comprehensive, multisectoral action to address alcohol consumption as a significant public health concern.
SL’s illicit liquor market
While Sri Lanka’s per capita alcohol consumption aligns with global averages at approximately 79 litres, the market’s growth potential over the past two decades has been stifled by the prevalence of illicit liquor. An estimated 65% of the total alcohol market in Sri Lanka is believed to be illicit.
Illicit alcohol, known by various names such as kasippu, goda, and moonshine, encompasses locally-produced, unrecorded, or illegal alcoholic beverages. These products, being outside the bounds of legal production, are not accounted for in official statistics, including sales figures. Moreover, illicit alcohol often lacks the quality and purity standards upheld by commercially-produced counterparts.
Presently, the illegal market significantly overshadows the legal one.
Integrating this sector into the mainstream could substantially boost Government revenues, which could be channelled into essential sectors such as education and health. It falls upon the Government and the Excise Department to devise strategies to monitor the production and sale of illicit alcohol, thereby capturing tax revenue for the country.
The lack of data on non-regulated alcohol complicates research into drinking patterns and associated effects. Currently, there is a scarcity of scientific evidence concerning non-regulated alcohol, including its production, consumption patterns, and health implications.
Moreover, high taxation may inadvertently drive consumers towards potentially hazardous forms of non-commercial and illicit alcohol, posing increased safety and health risks.
As highlighted by industry experts, the surge in illicit liquor consumption can be attributed to the escalating prices of liquor in recent years, primarily due to hikes in excise duty.
Effective 1 January this year, the Finance Ministry issued a gazette notification announcing increases in excise duty rates. Special arrack witnessed a rise of Rs. 840 per litre, while palmyrah, coconut, and processed arrack saw a hike of Rs. 900 per litre of alcohol.
Consequently, liquor prices surged following the implementation of the increased excise duty alongside a rise in the Value-Added Tax (VAT) to 18%. The Distilleries Company of Sri Lanka PLC (DCSL) responded by announcing price hikes for all its liquor products effective 1 January. Prices for DCSL brands were set to increase by Rs. 90, Rs. 50, and Rs. 20 per 750 ml, 375 ml, and 180 ml, respectively.
Further compounding the price increase, the VAT (Amendment) Bill, passed in Parliament on 11 December 2023, mandated a 3% hike in taxes, elevating the VAT from 15% to 18%.
Industry insiders disclosed that the absence of taxation on illicit alcohol enabled customers to purchase a bottle containing 30-40% alcohol content for as low as Rs. 60. Given that an individual typically consumes about a quarter of a bottle, the cost equates to approximately one-eighth of a bottle of beer.