By Shabiya Ali Ahlam
Fully-charged Lion Brewery Ceylon PLC, Sri Lanka’s largest brewer, has slammed the new government for toying with the country’s alcohol policy, endangering the health of the population.
Referring to the “shocking” policy that came into effect on October 3 by way of a significant excise duty hike on soft liquor, Lion Brewery said it is a clear indication that the relevant authorities prefer to drive the consumption of spirits over milder varieties of alcohol, notwithstanding the negative impact it will have on the consumer’s health.
“It is common sense that the alcohol policy must find a suitable balance between the revenue needs of government and the social and health needs of the people. For many years, Sri Lankan policymakers have favoured a significant tilt towards the revenue end, cynically ignoring its negative impact on the population at large,” asserted Lion Brewery in a review attached to its September quarter interim financials.
While it was hoped with the establishment of the new government a more equitable balance would be found, it added: “Unfortunately, for Sri Lanka, and more so for Sri Lankans, the balance has now tilted decisively, and even more cynically, towards revenue generation.”
The excise duty on mild and strong beer was increased by 27 percent and 32 percent whereas the arrack industry was subjected to a mere 7 percent adjustment as directed by the Finance Ministry.
The company cautioned that depending on the needs of the day, the balance may tilt marginally in favour of one over the other but never must it tilt excessively to either side.
Sri Lanka is the only country in the world where the tax on beer exceeds that of spirits when calculated on the basis of per millilitre of alcohol.
Noting that alcohol consumption habits in the country have been shaped by the policies followed by successive governments, Lion Brewery charged that “for reasons best known to them, global best practices and benchmarks have been consistently ignored when formulating alcohol policy.”
However, the entity proposed a shift towards a policy that can help minimise harm from alcohol consumption and address the revenue needs of the government.
“The win-win is to achieve an increase in revenue whilst simultaneously reducing the consumption of pure alcohol in the country. This can be done and we have provided the authorities with the methodology.”
Lion Brewery stated it now remains to be seen if the authorities have “sufficient empathy” towards consumers to make the necessary changes.
The company pointed out it had “no option” but to pass on to consumers the sharp excise duty increase.
However, it was observed that some in the spirits industry absorbed the additional cost.
Acknowledging that in some instances it appears that margins are negative giving credence to the widely held perception that some in the spirits industry refrain from paying their taxes in full, Lion Brewery asserted: “If the authorities are serious about widening the tax net, here is a good and easy place to start.”
Ceylon Beverage opts for secondary board
The board of directors of Ceylon Beverage Holdings PLC, the controlling shareholder of Lion Brewery PLC, has decided to reclassify the firm in the secondary board of the Colombo Stock Exchange (CSE) to comply with the regulatory minimum public float requirements.
The CSE rule on minimum public holding states that companies listed on the Main Board are expected to maintain a minimum public holding of 20 percent in the hands of 750 public shareholders or maintain a market capitalization of Rs.5 billion of its public holding in the hands of a minimum number of 500 public shareholders while maintaining a minimum public holding of 10 percent of its total ordinary voting shares, by December 31, 2016.
Ceylon Beverage Holdings doesn’t meet the above two criteria.
In order to comply with the listing rules, the board of directors has decided to proceed with reclassification of the company from the Main Board to the secondary Diri Savi Board.
The concurrence of the CSE has been obtained and the company has been requested to submit required documents to the exchange in order to proceed with the transfer.
“The decision to transfer the company to the Diri Savi Board was arrived at after detailed evaluation of all possible options available to the company. Accordingly, reclassifying the company to the Diri Savi Board was considered to be the optimal choice,” Ceylon Beverages said,
The minimum public holding threshold for companies listed on the Diri Savi Board is 10 percent of the company’s ordinary voting shares in the hands of 200 public shareholders.
The company’s public holding as at September 30, 2015 is 16.61 percent in the hands of 947 public shareholders and thus, complies with the minimum public holding rule applicable to be listed on the Diri Savi Board.