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Booze, hooch and taxes



Writing his chairman’s review in the latest annual report of the Distilleries Company of Sri Lanka PLC (DCSL), the country’s biggest liquor manufacturer, Mr. Harry Jayawardena warned that pure coconut arrack may soon be history. This prediction was based on the price of this super-taxed product, which has made it totally unaffordable to the consumer. Obviously Jayawardena is talking from the perspective of the manufacturer, but nobody would or could dispute his logic. People don’t drink kasippu out of choice. The price stick, freely used by all governments, has driven imbibers into the arms of the illicit hooch mudalalis. Gone are the days when ‘Pol’ and ‘Gal’ arrack was priced at ten and eight rupees a bottle respectively. Today a bottle of ‘Gal’ costs Rs. 1,600, ‘Pol’ Rs. 1,750 and if you want it double distilled, a bottle would set you back a cool 2,000 bucks.

‘Pol’ of course refers to coconut arrack while ‘Gal’ stood for what was produced out of potable alcohol obtained as a byproduct of the Gal Oya sugar industry. The word “byproduct” was a clear misnomer; the sugar industry, whether at Gal Oya, Pelwatte or wherever, has long been making more money out of the alcohol distilled from the sugar cane molasses than from the sugar itself. This was probably why a previous government took over the listed Pelwatte Sugar Manufacturing Company established to help the country to be self-sufficient in sugar. While a private sector chairman of Pelwatte pre-takeover freely admitted that the company made more money from its alcohol byproduct that from its sugar, where the alcohol Pelwatte produces goes now is anybody’s guess. The budget debate would have been an opportunity to ask that question and get a very useful answer; but that did not happen.

We are writing this in the context of what emerged during the budget debate which ended on Thursday after 20 days of sound and fury with the predictably comfortable passage of Budget 2021. There was a lot discussion there about “artificial toddy,” something that Harry Jayawardena too has been talking about for many years. Matara District MP Buddhika Pathirana (SJB) estimated state coffers were being robbed of as much as Rs. 80 billion in excise revenue by artificial toddy manufacturers exploiting loopholes in the law. Pathirana says that the artificial toddy industry is rooted in the southern coastal area where a cocktail of urea, ammonia, nickel-cadmium from old cell phone batteries and sugar is used in a lethal brew.

He explained that the extent of the problem can be gauged with some simple arithmetic. Apparently only about one and a half liters or toddy can be had from a single coconut palm. Adding up the number of trees tapped and the volumes offered to distilleries, Pathirana estimates a discrepancy of 60-70,000 liters. Dangerously, it’s not only imbibers choosing to down rotgut with the attendant health implications, but also ordinary householders buying what they think is coconut vinegar who are at risk, he has pointed out. The Excise Department is well aware of the existence of this artificial toddy racket, which is a continuing one, although it does not agree that the Rs. 80 billion revenue loss that is alleged is accurate.

DCSL which took over the assets of its state-owned predecessor, the Distilleries Corporation during the Premadasa administration, when the government arrack monopoly (or near monopoly) was ended has long been conscious of the fact that it is a player in a so-called ‘sin industry.’ It has from the time of its first chairman, former Civil Servant V.P. (Totsy) Vittachi, been diversifying into various other businesses. Given that over 90% of what you pay for a bottle of arrack (or a single cigarette for that matter) are taxes the manufacturers are collecting for the government, and the payments to the state are not instantly made, a massive cash tranche is available to them to make other investments. This DCSL has cleverly done over the years, and its holding company, Melstar, is a highly diversified conglomerate into a variety of businesses. Ceylon Tobacco Company (CTC) has not done likewise to the extent of DCSL although it once diversified into insurance like its parent, British American Tobacco. However CTC pays its tax collection to the Treasury on a weekly basis. We do not know how it works where DCSL is concerned.

State Minister Nivard Cabraal who is the virtual Deputy Minister if Finance (the Prime Minister holds the finance portfolio) has called for a report from the Excise Department and the Secretary to the Treasury on matters that emerged in Parliament during the discussion. He acknowledged Pathirana’s useful contribution to the debate and assured follow-up on matters raised. The hard liquor industry has not only been a substantial source of government revenue, but had also produced many millionaires in this country. Arrack has made fortunes for different entrepreneurs from the Dutch and British colonial era when so-called arrack renting was a lucrative business. There has been generous philanthropy arising from such fortunes with, for example, the founding of Visakha Vidyalaya by Mrs. Jeramias Dias (Selestina Rodrigo) of Panadura. Ironically, Arthur V. Dias (popularly known as Kos Mama because of his campaign to plant jak trees), the son of Jeramias Dias, became a leader of the temperance movement at a later time.

It is common knowledge that the illicit liquor industry rampant in the country not only costs the government desperately needed revenue but also is at the root of corruption in the various enforcement agencies. Political patronage to this menace has been freely alleged over the years as have similar allegations with regard to narcotics. Prohibition has not proved a success wherever it was attempted. Government must necessarily balance competing interests including revenue, the cost of alcohol related disease to the healthcare system, the damage drunkenness causes innumerable families and many more in designing its alcohol policies. There’s a lot wrong with what prevails – artificial toddy is just one aspect.

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Contempt then and now



Dr. Asanga Welikala, legal academic and constitutional lawyer, has gone on record saying that while imprisonment over contempt of court is legal, it is increasingly seen as inappropriate and disproportionate. This observation has been made in the context of the jailing last week of Parliamentarian and film star Ranjan Ramanayake to four years rigorous imprisonment on contempt charges. Thanks to television, the country was able to see the actor, screaming and shouting that he had neither robbed, killed nor engaged in drug trafficking and will not apologize, being dragged into a prison vehicle to be taken away to serve his term. He was clearly playing to the cameras as he would have on a film set and put up quite a show.

Readers would remember the highly respected Prof. Carlo Fonseka, Ramanayake’s uncle, accompanying him to court every day at the early stages of the trial which began three years ago. This was before the late professor, frail even then, was physically unable to go to court. This case, as most of them do, dragged on for a long time as is common, or even inevitable, in this country. Most people know that contempt of court is a serious offence and refrain from trifling with the judicial system for fear of punishment. While the courts are not infallible, as demonstrated by higher courts sometimes overturning judgments from lower down, there is no bar on the criticism of judicial decisions. But this must be done, as the text books say, in “chaste language” without scandalizing the court.

It was decades ago that Mr. Herbert Hulugalle, then editor of the “Ceylon Daily News,” was convicted of a contempt offence by a three judge bench of the Supreme Court headed by Sir. Sydney Abrahams, then Chief Justice, who later became a Privy Councillor. On the bench with the British CJ were two Ceylonese judges, Justice Akbar and Justice Koch. A fine of thousand rupees – not chicken feed at that time – and imprisonment till the rising of court was imposed on the editor over an editorial titled “Justice on Holiday” which Hulugalle did not write. But as editor, he had to take responsibility for what appeared in his paper. The editorial was written at the instance of D.R. Wijewardene, the legendary Lake House founder. Hulugalle, himself an advocate, sat with the lawyers in the courtroom after his conviction and spent the lunch adjournment with his friend, the Registrar of the court, in the latter’s chambers. Sir Sydney, ostensibly for Hulugalle’s benefit, adjourned court for the day earlier than usual. Wijewardene, no doubt at great expense, took the case right up to the Privy Council in a vain attempt to overturn the judgment.

More recently, Editor Fred Silva, also of the “Daily News” was imprisoned for six months for a newspaper column titled “Dress Sense” that appeared in his paper. This was a comment on different requirements of different courts on how persons appearing before them should be clad – a jacket and tie or national dress as the case may be. It was said there that while one court upbraided someone wearing trousers and an open neck shirt for not appearing in what we Lankans are fond of calling a “full suit,” a witness in another court was giving evidence neatly clad in a white shirt and pair of trousers. Although Silva was convicted and served his sentence, a reporter (subsequently editor) present in the courtroom said he clearly heard Justice Jaya Pathirana telling his brother judges “let him go” over the court public address system.

It was only a few months ago that Ven. Galagoda Aththe Gnanasara, the leader of the Bodu Bala Sena, was convicted of what appeared to be a blatant act of contempt by making a fiery speech in a courtroom at Homagama where a case in which he was interested was being heard. The complainant in this matter was the judge himself. The monk was convicted on several counts preferred against him and sentenced to six years in jail. But he was pardoned by President Sirisena after serving a fraction of his sentence and subsequently ran for Parliament. Although there was a report that Ramanayake, speaking on the telephone to UNP leader Ranil Wickremesinghe after his conviction had said that he would seek a pardon, this was said to be “in lighter vein”. Given the hellholes that our prisons are, whether ‘One Shot’ as the MP was styled in one of his movies, will ask for a pardon remains to be seen. He will continue to be an MP for six months after which his seat will be vacated. Opposition Leader Sajith Premadasa, under whose Samagi Jana Balavegaya ticket Ramanayake returned to parliament for his second term, said last week that “we will stand by him;” but what that means in practical terms is not clear. Whether the actor is made of similar stuff as General (now Field Marshal) Sarath Fonseka, who steadfastly refused to seek a pardon but soldiered through a part of his prison term until he was granted an unasked pardon, is debatable. Ramanayake stands to be disqualified from standing for election for seven years if he serves four years in jail. That can end his political career.

All things are impermanent as the Buddha said. How this particular drama will pan out remains to be seen.

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Unions bellow, Adani guffaws



Saturday 16th January, 2021

The government has chosen to grasp the nettle after weeks of dilly-dallying and prevarication; it has admitted that there will be a joint venture between the Sri Lanka Ports Authority (SLPA) and India’s Adani Group to run the East Container Terminal (ECT). According to the MoC (Memorandum of Corporation) Sri Lanka signed with India and Japan, in May 2019, on the ECT, the SLPA was to retain the ownership of the terminal and own 51% of the operating company with India and others holding the remaining shares. There is hardly any difference between this arrangement and what the present government has undertaken to do.

The yahapalana government failed to proceed with the controversial ECT deal as it was politically weak and could not square up to resistance from the powerful port unions. The situation changed last year following the election of a ‘strong’ government, which is using its two-thirds majority to bulldoze its way through.

Ironically, many of those who campaigned hard to bring the present government to power, claiming that a strong political leadership was a prerequisite for protecting the national interest and developing the country, are now protesting against the ECT deal! Some of the Buddhist monks who backed the SLPP to the hilt are condemning it for striking deals with foreigners at the expense of national assets. Their saviours have taken them for a ride—let them be asked to wake up and smell the coffee.

The JVP has launched a countrywide protest campaign, vowing to do everything in its power to torpedo the ECT deal. It should, in fact, ask for forgiveness from the people for what has befallen the ECT because it propped up the government which signed the MoC with India and Japan on this vital port facility. It may be recalled that in 2018 the JVP was instrumental in giving the yahapalana government a new lease of life on the pretext of safeguarding democracy when the latter was sacked by the then President Maithripala Sirisena. Having helped that beleaguered regime launch a successful counterattack, secure a majority in the House and remain in power, the JVP was backing it fully when the ECT deal was struck in 2019.

Only President Sirisena opposed the ECT deal during the yahapalana days; he even clashed with the then Prime Minister Ranil Wickremesinghe at Cabinet meetings, pointing out that it was detrimental to the country’s interests to have foreign powers as partners to manage national assets. He also warned that the port trade unions would fight tooth and nail to scuttle the deal. Following the ill-advised handover of the Hambantota Port to China on a 99-year lease, Sirisena must have realised that the SLPA should operate the ECT without any foreign partners.

The present government claims that it cannot do away with the ECT agreement which the previous government entered into with India and Japan. If so, how come the Sri Lanka-Singapore Free Trade Agreement, which was inked during the yahapalana administration, has been put on hold? The current administration cancelled the light rail transit agreement Sri Lanka had signed with JICA (Japan International Cooperation Agency), claiming that the project was seriously flawed. But it has chosen not to act similarly anent the ECT deal. Why?

There seem to be several reasons. It may be that the government, which is considered overly pro-Chinese, is wary of scrapping the ECT agreement lest it should antagonise India. The SLPP grandees are under Indian pressure; the official announcement of the Indian investment in the ECT came close on the heels of Indian External Affairs Minister S. Jaishankar’s recent Sri Lanka visit. He is believed to have urged Colombo to finish the deal post-haste. The government also seems keen to curry favour with the Modi administration by having one of the latter’s cronies, Adani Group, as a partner to run the new terminal. Another reason may be that Adani Group has come under fire for unethical practices, and the Sri Lankan politicians love to do business with such companies for obvious reasons—the country’s loss becomes their gain.

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Capitol blitzkrieg



Friday 15th January, 2021

What we witnessed in the US House of Representatives, on Wednesday, was a snap impeachment. It may even be called a legislative blitzkrieg. Its outcome came as no surprise because the Democrats control the House. Ten GOP members joined forces with them to secure the passage of the article of impeachment against President Donald Trump.

The person who is supposed to be the most powerful man on earth is in an unenviable position. The outgoing US President finds himself in a hole, well and truly. Finally, a swashbuckling Trump was at the mercy of Vice President Mike Pence, who resisted the Democrats’ determined bid to have him invoke Article 25 of the US Constitution and remove Trump as the President. Had Pence yielded to pressure from the House, Trump could have been removed, but the US would have been plunged into a bigger mess.

Pence, too, has blotted his copybook to some extent due to his fence-sitting. On the election night, he, in his wisdom, endorsed Trump’s claim of having won while votes were still being counted. Thereafter, he plucked up the courage in the face of pressure from Trump, who wanted the election overturned, to carry out his constitutional duty impartially, and certified Biden’s victory at a joint congressional session, which was disrupted by a violent mob. Thereafter, he turned down a request from the Democrats to remove Trump.

Trump has become the first twice-impeached US President. Less than one week remains of his term, which ends on 20 January, when Joe Biden will be sworn in as the new President. The Democrats’ plan to have Trump removed immediately has, however, gone pear-shaped because the Senate, where the GOP has a majority, does not want to act on the article of impeachment before the inauguration of President Biden. The Senate, however, will have to act thereon under the Biden administration to be installed shortly. Thus, trouble is far from over for Trump. Not even the GOP Congresspeople and Senators supportive of him have defended his actions during the last two weeks or so.

The manner in which Trump was impeached, on Wednesday, has left a bad taste in many a mouth. The House, in its hurry to see the back of him, telescoped the impeachment process into a couple of hours! True, Trump should be held accountable for the Capitol insurrection, but investigations are still being conducted into the riot. Most of all, the principle of natural justice should have been respected.

The battle plan of the political enemies of Trump is clear; they want to disgrace and demonise him so as to neutralise him politically and, thereby, ruin his chances of remaining active in politics and running for President in 2024 a la Grover Cleveland, who won two non-consecutive terms (1885–1889 and 1893–1897).

The US polity has split down the middle, and whether it will ever heal is in doubt. Some black Congresspersons gave the impeachment an ethnic twist by declaring that Trump had to be removed because he was a white supremacist. It would have been prudent for the Democrats to base their action against Trump on what he has said and done since the election day. Speculation is rife that Trump supporters will stage protests on the day of Biden’s inauguration. A visibly shaken Trump has called upon them to act with restraint. If only he had asked them to do so, on 6 January.

Perhaps, the Congress could have taken the wind out of Trump’s sails and prevented the unfortunate incidents at Capitol Hill if it had cared to appoint an ad hoc committee to conduct an emergency audit of the results in the disputed states in response to Trump’s call. If it had done so and been able to prove his allegations wrong, that would have helped prevent Trump from letting the far-right genie out of the bottle.

The Democrats may be able to neutralise Trump politically if their legislative action against him finds favour with the Senate before or after Biden’s inauguration. But the question is whether they will be able to tame the forces that have rallied around him all these years.

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