Sri Lanka state sugar firms drowned in unsold ethanol
Sri Lanka’s state sugar firms are facing a surplus of 1.3 million liters of unsold ethanol due to a sharp decline in legal alcohol demand, caused by the economic crisis and tax hikes. Discussions with the Department of Excise are ongoing to distribute ethanol purchases among four companies to manage the excess stock. The government is considering shifting focus to bio-diesel projects but faces challenges due to high production costs and increased illegal alcohol sales. The Treasury has been asked to reduce taxes, but the outcome is uncertain. The alcohol market is expected to recover once disposable incomes rise.
ECONOMYNEXT – Sri Lanka’s state sugar firms are stuck with a large stock of unsold ethanol as legal alcohol demand plunged, following an economic crisis and tax hikes, State Minister for Investment Promotion Dilum Amunugama said.
State-run Lanka Sugar operates Sevenagala and Pelwatte companies. Ethanol is made as a by product of sugar from molasses.
The two firm now had 1.3 million litres of unsold alcohol, he said.
Discussions with legal alcohol companies showed that some have suffered sales falls as much as 70 percent at times, he said.
There were two other sugar firms, Ethimale and Gal-Oya which were producing ethanol.
Minister Amunugama said following discussions with the Department of Excise an a verbal agreement was reached to issue ethanol purchase license dividing the demand equally among the four companies to keep stocks moving.
In Sri Lanka sugar and ethanol is protected by import taxes and domestic production is price competitive.
“We cannot export as our cost of production is high,” Minister Amunugama said. “We are looking at bio-diesel. As it is we can manage. We have not gone to the level we have to throw it out.
“The bio -fuel projects are on stand-by. The Sugar Research Institute had all the testing. If you go down to the price of a litre of diesel is much lower than what we sell the ethanol for. But we have several options on standby.”
Due to the high taxes illegal alcohol sales have appeared to have gone up, Minister Amunugama.
“We have made a request from the Treasury to reduce the tax,” he said. “But we do not know what will happen.”
Sri Lanka’s alcohol demand usually recovers as disposable income recover about two years after the currency crisis ends. This time however the rupee fell from 200 to around 300.
Source Link : https://economynext.com/sri-lanka-state-sugar-firms-drowned-in-unsold-ethanol-177692/
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