Sri Lanka can be self-sufficient in potable alcohol for the domestic liquor industry with the Pelwatte and Sevanagala sugar companies producing the necessary volumes but the largest consumer of ENA (extra neutral alcohol) is resisting the product on quality grounds.

"Although the product distilled at Pelwatte Sugar Distilleries Ltd. (PSDL) is accepted by over 50 customers, the largest consumer of alcohol in Sri Lanka only buys small quantities from us and imports large volumes at almost double the prices charged by us on the basis that our ENA is not of the required quality for the spirits produced by this consumer," Mr. Mahendra Amarasuriya, Chairman of Pelwatte Sugar has bitterly complained.

Pelwatte has made representations to the government to increase the import duty on alcohol saying that Pelwatte and Sevanagala together have the potential to produce almost 70% of the country’s requirements at present and if given the necessary assistance, could expand production to provide the entire requirement of the local liquor industry, he said.

Amarasuriya reported that Sri Lanka spends valuable foreign exchange in importing alcohol with 11.2 million litres imported in 2002 at a cost of Rs. 729 million. This was projected to increase to Rs. 1 billion.

PSDL, a subsidiary of Pelwatte Sugar, distilled 5.046 million litres of potable ENA during the year ended March 31, 2004 and 101,456 litres of technical alcohol.

"The main constraint on increasing production was the lack of sales compared to the distilling capacity of the plant," Amarasuriya said.

This was on the basis that the PSDL ENA was not of the required quality for the spirits produced by the biggest consumer who was not named. But the reference was clearly to the Distilleries Company of Sri Lanka which is the largest player in the legal domestic hard liquor industry.

"As a result, we are of the view that unnecessary foreign exchange is being incurred to satisfy the perception of this consumer and is a serious disincentive for local sugar cane producers," Amarasuriya said.

Cane sugar molasses, a by-product of sugar production has to be utilised on a continuous basis or disposed either by exporting or by environment friendly effluent disposal requiring substantial investments, he explained.

He said that during the last financial year, Pelwatte had to curtail heir potable alcohol production due to slow movements of alcohol stocks whereas paradoxically large quantities are imported to Sri Lanka.

"Unless the government changes the policy on import of alcohol and imposes a higher import duty on imports, local production will be discouraged," he said.

During the year under review, the Pelwatte Sugar Distilleries posted a profit of Rs. 66.9 million, down from Rs. 78.9 million the previous year.