The government has earned only Tk52 crore in revenue from foreign liquor imports in the last five years as only 5% of the total alcoholic beverages entering the country were commercially imported.
The revenue earned from the imports was little despite those having the highest duty, up to 600%, on alcoholic products as most foreign liquor was imported duty-free by six private diplomatic bonded warehouses.
Amid this backdrop, the government is also set to implement a set of measures to liberalise liquor imports.
From the fiscal 2016-17 to 2020-21, the total imported foreign liquor was 2.18 crore litres, of which only 11 lakh litres was imported by commercial importers and the rest came through the six diplomatic bonded warehouses.
While the government is earning little revenue from liquor imports, commercial sellers in the liquor trade are awash in profits.
For instance, in the fiscal year 2020-21, the government revenue from imported liquor was only Tk5 crore, according to data from the National Board of Revenue (NBR).
The total liquor import was 28 lakh litres during the year, of which only 4% or 1 lakh litres was duty-paid import and the rest was imported through duty-free bonded warehouses.
The value of total imported liquor, including commercial and duty-free, was shown at Tk37.54 crore, which means per litre average value was Tk134.
However, in the market, per litre liquor was sold at a minimum of Tk 2,500. As a result, sellers are making 19 times profit from per litre foreign liquor. If operational costs of an estimated Tk100 is added to the per litre import value, then the profit margin would be more than 10 times for commercial sellers.
The high-duty has prompted smuggling and leakage from duty-free diplomatic bonded warehouses depriving the government of revenue earnings.
If the total amount of liquor was imported commercially, the government would have earned around Tk1,800 crore in taxes in the last five years.
With foreign liquor in short supply amid a face-off between the NBR and private diplomatic bonded warehouses over the use of a software in the bonded operation aimed at checking leakage, demand for the local Carew & Co brand of alcohol has seen a marked rise.
The rising sales of locally manufactured alcohol prompted the state-owned company Carew to go for expansion of production.
The earnings of the government also increased significantly from local alcohol sales.
The usual monthly sales of Carew & Co's liquor were around 12,500-13,000 cases of liquor, but the figure rose to 18,579 cases this October and 19,446 cases in November last year.
The monthly revenue of the government from alcohol sales of Carew doubled to Tk4.32 crore in November from Tk2 crore in July last year, according to company data.
High liquor sales brought the government organisation a profit after 80 years.
In FY21, Carew and Company earned Tk195 crore in revenue only from liquor, which was Tk38.39 crore more compared to the previous year. Increased sales of hand sanitiser and vinegar contributed to the company's profit in the pandemic year.
However, due to large losses in the company's other units, mainly sugar, its consolidated profit at the end of the year was Tk29.18 crore, which is about Tk20 crore more than in the previous year.
Govt's move to ease liquor supply
As the government is losing revenue from the liquor business, the NBR is planning to cut tax rates to make it rational to encourage commercial import and stop illegal supply from duty free warehouses.
The government is also going to revise the import policy order by increasing the import ceiling for liquor importers.
Currently, importers are allowed to import alcoholic beverages on 7.5% of their foreign currency account balance, which has been proposed to be increased to 10% by the commerce ministry in a draft amendment of import policy order, according to a source at the commerce ministry.
However, the Department of Narcotics Control (DNC) proposed to fix the import ceiling at 12%.
Currently, hotels which have foreign currency earnings can import liquor.
In the draft of the amended import policy, any organisation which has foreign employees can import alcohol subject to approval from the DNC and commerce ministry.
However, other restaurants and bars which do not have foreign currency can purchase from Parjatan Corporation. In the existing import policy order, it is not mentioned that from which source non-foreign currency earners will purchase alcohol.
Meanwhile, the revenue authority is trying to issue licences against two state-owned organisations, including the InterContinental Hotel and the Parjatan Corporation, aimed at breaking the liquor syndication of the existing six private bonded warehouses.
A Chattogram-based private diplomatic bonded warehouse – Herbertsons Bangladesh, which remained inactive for years, now wants to be back in business to meet the liquor demand.
The revenue authority is reviewing the proposal of business resumption of the warehouse.
Not only imported liquor, the government is also planning to increase supply of locally manufactured alcohol.
Commerce Minister Tipu Munshi recently announced that Carew & Co will have a second unit at its present site in Darshana to enhance production capacity.
Previously, the company used only 50% of its existing production capacity and produced 12,000-14,000 cases every month. But the volume has gradually risen, reaching over 20,000 cases this month. In October, the company produced around 18,000 cases of liquor and the figure was approximately 19,000 cases the following month.
The company is setting up two new sales centres in Cox's Bazar and Kuakata — two tourism hubs in the country.