Crisis | Ambrosia India

India’s neighbours – Sri Lanka and Nepal – are in deep economic crisis. The crisis is a bit similar as both countries largely depend on revenues from tourism and that was severely affected due to the pandemic. Unlike Sri Lanka, Nepal is not that debt-ridden. Nevertheless, the Himalayan country is witnessing unprecedented inflation and its economy is just rolling down the mountains with no immediate relief in sight.

Hence, the Nepal Government headed by Sher Bahadur Deuba has initiated certain measures, including ban on imported cars, liquor, playing cards and nearly a dozen other “non-essential” goods to address the widening trade deficit and declining foreign currency reserves. Nepal’s central bank has said reserves are only sufficient to cover just over six months of imports, down from 10 months in mid-2021. The Finance Minister Janardhan Sharma has stated that the situation is nothing like Sri Lanka’s and that Nepal is in a “slightly better position” than Colombo in terms of production and revenue. He admitted, that although the forex reserves are stressful due to escalated imports of luxury items, Nepal is not burdened with foreign debts like Sri Lanka. Nepal’s trade deficit rose by nearly 34.5% on-year to $9.35 billion in mid-March, while forex reserves have fallen below $10 billion. Hence, the ban on some imported goods, including liquor.

“This is a short-term measure taken to prevent the economic condition of the country from going bad,” said ministry joint secretary Narayan Prasad Regmi. “The government has decided to curb imports of certain luxurious and non-essential goods as the recent surge in imports has put pressure on our economy.” The central bank had already verbally directed private lenders not to issue letters of credit for luxury goods earlier in April.

India major exporter to Nepal

In 2020, Nepal imported $5.58M in hard liquor, becoming the 142nd largest importer of hard liquor in the world. In the same year, hard liquor was the 228th most imported product in Nepal and the imports are primarily from India ($2.64M), Singapore ($1.76M), United Arab Emirates ($786k), United Kingdom ($169k), and Malaysia ($140k).

While emergency restrictions on imports of high-end vehicles might temporarily bolster Nepal’s balance of payments, the fact that imported wines and spirits represent less than 0.2% of the country’s total import value suggests that the ban will have negligible economic impact, state some experts. The heavy taxes on imported wine and spirits generate almost $55 million in the form of excise and customs,

The fear is that ban on imported liquor may lead to ‘bootlegging’. Nepal has a significant informal alcohol market. According to research by the World Health Organisation and the Nepal Health Research Council, at least 66% of all alcohol consumed in Nepal was either illegal or home-produced, making for an illicit market that is more than twice the size of the legal market.

Experts said that prohibiting the import of international spirits and wines will only compound this problem, increasing the share of illicit alternatives through smuggling across borders into Nepal and counterfeiting of popular, premium international brands.

Local brews

Locally, Nepal is known for some brews that mostly are made in homes. Rakshi is the Nepali term for a traditional distilled alcoholic beverage. Its alcohol content is around 45%. That is to say as a whiskey. Nepalese drink this homemade drink during the festivals.

Production and consumption of alcohol is controlled by the Madira Aain 2031. License is required to sell alcohol. However, it permits brewing and consumption for household purposes without a license. Gongo is made from scraps of ugali and maize, fermented over several days, and then distilled through a jerry-can of cold water into a soda bottle. This has hints of ethanol, but surprisingly palatable.

Tongba is the drink of the Limbu people of Eastern Nepal and also referred as Tibetan Hot Beer. And then there is Chaang which is made from a selection of cereals.

In 2020, Nepal exported $385k in hard liquor, making it the 123rd largest exporter of hard liquor in the world. During the same year, hard liquor was the 106th most exported product in Nepal. The main destination of hard liquor exports are to Japan ($231k), South Korea ($64.1k), Hong Kong ($53.6k), Macau ($20.4k), and Belgium ($13.5k).

The fastest growing export markets for hard liquor of Nepal between 2019 and 2020 were Macau ($20.4k), South Korea ($18.4k), and Japan ($8.41k).

Spokesperson: Mr. Ankit Gupta, Gov Body Member, ASPA (Authentication Solution Providers’ Association)

What has been the counterfeiting scenario in the spirits industry during the Covid crisis?

During the Covid crisis, alcohol in India has emerged as the sector with the largest number of counterfeiting incidents. This includes adulteration, trademark infringement, fake liquor, fraud, and other ways to copy products. According to ASPA counterfeit news repository study, alcohol continues to be in the top five sectors in 2018, 2019 and 2020 facing these risks. The same trend continued through 2021. Alone in Uttar Pradesh officials had seized approximately 12.57 lakh litre illicit liquor till November 2021 (Source: Aabkari Times, December 2021).

Despite being one of the most regulated sectors, in normal circumstances also alcohol industry is one of the biggest victims of counterfeiting and illicit trade. During the pandemic the industry was hit badly as sales through restaurants, hotels, etc. was adversely affected. Drinking at home became more acceptable and picked up but was still not enough to substitute the lost revenues. While the industry was struggling with low demand, criminals exploited the demand-supply gap to sell more quantities of counterfeit liquor, creating an even bigger threat to human well-being.

Why is the alcohol industry one of the top targets for counterfeiters and illicit trade?

Criminals are attracted to the alcohol industry because of various reasons e.g. high profitability, evasion of taxes, low consumer awareness, lack of universal pricing in India as well as high demand. In addition to this, the easy availability of raw material Methyl Alcohol, which is widely used for industrial purposes is another reason.

The margins for criminals are considerably huge and despite regulations, the task of counterfeiting and illicit trade is not being made challenging enough for them. During lockdowns, restricted access to and availability of good quality liquor gave a bigger push to the sale and purchase of counterfeit or illicit liquor. In some cases, it was observed that people saw the acquisition of liquor in difficult times at higher rates as social status or public image booster.

The danger has increased as criminals are using more reckless methods of producing and smuggling alcohol. For instance, many incidents of liquor being produced from sanitizers or ethyl alcohol or spirits from petrol and diesel mixed with colour being sold in copycat or discarded packaging surfaced across the country. These products are hazardous.

How can counterfeiting be controlled effectively post-pandemic?

Development of a solution always starts with recognising the problem and assessing its magnitude. Counterfeiting has been underestimated and this has prevented the development of a robust strategy and solution to curtail it. The fight against counterfeiting and illicit trade needs to be fought from three fronts – policy, brand, and consumer. A policy framework that guides support and nurtures an ecosystem which strong against counterfeiters. It should protect businesses and consumers against counterfeiting malice while enabling effective law enforcement and effective punishment to those who commit the crime.

Being an integral part of the system, brands should take solid steps to protect their products by building an adequate defence of anti-counterfeiting solutions and traceability infrastructure. For instance, multi-layered protection through packaging by implementing anti-counterfeiting solutions which make it almost impossible to copy – one-time break seals and sleeves. Supported by smart solutions such as tax stamps, digitally readable labels, QR Codes, etc. Made more effective by awareness which educates consumers about how they can safeguard themselves from counterfeit products.

Consumers can play an important role in the fight against fakes, they are their first line of defence. A little bit of carefulness and attentiveness on their part while buying liquor can save them from getting cheated.

Can the online sale of alcohol be a welcomed trend? Can it help in curbing the sale of counterfeit liquor in the country?

The pandemic crisis has encouraged discussions about the online sale of liquor in many states. According to a survey by YouGov National survey findings, almost 60% of consumers are eager to purchase alcohol online. Safety and convenience have been cited as key reasons to prefer the e-commerce channel to buy alcoholic beverages. While the online channel offers consumers more choice leading to innovation within the category and incremental revenue opportunities for state governments, we need comprehensive regulations and safeguards for selling liquor online and need to tread with a lot of caution. The process and compliance regulations for alcohol delivery will vary from the delivery of groceries or essentials. Moreover, the possibility of alcohol being seized during transit and the adulteration of alcohol by criminals cannot be ruled out either. The authentication industry can offer technology-enabled packaging and anti-counterfeiting solutions that can plug these risks and challenges. The digital footprint cn help in traceability and if done with proper provisions it can ease the process of identifying and catching frauds.

Tag Archives: Crisis

The Struggle with Counterfeiting in Spirits Industry: Coming out of Covid Crisis