The Government will soon be granting permission to state-owned Lanka Sugar Company Ltd to import molasses from India at a price of Rs.80 per kilogram to produce ethanol to meet the demand of local liquor manufacturers, informed industry sources said.

This action has been taken despite the ethanol import ban to assist Pelwatte Sugar Distilleries (Pvt) Ltd and Sevanagala which come under the Lanka Sugar Company Ltd which have failed to produce a sufficient quantity of ethanol at present.

The Sevanagala distillery has only 10,000 tons of sugar cane at present which is sufficient for 10 days production as it supplies to Pelwatte as well. The two refineries manufacture 45,000 litres of ethanol per day and the total requirement for 13 local manufacturers is in the region of 60,000 to 85,000 litres daily.

The government is now compelled to allow state-owned companies to import molasses despite the ban on ethanol imports to prevent a shortage of ethanol, manufacturers revealed.

The Department of Excise has directed the manufacturers to purchase ethanol either from Pelwatte or Sevanagala distilleries.

This move was aimed at boosting the revenue of loss-making Pelwatte and Sevanagala creating a state monopoly, liquor companies alleged.

This directive of the Excise Department infringes with the companies’ rights and excise regulations, a senior executive of a leading liquor company said.

"There are no provisions in Excise regulations to force a manufacturer to buy necessary raw materials from distilleries that are suggested or directed by the Department. It instead provides a manufacturer the choice to decide," he added.

According to official data, production capacity of five local ethanol producers amount to only 42% of the local requirement and the estimated maximum production of Pelwatte, Sevanagala, Royal Cask, Hingurana and Galoya plantations is in the region of 12 million litres per annum.

Earlier, alcohol manufacturers were allowed to purchase from any local ethanol distillery, and if the government sticks to the original ban, the liquor industry would cut their production, which would result in a significant loss of revenue to the government, manufacturers added.

According to the Ministry of Finance, the excise revenue target was Rs. 130 billion, out of which Rs. 68 billion was expected from the taxation on ethanol imports.