In terms of investment and contribution to the economy, Nepal's alcohol and beer industry is the biggest success story of the 1990s. The production of both beer and alcohol has doubled in the past 10 years, and because there is still unused capacity there is tremendous potential to grow.
All this is now threatened by Maoists who want a blanket ban on alcohol and beer from 18 August. This is a threat not just to the industry, but because of the revenue it provides to the government budget and the jobs and ancillary industries it is a serious threat to Nepal's economy as well.
Business confidence in Nepal started falling after political instability since 1995 affected the healthy investments that had been built up after democracy. Today, investor confidence is at its lowest ebb. The reason: Maoist extortion, threats and the latest action against breweries and distilleries. Business sources told us that unless the government works magic, Nepal's industrial sector which took 50 years to build is going to be face a catastrophic blow.
The Maoists have spearheaded this puritanical anti-alcohol drive through their front organisation, the All Nepal Women's Organisation (Revolutionary) which launched its drive in Chitwan in June, then in Nawalparasi in July. It tried out shorter bans in other townships. Emboldened by the "success" (businesses simply stopped selling alcohol because they feared punishment) they now want the government to announce a ban on alcohol throughout Nepal.
Alcohol and beer sales have already dropped to nearly nil in many hill districts such as Dhading, Gulmi, Palpa, Tanahu, Syangja and Argakhanchi. The Maoist propaganda machine has also begun warning retailers and distributors, even in Kathmandu Valley, to stop stocking liquors. Stores in many shops outside the Ring Road are emptying their racks, and it may be a matter of time before inner-city shops begin doing the same. The reason the Maoists can get away with it is the total lack of government authority and law enforcement.
"We've been told we will be provided security and have been asked not to stop production," says a brewery owner. "Is the government telling us it will post policemen at every retail and distribution outlet?"
Almost all of Nepal's major alcohol and beer brands are sold in Kathmandu Valley and other major townships along the highways. Barely 20 percent is sold in the rural areas. Besides, most Nepali indigenous groups need alcohol for their religious and social rituals. Maoists have in some places even stopped the production of home-made liquour.
Across Nepal, despite a stagnant economy, alcohol sales till recently were booming. Most of the demand is met by domestic production, but higher purchasing power in urban areas has also created space for many international brands, sold mainly through up-market outlets.
Beer and alcohol industries pay about Rs10 million in revenues and taxes every day, adding up to a whooping Rs5.5 billion annually. The industry employs 5,000 people directly and another 100,000 indirectly make their living off the alcohol industry from transport and packaging to printing and even poultry. Poultry sales and prices have come down by as much as 50 percent in Chitwan, since the ANWO launched its campaign. The recycling industry, which does business worth about Rs500 million annually, revolves mainly on buying and re-selling beer bottles.
The Maoist women may have a point when they say that they are trying to address the negative impact of excessive alcohol consumption, but that has to do more with awareness at the consumer level and government controls, rather than a total ban. They want the industry to shift investment into other productive sectors in 15 days, or else. It is clear that this uncompromising stance hides a strategy to directly deprive the government of revenue from alcohol taxes.
"How can you shift your investment in 15 days, this is just not rational," said an angry brewer, who like most people interviewed for this article did not want to be quoted by name. His brewery has seen sales drop by as much as 30 percent in the past few months. What puzzles many political and business analysts is why the Maoists would take on such an unpopulist cause. Aside from women's groups who have always been agitating against alcoholism, most do not agree with a blanket ban on alcohol.
Lax enforcement is partly to blame for alcohol abuse in Nepal. There is almost no monitoring of licenses and sales, and even a minor can walk into a store and walk away with a crate of the most potent liquor available in the market. There are laws that allow alcohol sales only between 2pm and 8pm, bans sales to minors, and stipulates that such stores should be at least 100 meters away from schools, temples and other places frequented by children. The government had no interest in monitoring because it takes away as much as 70 percent of the price of a bottle of beer or spirit as tax.
Any disruption of production will also affect the banks that have invested about Rs1 billion in the two industries-about Rs500 million in breweries, about Rs250 million in distilleries and another Rs250 million in ancillary industries. Banks saw a lucrative industry which has shown steep growth since 1990/91, and they cannot be blamed.
Nepal has five breweries which meet local demand and also produce for export to India. There are over 30 distillers producing hundreds of brands, including the low-end ones sold in plastic pouches. The government banned production of the easy-to-use pouches last year, but the product is still available in the market-sold as old stock. Most would agree that it is this lax control and monitoring that should be stopped, not the production of beers and spirits.
The alcohol industry also has backward linkages with sugarcane farmers along the tarai who sell cane to sugar factories, which in turn sell molasses to distilleries. The price of both cane and sugar are determined by the money sugar factories make by selling molasses-a major by-product of sugar making.
Nepali beer makers don't use food grains for production but use imported malt. Stopping beer production could lead to foodgrains being used for backyard distilleries, which over the long run could lead to food shortages.
Nepali brands
Gorkha Brewery, Carlsberg and Tuborg (Khetan Group)
Mount Everest Brewery, San Miguel, Golden Tiger, Guinness (Amatya Group)
Singha Brewery, Hayward (for export only) (Chaudhary Group)
United Brewery, Kingfisher, Kanyani Black Label (for export only)
Himalayan Brewery, Iceberg, (Shahi & Company)
Nepal Liquors, Bagpiper, McDowell's (UB Group)
Himalayan Distillery, Royal Stag (Jawalakhel Distillery & Segram)
Highland Distillery, Challenger, Virgin Rum, Mirnov Vodka (Shaw Wallace and ICTC)
Nepal Distillery, Khukuri Rum, John Bull
Shree Distillery, Mount Everest, King's Pride, Special Number 1 (Maskey Group)
Jawalakhel Distillery, Ruslan Vodka, Dry Gin, Rangela (JD Group)
Tribeni Distillery, Sea Pirates, Jay Rum and Dudhia (Rohit Group)
Sumi Distillery, Gill Mary, Dark Rum
