Alpha Orient Lanka has been forced to remove tobacco from its arrival shops after the government banned in-bound duty free tobacco allowances, arguing that the lost revenue will be regained by replacement local brand sales
on the domestic market (there are no international brands available on the Sri Lankan domestic market-Ed).
The ban was announced just over a week ago when Sri Lankan President, Mahinda Rajapaksa was on the campaign trail in local government elections in which his Sri Lanka Freedom Party (SLFP) subsequently won 85% of the 266 councils on offer.
In the run up to the elections Rajapaksa made several speeches and mentioned that he wanted to see more Sri Lankan product being sold at Colombo Airport, more products being exported generally and the removal of inbound duty free tobacco allowances. This has been a main aim of the Ceylon Tobacco company (a subsidiary of BAT) for some time, since it is the monopoly producer of local brands in the country.
When Rajapaksa announced the impending ban, the minister of aviation and the chairman of aviation were both out of the country, leaving Alpha Orient Lanka no channels of appeal at the time. An amendment was then quickly made to a gazette that the inbound allowance would be no more.
Alpha Orient Lanka (AOL) is now obviously in the position where a major material change has been made to its duty free contract at Colombo Airport and some renegotiation is certain.In the meantime AOL has been quietly lobbying to try and get the decision reversed, as Managing Director Paul Topping told The Business: ‘We believe that he has been ill advised and not taken into account the views of a number of ministries who, along with us, are lobbying him quietly and non aggressively.
‘We have got some statistics that show that 30% of the tobacco we sell in arrivals is in fact sold to international travellers, so that is 30% that will not be recovered on the domestic market. Another 30% of customers are Sri Lankans who smoke international brands so that is gone too.
‘We've done the sums and basically come to the conclusion that the country will be worse off, the government will be worse off and the airport authority will lose substantial revenue.’
Topping said that AOL is getting good support from some of the international tobacco companies who have written to the government pointing out that their only route to market in Sri Lanka is through AOL's duty free arrivals stores and their brands do not compete with locally produced brands.
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