Alcohol industry is allowed to increase exports

In May, export quotas for alcohol producers were abolished.

Alcohol production industry has annual production volume plans. Increased alcohol excise tax resulted in reduced vodka sales and overstocked warehouses. In order to prevent the industry’s collapse export quotas for alcohol production will be abolished.

In 2013 vodka and other alcoholic beverages production quota was set at 19 630 thousand dl, which is 20.7 liters per 1 person, including infants and the elderly. This is somewhat below the 2012 quota (20 020 thousand dl). In January – April 2013 Belarus produced 4,923 thousand dl of vodka and drinking alcohol, which is 5.5% less than in 2012. The decline in the production was due to the decreased consumption of vodka by population, and some problems with the distribution of alcohol quotas among enterprises.

State-owned alcohol producers are forced to meet the plans. Private producers do not have production plans. Due to increased excise duty on alcohol, retail vodka prices went up by 17.4% compared with early 2013 and consequently, vodka retail sales dropped by 12.7%. Due to unadjusted alcohol production plans, warehouses increased their alcohol stocks up to two months production volume by May 1^st, 2013. On January 1^st, 2013 stocks accounted for only one-third of the monthly production volume.

In the alcohol industry, state enterprises are virtually paralyzed. Alcohol production, even without consequential sales, requires them to pay the excise duty in the budget. Excise duties on alcohol make a large part in the final product’s price and distilleries are among the largest taxpayers in the country. However sales are falling and sellers delay settlements with alcohol producers. State-owned enterprises borrow at high interest rates to pay taxes. Warehouse stocks require additional funds to pay for storage space, resulting in high expenditures, particularly for Minsk-based businesses. The government is not willing to reduce the excise duties due to their great importance for the budget against the background of deteriorated economic situation. The government figured that the abolition of export production quotas for alcohol producers will help improving the situation since the growth of vodka consumption in the country is not envisaged.

Thus, the government’s desire to increase budget proceeds has resulted in significant problems for state-owned enterprises. Abolition of export quotas is an attempt to address the problem, but it is unlikely to substantially improve the situation in the industry due to the fierce competition in foreign markets.