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Liquor sticker security breach casts doubts about Indian company’s ID project bid
View(s):By Sandun Jayawardana
Concerns have been raised regarding an Indian company bidding to build the system for Sri Lanka’s digital ID project following widespread issues over the supposedly “foolproof” security sticker it supplied for liquor bottles.
The Indian company, Madras Security Printers (MSP), won the contract in 2018 to supply security stickers to be fixed on liquor bottles. This week, authorities widened their probe into a massive tax scam where fake security stickers have been pasted on liquor bottles.
The possibility of Madras Security Printers gaining the contract for printing of digital ID cards also has been questioned in Parliament considering some of the previous projects carried out by the company.
The State Minister of Technology, Kanaka Herath, told the Sunday Times last week that bid had not been awarded as yet and the winning bidder would be awarded the contract by November or December.
Meanwhile, the quality of the stickers printed by the Indian company for liquor bottles too has been questioned.
During island-wide raids conducted over the past two weeks, the Excise Department has so far seized over 25, 000 liquor bottles suspected to contain fake security stickers, Commissioner of Excise and Department Spokesman Kapila Kumarasinghe said yesterday.
Investigations conducted into bottles seized in the Central Province have been completed and tests on the samples have established that the stickers are fake. Tests on samples seized from other areas are continuing and results are expected next week.
Any bottles with fake security stickers will be confiscated while the companies involved will be instructed to pay a compounding fee. The Excise Department will also take steps to recover the tax revenue lost to the government owing to the fake stickers, said Mr Kumarasinghe.
Following reports of widespread use of the fake security stickers, some opposition MPs have already raised concern over the reliability of the stickers supplied by MSP. They have also alleged that the bidding process for the digital ID project had been manipulated to suit the company which is already under a cloud over the liquor bottle sticker scam.
The raids to detect liquor bottles with fake security stickers follow a directive issued by Parliament’s Ways and Means Committee chaired by Patali Champika Ranawaka. The Committee had earlier observed that the Excise Department had not conducted any raids to seize liquor bottles suspected of containing fake security stickers though in March it was given 200 machines that could identify whether the stickers were real or fake.
The proposal to introduce the security sticker for liquor bottles was submitted in 2016 as a budget proposal. Tenders were called in 2017 and Madras Security Printers won the contract to print the stickers in 2018.
The introduction of the sticker was initially a big success, with excise revenue climbing significantly by Rs. 19 billion in 2021 compared to the previous year and production increasing by 11%, State Finance Minister Ranjith Siyambalapitiya told Parliament this week. He was responding to a question raised by Samagi Jana Balawegaya (SJB) member Buddhika Pathirana. The opposition parliamentarian alleged that some Excise Department officials were involved in the scam.
Certain issues started to arise with the sticker later on, Mr Siyambalapitiya noted. “We have launched a full probe into this matter on the orders of the President. The Criminal Investigation Department (CID) is now involved. We have sent the samples of these alleged fake stickers to the Government Analyst. Based on the results, we will investigate and take action against those responsible, irrespective of their status,” the state minister pledged.
Though the Excise Department was blaming the drop in excise revenue on the rise in illicit liquor consumption, a major reason was also due to the high usage of fake security stickers on liquor bottles, Mr Ranawaka told the Sunday Times.
The Committee had also expressed its displeasure that not all companies were using the security sticker though it had been made mandatory. These companies had argued that the manual pasting of stickers was not practical for their speedy production process. As such, the Cabinet had approved a proposal whereby they could substitute the sticker with a digital feature. Accordingly, the gazette issued by the Excise Department notes that liquor producers can use a “foolproof sticker or digital feature” as a security feature.
Mr Ranawaka, however, said the Committee was not prepared to accept this, especially given that two companies that account for 73% of the country’s liquor market share were not pasting the security sticker on their products and were using a digital feature.
“We emphasised to the Excise Department the need to effect three major changes to the present system. One is to introduce a homogenous security feature to verify authenticity instead of different features for different companies. The second is to introduce a feature where the customer can easily verify the authenticity of the product through a QR Code. The third is that tax collection must be immediate after fixing the security feature on the bottle,” said Mr Ranawaka.
The MP also noted that the Excise Department had not taken steps to recover more than Rs. 7 billion in tax arrears from liquor manufacturers. The Ways and Means Committee has given the Department until October 15 to present a plan on how it intends to recover the arrears.
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