A 2,000-trillion lira ‘hangover’ for alcohol monopoly Tekel

ANKARA (Reuters) – Accumulated losses at Turkey’s alcohol and tobacco monopoly Tekel exceed 2,000 trillion lira ($1.3 billion) from its compulsory purchases of far more tobacco than it needs, privatization minister Yilmaz Karakoyunlu said on Thursday. This latest duty loss is smaller than similar debts that built up at state banks over the years, but underlines the way in which Turkey has used the state sector to subsidize farmers and other political interest groups. The government forced state bodies to buy from farmers or issue cheap loans but never made good on the losses. The IMF, helping bail Turkey out after successive financial crises, has promised to add $10 billion to a $19 billion rescue package designed to make up losses at the banks and back reforms that will prevent them reappearing. Karakoyunlu told a commission debating a tobacco sector reform law that Tekel’s purchases of tobacco from local farmers had resulted in large stocks for the company. We have stocks of around 500,000 tons. This would meet Turkey’s cigarette production needs for six years and has an economic value of 700-750 trillion lira, he said. The minister said the accumulated duty losses meant Tekel had been unable to pay tax debts of 2,600 trillion lira. The tobacco reform law, pledged to the IMF earlier this year, was delayed after a minister refused to sign it and the president vetoed it. The minister resigned rather than sign the draft, which the government is now pushing though Parliament a second time to override the presidential veto. The commission approved the draft, which now must go before the full assembly for voting. The reforms envisage an end to compulsory purchases by Tekel and introduce measures to encourage farmers who depend on tobacco to shift to new crops. It also aims at the eventual privatization of the monopoly and liberalization of the tobacco and alcohol markets. Many have opposed it for the upheaval it will cause farmers and for allegedly allowing favorable access to foreign cigarette makers. Many investors said they were holding back from taking positions and watching Parliament, which held a closed debate on the divided island of Cyprus yesterday.

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