In Business News: the government-imposed ban on spirits incurs heavy losses, the Czech state-owned oil transport company Mero is to buy a minority stake in the TAL pipeline, the EU Commission okays aid to Czech Airlines, and passenger car production growth slows.
Ban on spirits incurs huge losses
The government-imposed ban on spirits last Friday is incurring heavy losses to producers, restaurant and pub owners, sales outlets and not least, the state, in lost tax revenues. Spirits producers are losing 15 million on net sales daily and the situation is expected to worsen in the wake of a ban on exports that took effect on Thursday September 20th. Some companies have suspended production, others are producing beverages with a lower than 20 percent alcohol content. On average, bars and restaurants are losing one fifth of their sales, according to the Association of Hotels and Restaurants said this week. Ahold, which operates 282 sales outlets in the Czech Republic, says it is losing about 1 million crowns a day. Meanwhile, the state is losing 25 million crowns a day in tax revenues.
Government orders new tax stamps in view of lifting ban
The Czech government has promised to take effective action to mitigate these losses. It announced this week that the ban on spirits would be lifted as soon as possible allowing alcohol of certified origin on the market. The spirits allowed back on the market are to bear newly printed tax stamps. The State Securities Printing Company will produce around 10 million tax stamps by next Wednesday and the company has said it will do its utmost to distribute stamps to all producers and importers of liquor who apply for them. Producers have accepted this, but may seek compensation from the state for the extra costs incurred. The government is hoping that by making a clear distinction between certifiably safe liquor and illegal spirits the Czech Republic will be able to lift the ban on exports as well. The EC has said it wants to be briefed well in advance as to when this may happen.
Mero to buy minority stake in TAL pipeline
The Czech state-owned oil transport company Mero is to buy a minority stake in the TAL pipeline that brings oil from the Italian port of Trieste, a senior government official said on Tuesday. Mero has offered to pay Royal Dutch Shell 15 million euros for a 6 percent stake. The TAL pipeline hooks up to the IKL link in Germany that brings oil to Czech refineries. The Czech state has long tried to gain an equity stake in TAL as a strategic investment that would help guarantee supplies. The deal is still in its preliminary stages since it is subject to vetting by other shareholders. According to government officials a final agreement could be reached within two months. Imports via the TAL pipeline are expected to lighten the country's reliance on the Druzba pipeline from Russia.
EC approves state aid for Czech Airlines
The EU Commission this week gave approval for 100 million euros in state aid to be granted to state-owned Czech Airlines, within a restructuring programme which the regulator said had a reasonable prospect of getting the airline back on track. The Commission, which acts as competition and state aid regulator in the European Union, said the restructuring plan was sufficient to address the airline's financial problems. Under the terms of the plan, the Czech authorities provide support through a debt-to-equity swap of a 100 million euro loan from state-owned firm Osinek in favour of Czech Airlines.
Passenger car production growth slows
Passenger car production in the Czech Republic grew by 2.2 percent to over 804,000 vehicles between January and August, a slowdown compared with the January-July period when car output rose by almost 4 percent, according to data released by the Automotive Industry Association. Car production in Hyundai Nosovice and Skoda Auto increased in a year-on-year comparison, while production in Toyota, Peugeot and Citroën decreased. The slowdown is related to the situation on the European car market.