Quick answer
The arrack renters of colonial Ceylon were local entrepreneurs who bought, at government auction, the exclusive right to sell arrack in a district for a fixed term. The system, inherited from the Dutch and expanded by the British in the nineteenth century, made arrack one of the colonial government's largest sources of revenue. Successful renters, many from the south-western coastal towns of Moratuwa and Panadura, invested their profits in plantations, graphite mining, property, schools and temples, and their families became prominent in public life. The system ended with the Excise Ordinance of 1912.
Key takeaways
- Arrack rents were exclusive district rights to sell arrack, auctioned by the colonial government for a fixed period.
- Revenue from arrack rents was among the largest single items in the Ceylon government's income for much of the 1800s.
- Many leading arrack renters came from the coastal towns of Moratuwa and Panadura, south of Colombo.
- Renters reinvested arrack profits in coconut, rubber and tea plantations, graphite mining and urban property.
- The renting system was abolished by the Excise Ordinance of 1912, which brought arrack under direct government control.
How the arrack renting system worked
The arrack renting system was a form of tax farming. Instead of collecting duty on each bottle, the government sold the retail monopoly for an area and let the buyer recover the cost from drinkers.
- →The island was divided into rent districts.
- →Each district's rent was auctioned, usually annually.
- →The winning renter paid the government in instalments.
- →The renter then ran or sublet the taverns in that district.
- →Profit was whatever sales exceeded the rent and costs.
Why the British relied on arrack rents
The British relied on arrack rents because they were cheap to administer and reliably lucrative. A handful of auctions each year produced a large, predictable income without the need for an army of excise officers.
Arrack rents grew with the plantation economy. As coffee and then tea estates spread through the hills from the 1830s, wage-earning labourers created new demand, taverns followed the roads inland and the value of the rents climbed decade after decade. By the later part of the century a single province's rent could change hands for a sum that would buy several plantations.
Who the arrack renters were
The arrack renters were overwhelmingly Ceylonese, not British. Europeans considered the trade beneath them, which left the field open to local capital.
Many of the most successful renters came from the coastal belt south of Colombo, particularly Moratuwa and Panadura, towns already known for carpentry, trade and transport. Families pooled money to bid, formed syndicates to avoid bidding against each other and extended their reach from the low country into the hill districts.
What arrack fortunes built
Arrack fortunes were rarely left in arrack. Renting was risky and socially awkward, and families moved their money into respectable assets as quickly as they could.
- →Coconut, rubber and tea plantations.
- →Graphite mines, a boom industry of the late 1800s.
- →Mansions in Colombo's Cinnamon Gardens and along the coast.
- →Churches, Buddhist temples and schools.
- →English education for sons who became lawyers, doctors and legislators.
Criticism and the end of renting
Criticism of the arrack renting system mounted from the late nineteenth century. Renters had every incentive to open more taverns and sell more arrack, and Buddhist reformers and Christian missionaries alike blamed the system for spreading drunkenness.
The Excise Ordinance of 1912 abolished the rents and brought distilling and sales under a government excise department. Ironically, several leaders of the temperance campaigns that followed came from families whose wealth had originated in arrack.
Traces of the arrack renters today
Traces of the arrack renters are scattered across the south-west. The grand houses of Moratuwa and Panadura, the avenues of Cinnamon Gardens in Colombo and many endowed schools and places of worship date from the era.
Lankan Stays & Trails can include some of these on a guided day through Colombo and down the coast to Kalutara, where the coconut groves that started it all are still tapped each morning.
- →Cinnamon Gardens, Colombo 7: mansions and tree-lined streets.
- →Moratuwa and Panadura: old family houses and churches.
- →Kalutara coast: the tapping groves that supplied the trade.
Frequently asked questions
What was an arrack renter?
An arrack renter was a businessman who bought from the colonial government, at auction, the exclusive right to sell arrack in a particular district for a set period. The renter paid a fixed sum and kept whatever profit the taverns made beyond it.
What was the arrack farming system?
Arrack farming, also called arrack renting, was a system of tax farming used in Ceylon under Dutch and British rule. The government auctioned district monopolies on arrack sales instead of taxing each sale, which gave it a large, predictable revenue at low cost.
How important was arrack to the colonial economy?
Very. For much of the nineteenth century, revenue from arrack rents was among the largest single sources of income for the government of Ceylon. It also provided the first substantial capital for a class of local entrepreneurs.
Where did the arrack renters come from?
Most were Ceylonese from the low-country south-west, and many of the most prominent came from the coastal towns of Moratuwa and Panadura. Families and syndicates from these towns bid for rents across the island, including in the plantation districts.
When did arrack renting end?
The renting system was abolished by the Excise Ordinance of 1912, which placed the production and sale of arrack under a government excise department. Licensing of individual taverns and direct taxation replaced the auctioned district monopolies.
What did the arrack renters do with their money?
They diversified. Profits went into coconut, rubber and tea estates, graphite mining and city property, and into philanthropy such as schools, churches and temples. Their English-educated descendants were prominent in the professions and in early twentieth-century politics.