In 1956, His Late Majesty the Third King envisioned a new industry that would transform the kingdom’s economy. Under this vision, the Bhutan Central Distillery was set up in Samchi, Southern Bhutan. This became the country’s first commercial distillery. An Indian businessman, Shree J.R. Contractor was granted the contract to run the operations.
What began as a royal experiment quickly blossomed into a financial powerhouse. Within seven years (1957-1964), the distillery’s contribution to state coffers was extraordinary. Excise duty payments soared to Rs. 1,557,061, with 1963 marking a record-breaking annual contribution of Rs. 334,229. Even in its infancy, the venture showed promise, with the first two years alone generating Rs. 138,798 and Rs. 137,288 respectively. These figures, meticulously recorded in Government Memorandum No. 338/2-CMR dated 10 October 1964, painted a picture of unprecedented success.
However, fate had other plans. According to the memo states on 5 October 1964 disaster struck. An electrical spark from a motor pump ignited he distillery’s lifeblood – its alcohol reserves. Within minutes, the entire facility was engulfed in flames, its promise reduced to ashes.
The aftermath was captured in the “Report of Fire at Bhutan Central Distillery.” It recounts the details of Commissioner of Southern Bhutan’s visit on the 6th, during which the Deputy Commissioner was investigating. The report laments, “Every effort to save the distillery failed, and it continued to burn throughout the night and into the following morning.”
The damage to Shree Contractor was estimated at a staggering Rs. 645,000, with Rs. 400,000 attributed to liquor loss and Rs. 45,000 to personal items. The latter included a diverse range of possessions from firearms to clothing and household goods.
At the time, J. Raj Gurung served as Deputy Commissioner and Dasho J.B. Pradhan as Commissioner. The report states, “one supervisor by the name Shree Ahmed Amir-Beg Baig (Mirza) was severely burnt who received treatment in Samchi Hospital on the night of burning and the next day. As his condition grew worse, he was shifted to the Military Hospital in Binnaguri on the 7th inst. And in the early hours of the 8th inst. he passed away.”
When the D.C questioned the owner about the insurance the response was revealing. “The distillery was insured with Commonwealth Insurance Co Ltd for the value of Rs. 61,000/- and with Fire & Gen Insurance Co Ltd for Rs. 40,000/-; and when negotiations for larger insurance were going on during the last few months, the unfortunate incident happened. The total loss of property is estimated at about Rs. 700,000/- whereas the property is insured for a total sum of only about Rs. 101,000/-. His case is pathetic!”
The D.C. recommended providing reasonable assistance, including financial support, to the Contractor brothers for swift reconstruction and resumption of production. They were advised to use ‘non-inflammable’ materials and fully insure the structures and contents. Also, it was estimated that Rs. 300,000 would be required to rebuild, and they were advised to avail themselves of industrial loans granted to profitable concerns on long term basis at a nominal interest rate.
Following the report, the committee met and recommended to the government to consider the case sympathetically as the incident was an Act of God, and to waive the interest. It was also recommended to pay Rs. 50,000 now and the balance amount in instalments of Rs. 50,000 monthly. The conclusion of the report states “Contractor brothers expect to put right the Distillery and to commence normal supply of all varieties of liquors in three months’ time. They are arranging to bring 5,000 gallons of alcohol from Sikkim and Indian immediately and start supplying Rum for the present. The sale of 5,000 gallons is expected to yield Rs. 85,000/- as revenue to Government.”
Jimi Contractor
The catastrophic event marked a turning point in Bhutan’s fledgling spirits industry. From the ashes of this disaster, a new chapter would emerge. Recognising the distillery’s importance and potential to Bhutan’s economy, His Majesty the Third King granted an exclusive privilege to Jimi, a Parsee businessman from Bombay and Jehan Contractor of Dhohra, Gujarat.
Nari Rustomji, an Indian official friendly with Bhutan, recommended Jimi start a distillery in Samchi. However, the project was delayed due to Lyonchen Jigme P. Dorji’s medical treatment in Switzerland. In the interim, Jimi established the Sikkim Distillery in 1956 at the Sikkim Crown Prince’s request. With his cousins’ help, Jimi built the plant from scratch, contributing $750,000 annually to Sikkim’s economy. The Sikkim Government owned 51 percent of the distillery, the Chogyal 30percent, with unclear ownership of the remaining shares. Upon Lyonchen’s return, he pressured Jimi to fulfill his contract in Bhutan.
In 1965, Bhutan implemented a new liquor licensing system, granting Jimi Contractor and his partner a 16-year license to reconstruct and operate a distillery in Samchi. This license, which ran from 1 January 1965, to 31 December 1980, allowed for the manufacture of various alcoholic beverages, including foreign-type liquors, country liquors, wines, beers, and tinctures.
The license came with 52 specific terms and conditions, including an advance fee of Rs. 101 and a vend fee of Rs. 2.50 per case of liquor exported from Bhutan. By February 1965, despite the fire, the reconstruction was progressing well. The licensees had received their second installment of Rs. 50,000 and managed to pay Rs. 149,530.20 in excise duty, demonstrating the industry’s resilience and potential.
Concurrent with the new licensing system, the government introduced a sales tax structure. Rates varied from 16 naya paise per bottle for high-class liquors to 3 naya paise for country liquors. However, this additional taxation led to challenges for liquor distributors, who sought exemption based on their license agreements. One such challenge arose in Eastern Bhutan, including Samdrupjongkhar. On 10 April 1965, Jimi Contractor wrote to the Excise Officer of the Government of Bhutan (Letter No. J/65), explaining that despite having a license to sell foreign-type liquor in the region, they were unable to do so until December 31. This restriction resulted in a potential daily revenue loss of Rs. 500 for the government. Contractor requested urgent discussions with local officials to resolve the issue and obtain necessary permissions.
While establishing the distillery, Jimi made a fortune. He paid his taxes but avoided other financial obligations. As Bhutan continued to modernize its governance structures and policies in the following years, the government worked to address various economic and administrative challenges, including those raised by businesses like Jimi Contractor’s distillery.
Bhutan Toast
The development of Bhutan’s distillery sector has mirrored significant national milestones, underscoring its growing importance in the country’s economic and cultural landscape. A prime example of this parallel evolution occurred in 1972 when Crown Prince Jigme Singye Wangchuck was appointed as the Trongsa Penlop, a pivotal moment in Bhutanese history. To commemorate this momentous occasion, Bhutan Central Distilleries introduced a limited-edition liqueur aptly named ‘Bhutan Toast’.
This special release was not only a celebration of the Crown Prince’s appointment but also a testament to the distillery’s craftsmanship. Each 450ml bottle, containing liqueur with an alcohol content of 35 percent, was carefully packaged in vibrantly decorated boxes. These boxes featured intricate designs of dragons and the eight auspicious symbols of Bhutan, reflecting the country’s rich cultural heritage.
The exclusivity and cultural significance of ‘Bhutan Toast’ have only grown over time. Recently, the last 12 bottles of this commemorative liqueur were sold for Nu. 300,000 each, highlighting both its rarity and the increasing value placed on Bhutan’s distillery products.
Two years after the formal coronation of the Crown Prince as the Fourth King of Bhutan, the Army Welfare Project was established and assumed control of the Samchi Distillery. General Lam Dorji, Zimpon Dorji Gyeltshen, and Goob Sonam Wangchuk were appointed to oversee its operations. This strategic initiative aimed to generate employment opportunities and provide post-service benefits for ex-servicemen, demonstrating the government’s commitment to supporting both the industry and its army veterans.
As the distillery industry grew in prominence and profitability, it also attracted unwanted attention from those seeking to capitalize on its success. For example, a non-Bhutanese tried to bribe a court official with Rs. 700,000. However, the scheme failed and the rest is history.
The AWP continued to expand its operations, establishing a new distillery in Gelephu in 1976 and leasing the Samdrup Jongkhar distillery from Namdik Enterprises in 1979. This period of growth and consolidation highlights the significant economic impact of the industry and the government’s ongoing efforts to support and regulate the sector.
Looking back on the evolution of Bhutan’s distillery industry from 1956 to 1976, we can see how it mirrors the nation’s broader journey of modernisation and economic growth. From its humble beginnings as a royal experiment to becoming a vital contributor to the national economy, the industry has weathered challenges and emerged stronger. The story of Bhutan’s spirits industry is one of resilience, innovation, and strategic vision. It demonstrates the foresight and patience of Bhutan’s monarchs. Today, AWP distillery is recognised both nationally and regionally for producing high-quality spirits and for its positive impact on the economy.
Contributed by Tshering Tashi