Wednesday, 15 June 2016 14:35

Bureaucratic bungling delays Kantale Sugar mill revival

The much hyped revival of Kantale Sugar factory is to be further delayed due to Treasury’s hold up in the signing of share holder agreement with the foreign investor although the Board of Investment (BOI) has entered into an investment agreement one year ago.

The BOI has brought to the notice of the Cabinet Committee on Economic Management (CCEM) that a project application has been submitted to them on 11-05-2015 by a group of investors comprising Shri Prabulingeshwar Sugars and Chemicals Ltd, Bangalore, UK based Mendel Gluck company and K.P. Nagaraja.

Around six years ago the same company Mendel Gluck has expressed willingness to invest in the sugar industry of Sri Lanka during the previous regime but no interest had been shown at that time, BOI sources said.

The lead investor of the BOI approved project, Shri Prabulingeshwar Sugars has informed the CCEM that the company is working with a consortium which has now incorporated a Special Purpose Vehicle (SPV) SLI Development Pte. Ltd to carry out the Kantale sugar factory revival project.

The interest of investors will be represented by the SPV and it has furnished bank guarantee of US$ 40 million to the BOI ensuring their total investment of $110 Million, a senior state official revealed.

The CCEM has directed the authorities to refer this matter to the Attorney General for its advice on the share holder agreement and seek the cabinet approval to go ahead with the project.

The 30 year project agreement would be run on Built, Operated and Transfer (BOT) basis and the basis of shareholding of 51 percent held by the Government of Sri Lanka and 49 percent by the foreign investor, he added.
The total investment of $ 110 Million for the project will be borne by the investor SLI Development Pte Ltd.

Around 1,220 direct employment opportunities would be crated with the implementation of the project, he said.

The project is aimed at reviving and restructuring Kantale Sugar factory to process 4000 Tons of canes per day (TCD) of sugar cane and manufacture 72,000 MT sugar per year, generation of electricity and dairy products.

CECM was of the view that the approval of the Cabinet of Ministers should be taken to go ahead with the project.

Kantale Sugar Factory was constructed in 1957 as a grant offered to the country during the tenure of Prime Minister S W R D Bandaranaike by the government of Czechoslovakia and it was opened in 1960.

It had been smoothly functioning as a profit earning venture until 1986. Thereafter it ceased to be an income earning enterprise and various attempts were made to identify a suitable investor.

Accordingly, it would be highly beneficial to restart Kantale Sugar Factory which was
inactive over a long period of time as an accelerated development process.

Restarting the Kantale Sugar Factory would address loss of direct and indirect job opportunities in the area as well as losses to the local economy due to non-operation of the sugar factory, state official said .

The sugar cane required for manufacturing of sugar will be grown by farming communities in the area. With the establishment of Kantale Sugar industry development project in Kantale the concentration of industry, agriculture, infrastructure, communications and community services in one location would rapidly become a regional economic growth stimulator, he emphasised.

Although the potential for expansion of the industry exists, as Sri Lanka imports over half a million tonnes of sugar per annum, the government is yet to create conditions favourable for its development by enacting a Sri Lanka Sugar Act to regulate the stakeholders, viz - the farmer, miller and government activities, an industry expert said adding that the government should accord high priority to revitalise the sugarcane industry, considering the huge sum of around Rs. 41 billion spent on sugar imports annually.

There is a substantial ready market locally for sugar if matching mill capacities are available. Only 10 – 12 percent of sugar consumption in the country is produced by Pelwatte and Sevanagala. The rest is imported at a huge cost of foreign exchange to the country. “We need to cultivate over 110,000 ha to reach near self sufficiency. But currently we cultivate no more than 30,000 ha”, he pointed out.

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