Sri Lanka Aims to Become Self Sufficient in Sugar

The Kantale Sugar Factory which was closed for 30 years is set to open. With the commencement of production, it will first stop an annual foreign exchange drain of Rs. 20 billion for sugar imports in two years and make Sri Lanka self-sufficient in sugar. The machinery to commence operation of the Kantale Sugar Factory is imported from Israel. Sri Lanka spends 35 billion rupees annually to import 644,000 metric tons of sugar which can be saved in foreign exchange. As a result of this process, consumers will be able to buy sugar at lower prices.

The project will firstly produce sugar for local consumption and then look at exports adding a new product to Sri Lanka’s export catalogue. The sugar cane waste would be utilised to generate electricity which will be added to the national grid.

In addition ethanol too will be produced at the factory, once again helping to reduce ethanol imports thus saving foreign exchange. The multi-functional project will be funded by a consortium of Israel, London, Singapore and Sri Lankan investors who were ignored by the previous government despite having obtained all the BOI and other approvals.

The total stage one project cost would be around Rs. 400 million. This will be the first post covid-19 FDI to Sri Lanka. “Two of the other unique features of this investment are that it would create over 4,500 new job opportunities and also help famers to cultivate over 7,500 acres of Sugarcane. The factory will also have a forward buying agreement with the farmers thus ensuring a steady income for them,” an official from the consortium said.

The Kantale Sugar Factory which was received as a Czechoslovakian government aid grant began production on October 2, 1960. The Kantale Sugar Factory, in the 1960’s was considered as the largest sugar production facility in Asia, provided about 10,000 direct and indirect job opportunities.

It was also running at a profit and from 1980 to 1986, the factory earned a Rs. 70 million profit. However in 1993 the then UNP government handed it over to a private company and which resulted in a closure by the end of 1999.The total annual requirement of sugar in the country is around 550,000 tons and around 8% is produced locally through Pelwatte and Sevenagala factories. The total annual expenditure on sugar imports is around Rs. 20 billion. The venture would be operated as a Build Own and Transfer (BOT) project on a 30 year lease. There would be a tri party agreement with Government, farmers and the consortium.

Finance Minister Ravi Karunanayake said in a statement, Sri Lanka will deploy new initiatives to become self-sufficient in sugar manufacture. Plans are underway to increase sugarcane cultivation and set up of 15 new manufacturing plants in the country, the statement said.

The project will be implemented under two stages. Under the first stage the country expects to manufacture 50 percent of its sugar requirement locally by 2020. Karunanayake said Cabinet has already approved the new sugar manufacture development project and the policy framework proposed. The second project under the long term basis will be implemented with the participation of the private sector to make the country self-sufficient in sugar by 2025.

There are several sugar factories engaged in manufacturing and they come under the purview of different ministries. In addition to the current 26,000 hectares owned by the prevailing four sugar manufacturing factories, another 31,000 hectares of land should be cultivated by 2020, the statement said.

It has been calculated that a total number of 102,000 hectares should be cultivated to make the country self-sufficient in sugar. It has also been decided to introduce a cultivation system which would accommodate the minor cultivators in the respective areas to enable them to enjoy benefits of the proposed sugar manufacturing project. Every farmer family which joins this system will be able to earn a minimum 30,000 rupees per month under this project.

This national sugar manufacturing development plan includes a framework to maintain a quality sugarcane cultivation system, introduce a reasonable consumer price through maintaining a stable sugar market price, provide necessary infrastructure to improve the irrigation for the cultivation and introduce a policy of labor force development mechanism to empower the laborers in the industry, the statement said.