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Mendel Gluck, an investor formally receives the BOI agreement from Chairman, BOI, Upul Jayasuriya. Minister of Land M K D S Gunawardane is also in present

The recommencement of the Kantale sugar factory is expected to provide 30,000 direct and indirect job opportunities to approximately 30,000 individuals in the region, while expected to produce at least 72,000 metric tons of sugar annually, Chairman, Board of Investment (BoI), Upul Jayasuriya said last week.

Moves to recommence operations at the plant officially commenced with the signing of the agreement between the BoI and M G Sugars Lanka (Pvt) Ltd last week.

The Chairman addressing the event pointed out that even though the official event took place on July 27, works towards restructuring the plant commenced quite a long time ago.

“In fact, the proposals to recommence operations five years ago,” he said. Secretary to the Ministry of Lands, I.H.K. Mahanama speaking to The Nation Gain said that the factory would be completely operational in two years. “The initial paperwork would be completed in two to three weeks and the factory is expected to be functional in 2017, he said.

A statement by the BoI stated that approximately 72,000 metric tons of sugar per year would be produced by processing 4,000 tons of cane per day (TCD).

Shri Prabulingeshwar Sugars and Chemicals Ltd, Bangalore which engages in sugar cane cultivation, sugar manufacturing, co-generation of power plants and dairy industry will be the technical partner for the project, the BoI further said.

Jayasuriya stated that that the project agreement would be run on Built, Operated and Transfer (BOT) basis. “Fifty one percent of the ownership will be held by the Government of Sri Lanka and 49% by the foreign investor,” he said.

The total investment of the project US $ 110 million will be borne by the investor. SLI Development Pte. Ltd, Singapore is the foreign investor of this project. A total number of direct employment generations would be around 1,220.

In addition the new investment agreement would also include generation of electricity and dairy products, as per the approval granted by the Cabinet of Ministers.

Initial commencement
Kantale Sugar Factory was initially constructed in 1957 through a grant offered by the government of Czechoslovakia to the country during the tenure of Prime Minister S W R D Bandaranaike and was officially opened for operations in 1960. However, is operations came to a halt after functioning as a profit earning entity till 1986.

Subsequent efforts to revive operations failed due to the prevalent political situation which made economic prospectives in the Northern and Eastern provinces bleak. However, the end of the war provided a clear platform for the Government and investors to restart the plant. But, various obstacles in the delay of paperwork resulted in the plant continuing to be idle.

“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,” the BoI said.

Fresh process
According to the BoI, the cultivation of sugar cane required for manufacturing of sugar will be grown by farming communities in the region, thus it would provide the much needed job opportunities mentioned earlier. Sri Lanka’s Ministry of Land will choose villages in the area to cultivate the land.

Jayasuriya in his address pointed out that there will be no borrowings from domestic banks and the full investments of Rs.13.5 billion would be from investors abroad. “In addition, the government will not invest any tax money in the Kantale factory,” he added.

“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,” the BoI further said.

Meanwhile, following moves to recommence operations of the Kantale sugar plant, industry experts have called upon the government to focus on sugar production which currently meets a mere nine percent of the total sugar demand in the country.
Chairman, Managing Director, Pelawatte Sugar, Ariyaseela Wickramanayake said strengthening the industry would also help in improving the uses of its by-products such as power production and alcohol.

By-products
He stated that the strengthening and restructuring the sugar manufacturing plants in the country would improve the usage of its by-products for power generation and alcohol production.
“By improving the productivity, we could also focus on power production and also alcohol. Currently, we import alcohol, through strengthening sugar industry, we could save a lot of foreign expenditure and produce them here for cheaper price,” he said.
According to the Annual Report of the Central Bank of Sri Lanka, domestic sugar production slowed down last year with the reduction in sugar production at Pelawatte sugar factory. As a result, total sugar production declined by 1.4 percent to 52,342 metric tons.

Currently, sugar manufacturing takes place in three factories (Pelawatte, Sevanagala and Gal Oya) while Kantale remains defunct. According to the report, the production at Gal Oya factory (earlier Hingurana factory) increased by 90 percent to 19,961 metric tons as sugar cane supplies of private growers improved supported by an increase in extent cultivated and the use of high yielding varieties.

The report further said that domestic sugar manufacturers were able to meet 9.2 percent of the sugar demand in the country in comparison to 8.8 percent in 2013.