Bureaucratic bungling delays Kantale Sugar mill revival

The much hyped revival of the Kantale Sugar factory has been further delayed due to the Treasury’s inability to speed-track the shareholder agreement with the foreign investor although the Board of Investment (BOI) had 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 had 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 pro j e c t , S h r i 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 a 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 shareholder agreement and seek cabinet approval to go ahead with the project.

The 30-year project agreement would be run on Built, Operated and Transfer ( BOT) basis through shareholding of 51 per cent held by the Government of Sri Lanka and 49 per cent 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 created with the implementation of the project, he said.

The project is aimed at reviving and restructuring the Kantale Sugar factory to process 4000 tonnes of cane 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.

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 official told the Business Times.

Only 10 – 12 per cent of Sri Lanka’s sugar consumption in the country is produced by Pelwatte and Sevanagala factories. The rest is imported at a huge cost of foreign exchange to the country. “We need to cultivate over 110,000 hectares to reach near self sufficiency. But currently we cultivate no more than 30,000 hectares,” he pointed out.