$100m Kantale sugar deal turns bittersweet

Saturday, 4 March 2017 00:34 -     - {{hitsCtrl.values.hits}}

  • BOI says unfair delay from Agriculture Ministry side to clear defunct machinery 
  • Wants more support from Govt. agencies to implement FDI projects 
  • Reports allege Ministry corruption in clearance process 
  • Livelihoods of 20,000 farmer families in jeopardy, new projects in pipeline   

 

By Uditha Jayasinghe 

Caned by bitter FDI numbers, the beleaguered Board of Investment (BoI) yesterday made a desperate plea to Government institutions and agencies to cooperate with them to implement investments, highlighting delays in the $100million Kantale Sugar factory project ,but insisting they could display a turnaround by December if support is given. Controversy has been swirling around the Kantale Sugar factory, which after being closed for over 25 years, was handed over to a joint venture in July 2015. A supplementary agreement was signed in August 2016 between the Government of Sri Lanka and M. G. Sugars Lanka (Pvt) Ltd for revival and restructuring of the Kantale Sugar factory. Untitled-2

M. G. Sugars Lanka is made up of Shri Prabulingeshwar Sugars and Chemicals Ltd, Bangalore, as well as SLI Development Pvt. Ltd, Singapore, with the latter being the foreign investor. Under the joint venture, the Sri Lankan Government owns 51% of the shares while M.G. Sugars holds the remainder. The company, which commissioned a $2 million feasibility study into the factory, hopes to process 500,000 metric tonnes of sugar cane within 18 months from the start of production and provide livelihoods to 20,000 farmer families in the area.   

However, the project has been dragging for over one and a half years because the Ministry of Agriculture, which the Kantale Sugar factory is under, has failed to clear the defunct machinery and handover the buildings to the investors. Local media reports have alleged corruption has crept into efforts to sell factory machinery as scrap metal and profits from the sale are likely to be siphoned away to interested parties. 

Responding to media reports on the matter, BOI Chairman Upul Jayasuriya refrained from mentioning specifics but appealed to Agriculture Ministry officials to expedite the clearing process. 

“The investor wants it yesterday,” he said. “About 90% of the machinery at the Kantale Sugar factory cannot be used. So it has to cleared out before the buildings can be handed over to the investor. That is the responsibility of the Government.” 

Under the agreement, about 500 acres will be handed over to M. G. Sugars, which will house the factory and a nursery to develop higher quality sugar cane seeds. The company also plans to give seed capital to the farmers. Jayasuriya noted that the company had already started distributing higher yield sugar cane plants among thousands of farmers who lost their livelihoods when the factory closed in 1986. 

“These farmers have faced serious issues over the past few decades because of the closure, and when we have finally resolved this and the company is ready to help them and restart the business, we are seeing unhelpful delays. The support we need we hope to get from Government agencies.” 

Struggling to get FDI numbers up, the BOI Chairman acknowledged he was at a loss as to why delays were cropping up at the factory even when M. G. Sugars has already given a $10 million Swiss bank guarantee to the Government assuring that the investment would be sourced from external sources, thereby strengthening flagging reserves. 

“Investments of this kind are exactly what Sri Lanka needs. We have had a company called Sutech offer to start a sugar factory in Vavuniya. However, the Government Agent of that area felt there would be insufficient rainfall to grow sugar cane. We feel that this is a decision that should be made by the investor, as he would do a feasibility study. So we will not infringe upon that space.” 

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