How UNP governments destroyed our Sugar Industry
Posted on December 28th, 2019


Cultivation of sugar cane is the major sucrose extracting crop used in sugar industry in Sri Lanka. Sugar is considered as one of the main food items consumed in the country and hence sugar production and price directly affects day-to-day life of people in the country.

The annual per capita consumption of sugar in Sri Lanka is approximately around 30 kg and the total annual requirement of sugar in the country is around 550,000 tons. In 2012 the country only produced 42,940 tons and imported 593,870 tons, with only approximately 7% of the annual requirement produced locally. The balance requirement had to be imported. The total annual expenditure on sugar imports is around Rs. 20 billion. In 2008, 575, 000 tons of sugar have been imported at a cost of Rs. 22.3 billion.

During the colonial occupation following the lifting of the ban on the purchase of land by Europeans in 1810 and the elimination of land tax on export crops by the Governor of CeylonEdward Barnes in 1824, there was a period of experimentation (1823-1839) with a number of different cash crops, including sugar. There were a number of potential reasons, primarily social and environmental on why sugar production failed to become an established industry although the southern coastal areas were most suited for sugarcane cultivation. This land was being used extensively for rice cultivation and the owners of these lands were unwilling to sell their land.

In the interior the soil was too wet and the lack of available transport was a problem. The only sugar plantations that survived from this period were in the south coast near Galle. In the early 1850s the country had just become self-reliant in respect to sugar production but by the 1860s the industry was virtually non-existent.

 Due to high temperature and dry condition available in Eastern part of the country, Sugarcane is an ideal crop to cultivate for sugar production. Monaragala and Ampara Districts are largely giving their contribution to sugarcane cultivation for uplifting the country’s economy while declining annual expenditure spent for sugar import. Four sugarcane plantations have largely involved to sugar production in Sri Lanka. They are Pellwatte, Hingurana, Sevanagala and Kanthale. Due to the terrorist war in the last few decades in the country Kanthale sugar processing plant and the plantation was closed and the production has not been started yet.   It is reported that the Government has taken steps to reopen the Kantale Sugar Factory, and tenders have been called from investors and the Sugar Corporation has received applications from 25 investors who are willing to reopen the Kantale Sugar factory.   It is believed that more than 5,000 job opportunities could be created and a saving of nearly Rs. 4,000 million could be made on sugar imports by commencing production at this factory.  The Governor of the Eastern Province Mrs. Anurahda Jayampath visited the Kantale Sugar Factory on an inspection tour recently and said steps would be taken to re-open the sugar factory under a new investor within the next three months.   She expressed hope that the factory would be ready to start production within the next three months. It was observed that the factory had remained out of commission for nearly 25 years thrusting machinery and equipment valued at nearly Rs. 5,000 million to neglect and ruin. The Kantale sugar factory which was received as a Czechoslovakian government aid grant began production on October 2, 1960. It was commissioned then by the first lady Prime Minister of the world Madam Sirimavo Bandaranaike.    In 1993 the UNP government handed it over in a private company and suffered closure by the end of 1999. Although the factory was again taken over by the government in 1997 it did not begin production.The factory boarders the Mahaweli river,” Seruwila, Kithul Uthuwa and Minneriya.   The factory was supplying quality sugar to the market for more than three decades from 1960. During the first and second decades since inception, the factory was running profitably. From 1980 to 1986, the factory earned a Rs. 70 million profit. It was considered as the most prosperous period of the Kantale Sugar factory in its history.   The privatization adversely affected the factory. The inefficient management and the issues of the workers reported to have led to the eventual closure of the factory. LTTE activities in the area also affected its operations.   The salaries, EPF, ETF and gratuity were also not paid to employees properly by the then administration after privatization. The workers staged a strike against the management demanding their rights.   There was only one plantation zone in the earlier period of the factory. After 1970 the plantation area was decentralized. During the development processof the Kantale Sugar Factory and Plantation, the plantation area was divided into four zones namely Zone 1, 2, 3 and 4.   Each zone had eight to 17 fields. Each field comprised 2,000 to 3,000 acres. During the prosperous period the factory granted various benefits to its employees and labourers. A working Director attached to the factory popularised the concept of planting coconut trees in every field in Zones 1, 2 and 3. Quality mango trees were planted along the approach roads of the factory. There was a bakery in the factory premises to provide bread to factory workers. There were ten small tanks in the factory. Small tanks were constructed at suitable places to facilitate the sugar cane plantation during the drought period and to improve the living standards of the workers. During the rainy period water was stored in the small tanks. There were enough fish in those tanks for the workers’ consumption.

Sri Lanka Freedom Party which was proud to have established sugar manufacturing factoring and thereby curtailing expenditure on sugar imports severely criticized the UNP government for privatising thee sugar factories to hand them over to their political cronies including Daya Gamage for financing their election campaigns.  This Gamage is alleged to have amassed undisclosed huge wealth and provides his own helicopter to UNP leader Ranil Wickremasinghe to facilitate his travel plans during elections. It has been found that these UNP cohorts who got these sugar factories heavily under-valued and almost free as political patronage instead of giving priority for the production of sugar were keen on producing Ethanol in these industries for production of alcohol in their liquor factories.  

The government of Prime Minister Mahinda Rajapaksa repealed the controversial Takeover Act in 2011 ans enacted the Revival of Underperforming Enterprises of Underutilized Assets Act of 2011and took over 37 institutions, including the two sugar companies that were privatised in 2002 by Ranil Wickremasinghe with the concurrence of Chandrika Kumaratunge..

Most of the institutions that were taken over under the Revival of Underperforming Enterprises of Underutilized Assets Act of 2011 have become profitable entities. Sevanagala and Pelawatte sugar factories were the most profitable business entities, and  their privatization directly affected the livelihoods of sugar cane farmers.

In 2002 Lanka Sugar Company Private Ltd. had a fixed deposit of Rs. 985 million and it has been dwindled to a fixed deposit of Rs. 781 million. However, the Lanka Sugar Company has not obtained funds from the Treasury since it was taken over in 2011 and Rs. 700 million has been transferred to Treasury annually since 2011.

Meanwhile, the Kantale Sugar Factory which has been closed for nineteen years is falling into ruin.

Residents say that the closure of the factory has led to them being deprived of numerous direct and indirect job opportunities. The Kantale Sugar Factory, which in the 1960’s was considered as the largest sugar production facility in Asia, provided about 10,000 direct and indirect job opportunities for the people residing in the vicinity.

They say that following a conflict between the administration and employees as a result of the privatisation of the company in 1994, the factory has been closed with no production whatsoever taking place.

The closure of the factory led to numerous residents losing their jobs.From 1960 to 94 it was under government control. In 1994 it was handed over to a private entrepreneur.. About 4000 people, 2000 permanent and 2000 non-permanent, were working in this factory. Rogues are reported to have made off with about 50 percent of the factory’s assets.

The factory complex which once comprised of luxury housing, a sports club, shopping complex and social club is now in a dilapidated state, and has become a burden on the treasury, wasting public funds.

25,000 acres that were allocated for the cultivation of sugar cane has now become a barren land that poses a threat of wild elephant incursions and the factory premises remain as a graveyard of metal beasts with abandoned trucks, tractors, and machinery rusting and becoming unserviceable. 

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