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Treasury denies selling Kantale sugar factory land

16 Feb 2022

 
  • Attygalle rejects allegations of selling land belonging to Kantale factory to S’pore company
  • Says will only enter into supplementary agreement 
  • Company to receive 454 acres as lease for nursery 
  By Shenal Fernando The Treasury rejected the recent allegations made by certain parties that a cabinet paper has been prepared, under which the Government of Sri Lanka (GoSL) is selling 20,000 acres (ac) belonging to the Kantale sugar factory to a Singaporean company in order to establish the largest alcohol distillery in Asia. Speaking to The Morning Business, Treasury and Ministry of Finance Secretary S.R. Attygalle stated that this agreement involving a Singporeon investor referred to by these critics was signed with the Board of Investment of Sri Lanka (BOI) back in 2015 during the previous regime and that the GoSL will be only entering into a supplementary agreement with more favourable terms.  “During the previous Government’s tenure, the foreign investor went for arbitration since the Government at the time failed to take the necessary measures for the implementation of the project. Subsequently, the investor received an arbitration award under which the GoSL was liable to pay damages to them. We have discussed with them and they have agreed not to claim damages,” stated the Treasury Secretary.   He further noted that the Singaporean investor, SLI Developments Pte. Ltd., will be making a significant investment and emphatically denied the circulating allegations that the GoSL will be selling 20,000 ac to the foreign investor as part of the agreement. “Under the agreement they will receive only 454 ac that will be leased out for the nursery. Even the old factory will continue to belong to the Government. The balance 20,000 ac referred to in the cabinet paper are the lands belonging to the farmers of the Kantale area. Once this factory is established, the farmers will carry out sugarcane cultivation and this company will buy the crops from them.  “Furthermore under the agreement signed during the Yahapalanaya regime there was a liability on the Government to supply water. However, in this new agreement there is no such obligation on the water because we don’t want to use the water from the Kantale tank. We have told them to seek out their water requirements by themselves,” stated Attygalle.       In response to the allegation that the agreement involves the establishment of Asia’s largest alcohol distillery, he said: “In every sugar company ethanol is manufactured since it is a natural by-product. Why should we import ethanol when we can produce it here?” According to the Treasury Secretary there is an Israeli expert involved with the Singaporean investor who will introduce the world-renowned Isreali agricultural technology to the sugarcane farmers of Sri Lanka, leading to a technology transfer. In 2015, MG Sugar Lanka (Pvt.) Ltd. (MGS) was incorporated for the purpose of re-establishing the Kantale sugar factory after a 30-year hiatus. The Government through the Treasury owns a 51% stake in the company, while SLI Developments PTe. Ltd. owns a 49% stake. Subsequently, In July 2015, MGS had entered into an agreement with the BOI to develop an integrated sugar, ethanol, and power complex in the Kantale sugar factory land on a Build, Operate, and Transfer (BOT) basis. This agreement will be amended by the GoSL by the new supplementary agreement which the Government claimed is more favourable for the country.  Attygalle further stated that he is unable to set out a timeline for when this venture for the establishment of a integrated sugar, ethanol, and power complex between the GoSL and the Singaporean company will commence, owing to him being unable to sign the supplementary/new agreement related to the venture until the Cabinet of Ministers provide their approval. He further stated that the lease relating to the 454 ac will be granted to MGS within the next two weeks upon the payment of $ 70 million and that further investments in the Kantale sugar factory and surrounding areas  will be made by the company based on their investments. When completed, MGS will include a state-of-the-art drip irrigated sugarcane plantation with 7,000 hectares (ha) of land under cane, a 5,000 tonnes of cane per day (TCD) crushing capacity sugar mills capable of producing approximately 85,000 tonnes (T) of sugar, a 75 kilolitres per day (kL/d) potable ethanol distillery, and a 27.5 megawatts (MW) bagasse-fired power plant. The expected commercial operation date (COD) of the project is during the first quarter (Q1) of 2024. On Monday (14), Federation of National Organisations Convener Dr. Gunadasa Amarasekara stated that a cabinet paper has been drafted to sell off 20,000 ac belonging to the Kantale sugar factory to Singapore in order to establish Asia’s largest alcohol distillery. Similarly, Professionals’ National Front (PNF) Spokesman and Secretary Kapila Renuka Perera, in a press release, stated that Sri Lanka doesn’t receive any benefit from this 30-year agreement with a Singaporeon company in terms of the Kantale sugar factory, because under the agreement during the first 10 years, the foreign company will receive 85% of the profit, and further claimed that the Government is giving the sugar monopoly in the country to this foreign company.  The Kantale sugar factory was established on 2 October 1960 by a Czechoslovakian Government aid grant. During the 1960s, the Kantale sugar factory was considered the largest sugar production facility in Asia and provided about 10,000 direct and indirect job opportunities.  In 1993, its interests were vested with a private company and suffered closure by the end of 1999. Although the factory was reacquired by the Government subsequently, it did not begin production. The Kantale sugar factory complex also consisted of luxury housing, a sports club, a shopping complex, and a social club, which are now abandoned.


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