Industry and Commerce Ministry Secretary T. M. K. B. Tennakoon (left) and Lanka Sugar Company (Private) Limited Chairman Navin Adikarama
Pic by Pradeep Dilrukshana
By Chandeepa Wettasinghe
Foreign investor interest in the local sugar industry is rising, with discussions underway to provide another 20,000 hectares to a Korean company to start production, a high level government official said yesterday.
“A Korean company which is interested in planting sugarcane is currently conducting negotiations with us,” Industry and Commerce Ministry Secretary T. M. K. B. Tennakoon said.
He added that the investor was looking at planting in around 20,000 hectares, and the government is currently evaluating which land parcels should be allocated.
The government has set aside 120,000 hectares for sugarcane cultivation, including the 13,000 hectares currently under cultivation.
Meanwhile, Tennakoon added that the Indian company which had signed an investment agreement to take over the dormant Kantale sugar factory and 20,000 hectares for sugarcane cultivation was ready to start planting soon.
He failed to provide the names of the two companies.
Only brown sugar is produced locally, and amounts to around 8 percent of the total sugar market in Sri Lanka.
Primary Industries Minister Daya Gamage had recently said that the government was hoping to facilitate the creation of 5 new sugar factories to boost local production.
The state-owned Lanka Sugar Company (Private) Limited Chairman Navin Adikarama said that a local investor was planning to cultivate 3,000 hectares of sugarcane in Athimale, Monaragala.
According to Adikarama, sugarcane seedlings can be harvested in 10 months, and planting a hectare costs around Rs. 130,000.
Sugarcanes can be ratooned for 2- 3 years, where the base of the plant is left standing on the soil, to allow harvestable sprouts to grow even faster, and to save up on planting costs.
Adikarama said that sugarcane has a very high return on investment.
“You can get 90 percent of the return on investments in one year,” he said.
He noted that the returns depend on the recovery rate of sugar i.e. the sugar produced per volumes of sugarcane crushed.
“It depends on how much you recover per tonne of cane. If we have 5-6 percent we can’t break-even. If it’s 8 percent plus, we can break even. Actually, with ethanol, we’re positive,” Adikarama said.
He noted that even with a 5-6 percent return, where sugar worth Rs. 4,500 is produced from a tonne, the ethanol collected as a by-product of the manufacturing process helps to push the returns from a tonne to Rs. 11,000.
Tennakoon said that a Rs. 4,750 subsidy is given to local farmers per tonne of sugarcane supplied, which the government is hoping to increase above Rs. 5,000 in the future.
According to Adikarama, with a sugar recovery rate of 9 percent, Rs. 5,500-6000 in sugar can be produced.
He noted that Lanka Sugar Company is currently averaging a recovery rate of 8.33 percent. According to the Central Bank, the recovery rate for 2015 had been 7.5 percent, 8.0 percent for 2014, and 8.2 percent for 2013. According to the Central Bank, the average sugarcane yield per hectare was 90 metric tonnes in 2015, improving from 75 in 2014. The sugar factories, which were nationalized in a controversial move by the former regime, had crushed 750,000 metric tonnes of sugarcane in 2015, up from 657,000 metric tonnes in 2014.
They had purchased 337,000 metric tonnes of private sugarcane in 2015, up from 204,000 metric tonnes in 2014.
Meanwhile, Tennakoon said that the ethanol tanks in the state-owned companies are always full, and that they sometimes have to sell ethanol at a cheaper rate in order to free up storage for new supplies.
However, most of the ethanol used for alcohol production in Sri Lanka is imported, and corruption allegations have been levelled at the importation process.