According to information received, MG Sugar Company had arrived in Sri Lanka in 2015 through an agreement to restructure Kanthale Sugar factory and the direct investment was Rs. 15,000 million.
According to the agreement, MG Sugar Company is to receive 500 acres of land on a 30 year lease.
While the Kanthale Sugar factory, currently in a dilapidated state, is to be completely rebuilt, by August 2016 the said company had fulfilled all its obligations according to the agreement.
A bucket by the Land Ministry
Except for the Land Ministry, all other involved state parties have provided the legal provisions during this period.
However, the Land Ministry has so far failed to provide the agreed land extent and despite repeated inquiries, have so far failed to show cause for their delay.
The officials of MG Sugar Company had recently taken steps to complain about their plight to the Prime Minister and several senior ministers and have expressed great displeasure at the manner the new government is treating investors who had accepted the 100 day government’s open invitation and come here to invest.
When we contacted the Prime Minister’s office in this regard they confirmed that the Prime Minister had summoned all parties concerned on March 15 and subsequent to discussions held he had instructed the relevant parties to expedite the process to resolve this issue.
When we contacted the Land Ministry Secretary I.H.K. Mahanama regarding this issue he said the delay was caused by certain legal obstacles in releasing land to MG Sugar Company for the construction of the Kanthale sugar factory.
He further stated that subsequent to the discussion held on March 15 with the Prime Minister, they had forwarded the legal hurdled faced in providing land to MG Sugar Company, to the Attorney General and expressed hope that the issue could be resolved without further delay.
However, the issue here is that two years since the agreement was signed, the authorities had failed to resolve the legal issues obstructing the investment and what these legal obstructions are.
No specific reason:
The Land Ministry Secretary however, failed to specify what these legal obstacles were.
It is ironic though that even after an agreement is signed, an issue cannot be resolved by the relevant authorities without the mediation of the President or Prime Minister. Hence the issue has been dragging on without a specific date for resolving the issue in sight.
At a point when the country’s economy is facing a bleak future, such issues will only further deter direct investment into the country.
Fifty one percent to the Government:
The agreement signed by MG Sugar Lanka for the restructuring of the Kanthale Sugar factory took place on July 27, 2015.
The agreement was signed by the Investment Board Chairman Upul Jayasooriya and MG Sugars Lanka (Pvt) Ltd Chairman Mendel Gluck. At the time the Land Ministry was under M.K.D.S Gunawardena while the secretary was Dr. I.H.K. Mahanama.
Although MG Sugars Lanka will restructure Kanthale sugar factory, 51% of the shares will be held by the government while MG Sugars will hold 49%. Meanwhile the expected production capacity will be 80,000 metric tons annually, while 20% of the country’s sugar import costs will be reduced.
Investment of 15,000 million:
The entire Rs. 15,000 million will come into the country as direct foreign investment and no monies will be borrowed from local banks or the government.
Further, 2,500 direct employment opportunities will be made available through the project while around 15,000 indirect employment opportunities will also be created. The world’s latest technology is also expected to be used in this venture.
In addition to sugar production the factory is also expected to produce 10 million ethanol through the main by product molasses and the boilers will be fuelled through the sugarcane refuse, bagasse.
Accordingly, annually around 38-40 MW of power will be generated and while the factory’s power requirement of 6-8 MW will be utilised while the rest will be added to the national grid.
The water utilised for the project will also be recycled and with no fuel being used the project is also environmentally friendly.
Ownership of the pile of iron?
Meanwhile, subsequent to the agreement being signed, MS Sugars have spent $7.5 million for feasibility studies, soil and air testing, environmental impact assessment and Geological surveys etc. and South African company BOSCH has been hired for business planning.
Similarly, the Sugarcane Research Institute has also spent Rs. 25-30 million for the sugarcane seedlings required for the entire sugarcane cultivation.
According to reports we have received however, if this delay is due to the government not being able to determine who gets possession of the pile of iron at the Kanthale Sugar Factory, no matter what the government does to bring in direct foreign investment to the country, their efforts are bound to prove futile.