Pelwatte Sugar Factory on the brink of collapse
Sri Lanka’s state-owned Pelwatte Sugar Factory is facing a dire operational crisis, with over 16,500 metric tonnes of unsold brown sugar clogging its warehouses, and the looming sugarcane harvest threatening to bring production to a grinding halt.
According to owning company, Lanka Sugar Company Chief Operating Officer (COO) Nuwan Dharmaratne, this surplus, driven by unchecked sugar imports and an uneven tax policy, has left the company in financial and logistical disarray.
“The factory cannot store the upcoming harvest if we don’t clear this stock,” Mr. Dharmaratne warned, revealing that the company is grappling with an overdraft of Rs. 11.2 million and unpaid statutory dues of Rs. 30 million. While the ethanol stock has been cleared out, a sharp drop in market prices has slashed profits. Simultaneously, the molasses by-product remains unsold, further strangling cash flow.
A key contributor to this crisis is the controversial application of an 18 per cent VAT on locally produced brown sugar, while imported white sugar remains exempt.
This has made local brown sugar up to Rs. 150 more expensive per kilogram in supermarkets. “We sell at Rs. 250, but it retails for over Rs. 400, while white sugar is available for less than Rs. 300,” Mr. Dharmaratne said. “Consumers choose by price, not health benefits.”
Government attempts to lower prices through cooperative outlets like Sathosa have had minimal effect on producers.
Compounding the challenge, the government plans to transform nearly 15,000 hectares of land owned by the Pelwatte and Sevanagala factories into tourism hubs under a Public-Private Partnership (PPP) model.
Industry Minister Sunil Handunnetti says this will lower brown sugar production costs and attract investors. “Sugar production will continue alongside tourism,” he assured, promising no job cuts for existing employees.
However, Mr. Dharmaratne stressed that without immediate intervention—including VAT removal and a halt to indiscriminate sugar imports—the factory may not survive.
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