News
Sugar factories to be revived regardless of legacy problems
View(s):By Ishu Bandara
While unions continue to claim that long-standing issues in the sugar industry remain unresolved, state officials say that arrears to farmers and suppliers have been settled, and the government is focused on reviving state-run factories.
The Pelwatte and Sevanagala sugar companies are fully government-owned. Pelwatte, located in the Monaragala District, was established in 1981 and manages about 7,000 hectares of land for sugarcane cultivation. Sevanagala, situated in the Polonnaruwa District, was established in 1986 and has around 4,215 hectares of cultivable land, with about 3,311 hectares under sugarcane farming. Both factories play a vital role in supporting local farming communities and contributing to the national sugar supply.
Both Pelwatte and Sevanagala sugar factories have for long continued to face financial issues, unpaid dues, and operational inefficiencies
These two factories have for long continued to face financial issues, unpaid dues, and operational inefficiencies.
Opposition leader Sajith Premadasa has highlighted the deterioration, blaming government mismanagement. He revealed that Pelwatte Sugar Company has not paid Employees’ Provident Fund (EPF) contributions for the past nine months, accumulating Rs. 324 million in dues along with Rs. 23 million in penalties.
The company had borrowed Rs. 1.5 billion in 2024 and 2025 to cover operational costs, while owing Rs. 300 million to farmers and Rs. 400 million to suppliers. Pelwatte employs 3,795 staff and supports around 5,700 farming families. Sevanagala Sugar Company faces similar issues, with outstanding payments of Rs. 205 million to farmers, Rs. 150 million in EPF arrears, Rs. 100 million to suppliers, and Rs. 400 million in unpaid VAT to the government.
However, unions continue to blame both factories for unresolved payments. 
Government officials told the Sunday Times that, following a Cabinet decision, the government has also pledged financial support, potentially amounting to Rs. 100 million or Rs. 200 million monthly, subject to a review of business and cash plans by the Public Enterprises Department. Although this funding has not yet been fully released, the first installment is expected soon.
Officials also clarified that these funds are intended for capital contributions and development initiatives, rather than routine operational expenses or debt servicing. It was also noted that the Rs 1 billion allocation mentioned in Parliament by the President is being disbursed in monthly installments of Rs. 100 million over 10 months.
Union Leader Nihal Atthanayake told the Sunday Times that despite ongoing challenges, production continues, with 23,000 metric tons of sugar and 300,000 litre of ethanol currently in storage.
State officials said that by selling the stock, they managed to pay dues owed to employees, and the state is now providing support only to mitigate the current loss of Rs. 45–Rs 50 per kilogram of sugar.
However, Kasun Gamage, the media secretary of the Minister of Industries and Enterprise Development, told the Sunday Times that the government aims to make significant changes to make the state-owned sugar factories more sustainable and profitable.
According to him the proposed new development projects and strategies include tourism development, integrating tourism aspects into the factory premises, such as upgrading existing guesthouses and potentially developing attractions like an elephant fence (Aliweta) for crop protection near areas such as Yala.
They are also considering upgrading technology by investing in new machinery to reduce production costs and exploring the production of organic sugar for export.
Mr. Gamage said that the government-owned sugar factories, specifically Sevanagala and Palwatte, will not be privatised, but for development projects beyond the existing scope, the involvement of third parties may be considered.
The Sunday Times learnt during discussions that the factory boards and officials are expected to develop proposals for new projects. We also reached out to the CEOs of both factories for comments on these proposals, but there was no response.
The government is planning large-scale development work for the factories, with the allocated funds intended to support these capital-intensive initiatives.
Meanwhile an official in the sugar industry highlighted the larger problems facing Sri Lanka’s sugar industry.
A key issue is the excessive imports of white sugar, which creates a surplus in the market and benefits importers rather than local producers. In just six months, about 375,000 metric tons of sugar were imported, causing prices to fall.
Local producers also face storage problems for sugar, molasses, and ethanol. Sugar crushing can only be done in the dry season, so if storage is full, production must stop, forcing farmers to sell at lower prices.
Another concern is the tax difference. VAT is applied to locally produced sugar, but not imports.
He suggested either removing VAT, imposing a tax on imports, or adding VAT to imports. He emphasised that brown sugar is healthier than bleached white sugar.
The official stated the current market, with cheap imports and alleged manipulation of ethanol prices by the so-called “bottling plant mafia,” affects 400,000–500,000 families, including 12,000 farming families. He also expressed concern over the supply of illicit liquor (“kasippu”) due to the high prices of legal alcohol, urging the government to fix ethanol prices and restrict its production from corn and rice to bolster the local sugar industry and safeguard public health.
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