Kantale sugar factory revival becomes a distant dream
The Kantale Sugar Factory revival is now embroiled in legal issues, a scrap iron tender and bribery scams delaying the project indefinitely with the relevant line ministries grappling to trace missing documents and files owing to the change of the subject from the Lands Ministry to the Ministry of Public Enterprise and Kandy City Development, officials said.
File picture of sugar cane being transported.
The Ministry of Public Enterprise has sought the opinion of the Attorney General to find out as to how they are going to tackle the issues and revive the Kantale sugar industry despite court cases pending in Colombo and Singapore, a senior official of the Ministry disclosed.
The Lands Ministry has handed over all available documents relating to the 500 acre land deal and obsolete machinery tender deal, he said adding that some of the important documents and files have gone missing making impossible to carry out a proper investigation.
A Cabinet paper has been submitted to make payments to 33 workers who are looking after the land and factory during the past seven months but the Ministry has been directed to find money internally to pay salaries of workers, he disclosed.
The deposit of Rs. 35 million paid by Meerigama Lanka Co. to purchase the movable property including discarded machinery and scrap metal at a price of Rs.540 million had been transferred to the public account of the Treasury.
This company had been awarded this tender in July 2017 by the then Secretary to the Lands Ministry I.H.K. Mahanama who is in remand prison for his alleged involvement in a bribery scandal.
He was accused of allegedly blocking the transfer of machinery, scrap metal and other assets belonging to the Kantale Sugar Factory to a joint venture company that had signed a US$100 million deal to revive the facility.
Meerigama Lanka Co, the highest bidder in the tender, is now in dire straits as they have been deprived of removing the machinery, scrap metal owing to legal and administrative issues and their deposit of Rs. 35 million is lying in a Treasury account.
The Finance Ministry has written a letter to the company informing it of the current situation; a senior Treasury official said adding that it cannot refund the money immediately due to legal obligations.
Several attempts were made by the present and previous governments to revive the Kantale factory which was closed for around 25 years due to labour disputes and political administration issues.
The scrap metal tender bending and bribery scam have blocked the present government’s initiative to hand over the factory and the land to an Indian investor for sugar production.
It was nearly three years ago, in July 2015 that the BOI signed an agreement with MG Sugars Lanka Pvt Ltd to revive the Factory.
The company, a partnership between Bangalore-based Shri Prabulingeshwar Sugars Chemicals Ltd and Singapore’s SLI Development Pte Ltd, had agreed to invest $100 million inclusive of a Swiss Bank guarantee of $10 million.
The company had then conducted a $2 million feasibility study on the project through a German Company Bosh.
The 30-year lease agreement was signed with the investor and the project would run on Built, Operate and Transfer (BOT) basis in the basis of shareholding of 51 per cent held by the Government of Sri Lanka and 49 per cent by the foreign investor.
In 2017, the then BOI Chairman Upul Jayasuriya had announced to the media that the then Ministry of Lands had failed to clear the defunct machinery on the property and handover the buildings as well as release the lands to the investors, long after the agreement was entered into between the Government of Sri Lanka and the Indian company for the sale.
I.H.K. Mahanama, in his previous role as Secretary to the Ministry of Lands had secured Cabinet approval to auction the assets, which M.G. Sugars Lanka (Pvt) Ltd was claiming under the agreement.
The company then filed arbitration proceedings in a Singapore tribunal to stop the Government of Sri Lanka from selling the machinery and scrap metal.
In October last year, the Singapore International Arbitration Centre granted M.G. Sugars Lanka an interim award preventing the Ministry of Lands from disposing of the machinery and other assets pending a final decision.
Investigations have revealed that Mr. Mahanama allegedly solicited a bribe from the investors to hand over the land and machinery using his high influence as the President’s Chief of Staff, informed sources said. The revival of this factory now appears to be a distant dream.