Financial Times

Pelwatte: handling challenges of a sugar producer
From Quintus Perera at the Pelwatte township
Pelwatte Sugar Industries Ltd (PSIL) together with Sevanagala Sugar Industries Ltd could produce almost 70 percent of the country's alcohol (molasses) requirements if sales are guaranteed and proper government support is forthcoming.

Mahendra Amarasuriya, PSIL Chairman says that while over 50 local customers accept produce from Pelwatte Sugar Distilleries (Pvt) Ltd, a PSIL subsidiary, the country's largest consumer of alcohol buys just a little and imports the rest saying local alcohol is inferior.

He declined to name the company but it's well known that Distilleries Co. of Sri Lanka led by business tycoon Harry Jayawardene is the biggest manufacturer of alcohol.

Alcohol molasses, a by-product of the cane sugar production, must be utilized on a continuous basis or disposed of either by exporting or by environment friendly affluent disposal requiring substantial investment. Amarasuriya said that they have received some export orders to sell part of their alcohol.

Pelwatte Sugar is not just a plantation and a factory but a complete agricultural settlement and a township complete with everything a modern town requires. Communications, transport, schools, medical centres and everything needed by the settlement is provided by PSIL.

The town is located in the Monaragala district, about 275 km off Colombo. A team of The Sunday Times FT drove through this bustling panoramic economic zone some weeks back, looking at the economic nucleus of the district. PSIL provides employment for 1,500 local people and another 4,000 finds part-time seasonal work while as many as 100,000 people find indirect employment.

Sugar and molasses are not the only products from sugar cane. Using bagasse, Pelwatte produces 3.5 MW of electricity and plans are afoot to produce around 25 MW. The company has already done the feasibility studies. Out of the 25 MW, five would be used for domestic purposes such as for the factory and the settlement and the balance sold to the national grid.

Amarasuriya, in an interview in Colombo, said that in Sri Lanka to produce one kilo of sugar the cost is around Rs 31. However sugar market prices are not determined by local costs of production but by the imported price and on many occasions the Sri Lankan producer is compelled to sell below cost. He said that for the last two years PSIL operated at a considerable loss.

He said that if the Hingurana and Kantale factories are also revived, all the four factories together could meet 50 percent of the local consumption by 2008 compared to 15 percent now. If sugar cultivation is expanded to areas like Hambantota and Matara districts there is a possibility of Sri Lanka becoming self-sufficient in sugar by 2012.

The Pelwatte company, in a complex covering an extent of 12,200 hectares, manages the plantation and industry and looks after the needs of the settlers. Y. Thilakasena, Chief Executive Officer, explained that they are now looking out for land to expand cultivation and to supplement the irrigation facilities. He said cane growers are given all the facilities and assistance such as loans, fertilizer and also advice. Seed cane grown under strict research conditions are provided to the growers.

The area has also been developed as a tourist destination. The superbly kept restaurant serves delicious Sri Lankan food. Small groups could now be provided accommodation to stay on holiday. In the middle of every irrigation tank there is an island built from the sand dredged to deepen it. Cabanas or chalets are built on all these islands and the surroundings are nicely planted with various trees, foliage and flower plants.

There are several ancient tanks that have been revived and new ones have been built. M V M Champika Damayanthie, wife of sugar cane farmer Wasantha Premaratne said that they came to Pelwatte in 1992 - from a nearby village - and have been growing sugar cane on 4.5 acres. They have raised two children and with their savings have begun constructing their house. They have also started a small shop. "This life is much better than before when we were chena cultivators," she said. Another settler W M U Ariyadasa also came to Pelwatte in 1992 and cultivates the same extent of land. The company has built 645 houses for settlers.

Thilakasena said the factory works 210 days per year and during the off season the entire machinery is dismantled and overhauled with wasted parts being replaced and larger machines installed to prepare for the next season. The additional investment to install new machinery is in the range of Rs 65 million.

It was in 1978 that the World Bank during a survey found Monaragala district ideal for sugar cane cultivation with Pelwatte being the best area for this. The survey also found that with proper management and correct planting process Sri Lanka could be self sufficient in sugar. Pelwatte Sugar Co Ltd was incorporated in 1981, converted to a public company the following year and quoted on the Colombo Stock Exchange in 1984.

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