Court bars Jacobi’s access to charcoal

By Natasha Gunaratne

The Supreme Court last week barred for two weeks Jacobi Carbons Lanka (Pvt) Ltd, a foreign investor involved in the activated carbon industry, from buying local charcoal and raw material.

This follows a case filed by Prime Carbons Lanka (Pvt) Ltd, a local firm producing the same product, complaining that Jacobi had violated its investment conditions – utilizing local raw material. The court fixed the case for further inquiry for September 22.

Local companies in the activated carbon market such as Prime Carbons and Haycarb Ltd, the world's largest coconut shell based activated carbon manufacturer, have complained bitterly over the entry of Jacobi operating in an industry which has a limited supply of charcoal.

Sri Lanka cannot source more than 50,000 tonnes of charcoal a year -- usually being between 35-45,000 tonnes - while the annual requirement is 60,000 tonnes.

Due to the shortage, Haycarb was forced to import 12,000 tonnes in 2005 incurring losses in order to ensure they retained their customer base. The import of charcoal is costly due to high shipping costs despite charcoal being cheap in other countries.

According to industry sources, the BOI granted approval to Jacobi in June 2005 despite being cautioned by the local industry on the limited supply of charcoal here. The Coconut Development Authority (CDA) issued a letter of no objection to the BOI on Jacobi being awarded BOI status except that it would be subject to CDA rules and regulations, not specified at that time.

At a later date, the CDA specified that one of those regulations was that the company would not be permitted to purchase charcoal and raw materials locally. Once the rules were gazetted on 29 May 2006, the CDA had slightly amended them saying it will consider the licence to companies on the availability of raw material with permission also being granted upon availability.

However on 3 July 2006, Jacobi, through its lawyers, wrote to Trade and Commerce Minister Jeyaraj Fernandopulle stating that "concurrence of the Minister in charge of Foreign and Internal Trade," had not been sought during gazetting as per CDA Act No. 46 of 1971. The Supreme Court asked as to why the Minister has not yet approved the formulation of the regulations put forth by the CDA.

Court was also told that the CDA had discovered that Jacobi had installed five Rotary Kilns and five Boilers on their facilities though they had initially secured BOI status for only 2 Rotary Kilns and 2 Boilers which would require 450 tonnes of charcoal per month.

The increase in the number of kilns and boilers would also require a 250% increase in the amount of coal needed per month for the company to operate. In addition, the Court said that the use of more than 2 kilns is harmful to the environment due to the use of a chemical called carbon tetrachloride.