Sri Lanka’s sugar industry in crisis
- By KrishCNL
- August 18, 2025
- News, Political
- Pelwatta, Sevanagala, Sri Lanka, Sugar Factory
- 0 Comments
Sri Lanka’s state-owned sugar industry, primarily represented by the Pelwatte and Sevanagala sugar companies, is currently navigating a profound crisis marked by significant financial distress, unpaid dues, and operational inefficiencies.
While trade unions contend that long-standing issues remain unresolved, state officials indicate that arrears owed to farmers and suppliers have been settled, with the government now focusing on new development initiatives.
The Pelwatte Sugar Company and Sevanagala, both located in Monaragala District, play a key role in sugarcane cultivation. Pelwatte, established in 1981, manages approximately 7,000 hectares of sugarcane, while Sevanagala, established in 1986, oversees around 4,215 hectares of cultivable land. Both factories are crucial for supporting local farming communities and contributing to the national sugar supply. However, their financial stability has severely deteriorated.
Pelwatte Sugar Company faces substantial debts, including Rs. 324 million in unpaid Employees’ Provident Fund (EPF) contributions plus Rs. 23 million in penalties, and has taken loans totaling Rs. 1.5 billion in 2024 and 2025 for operational costs. It also owes Rs. 300 million to farmers and Rs. 400 million to suppliers. Sevanagala Sugar Company confronts similar challenges, with Rs. 205 million outstanding to farmers, Rs. 150 million in EPF arrears, Rs. 100 million to suppliers, and Rs. 400 million in unpaid VAT to the government. Opposition leader Sajith Premadasa has attributed this crisis to government mismanagement.
In response to these challenges, government officials have stated that, following a Cabinet decision, the government has pledged financial support, potentially amounting to Rs. 100 million or Rs. 200 million monthly, subject to a review of business and cash plans. These funds, part of a one-billion-rupee allocation mentioned in Parliament, are intended for capital contributions and development initiatives, rather than routine operational expenses or debt servicing. State officials also reported that by selling the factories’ existing stock, they managed to pay outstanding bills owed to employees.
Despite the ongoing difficulties, production continues, with 23,000 metric tons of sugar and 300,000 liters of ethanol currently in storage. Mr. Kasun Gamage, media secretary to the Minister of Industries and Enterprise Development, stated that the government plans to implement significant changes to improve the sustainability and profitability of these state-owned sugar factories.
Proposed initiatives include integrating tourism development into the factory premises, such as upgrading existing guesthouses and potentially creating attractions like an elephant fence (Aliweta) for crop protection; technology upgrades, with investments in new machinery to reduce production costs; and exploring organic sugar production for export markets.
Mr. Gamage firmly stated that Sevanagala and Pelwatte will not be privatized for their current operations. However, the involvement of third parties may be considered for development projects that extend beyond the existing scope.
Beyond the state-owned entities, the broader Sri Lankan sugar industry, including the 51% government-owned Hingurana, faces significant challenges.
A key issue is the excessive import of white sugar, which creates a market surplus that primarily benefits importers rather than local producers. Approximately 375,000 metric tons of sugar were imported in just six months, causing prices to fall. Local producers also struggle with storage problems for sugar, molasses, and ethanol, which can force production halts when storage is full, often leading farmers to sell at lower prices.
Another major concern is the VAT disparity, where VAT is applied to locally produced sugar but not to imported sugar, creating an uneven playing field. The industry also emphasizes the importance of by-products such as ethanol, power, and bio compost derived from molasses, bagasse, and filter mud, rather than relying solely on sugar sales.
Officials warn that cheap imports and fluctuations in ethanol prices affect hundreds of thousands of families, including farming communities, and may contribute to the rise of illicit liquor.
They urge the government to stabilize ethanol prices and regulate its production from corn and rice to strengthen the local sugar industry and safeguard public health.
(Source: The Sunday Times)
