Sugar projects face land, human, and environmental challenges

Consumer demand for sugar and sugar-related products has been on the rise in Sri Lanka and much of the domestic need has been met with imports.

In 2022, Sri Lanka has spent US$268.66 million on sugar and sugar confectionery as reported by the United Nations Comtrade database on international trade. According to the Central Bank of Sri Lanka data, the country imported 415,000 metric tonnes of sugar in 2020 and 404,788 MT in 2021.

The Bibile sugarcane cultivation project was seen as a potential solution to reducing import expenditure on sugar, but its delayed implementation has highlighted the challenges of increasing domestic production.

The local investor, Islandwide Marketing Services Holdings (IMSH), has said that the international investor, Gazelle Ventures, is prepared to invest US$152 million.

However, the project has not yet begun. Despite this, Bibile Sugar Industries Limited (BSIL), a company comprising IMSH and Gazelle Ventures, has already spent Rs. 800 million as of December 2022, said Jaliya Udagama, the project coordinator of IMSH.

The project established the factory complex of the proposed smallholder farmer-based Bibile sugar-powerdiary-homestead farms integrated development project. It was approved by the Cabinet in 2017. It was designed to be implemented across 149 acres of Mahaweli Authority land in Dehigama Village, located in the Rideemaliyadda Divisional Secretariat in the Badulla District.

It has promised prosperity to the area, with a guaranteed market for sugarcane, and employment for smallholder farmers. But, the project has barely made progress due to political and environmental issues.

Mahaweli Authority director general Keerthi Kotagama said: “The BISL was allocated 149 acres of land for their sugar factory and sugarcane cultivation project. However, an encroachment issue arose, which was subsequently cleared by the court and the land was handed over to the investor. Despite this, objections were raised by several farmer families, leading to political issues and difficulties in starting the project.’’

He said the local investor recently requested a new piece of land, but the availability of land is being assessed.

“All the approvals for the project have been obtained, but progress has been hindered by the presence of farmer families who had previously occupied the land illegally,” Mr. Kotagama said.

IMSH chairman Jinawara Dharmawardena expressed frustration with the Mahaweli Authority for not cooperating. He claimed that the authority was receiving an annual income from the project, yet had not realised its potential.

Mr. Dharmawardena said the land was barren and was not occupied until former JVP provincial councillor Samantha Vidyarathne forcefully located 46 families on the land, which led the Mahaweli Authority to file a case against them.

He expressed concerns about expenses such as worker salaries, as well as meeting the expected Rs. 9.8 billion in annual cash payments to farmers already involved in the project.

According to the joint-venture agreement between the Mahaweli

Authority and the three investors, the BISL project is expected to produce 80,000 metric tonnes of sugar within six years. The Mahaweli Authority has been allocated 1% equity share in BISL as part of the agreement.

The agreement involves IMSH, Gazelle Ventures, a Singapore-based investor, and BISL. The cost of the 1% equity shares allocated to the Mahaweli Authority in BISL will be borne by Gazelle Ventures. Additionally, once the project is established, the agreement stipulates that a facilitation fee of 25 cents will be paid to the Mahaweli Authority for each kilogram of sugar produced.

Meanwhile, the Central Environmental Authority (CEA) approved the project on June 12, 2017 on the basis that all information provided by Bibile Sugar Industries Limited (BSIL) in three Environmental Impact Assessment Reports (EIAR) submitted in August 2013, February 2014 and April 2017.

However, CEA approval is valid for only three years from the date of issuance unless the validity is extended 30 days before expiry through a written request.

Environmentalists and local activists objected to the project considering the land allocated for sugarcane cultivation is home to several endangered species of flora and fauna. A series of legal battles and protests held up the project.

“It has been a long time since the EIA approval was taken by the relevant company, and they cannot carry out this project based on the EIA obtained. Generally, if an EIA is approved, if the project is not implemented within three years, it must be renewed. We don’t see that at this time,” said Hemantha Withanage, Senior Environmental Scientist from Centre for Environmental Justice (CEJ).

He said the company had already left the site and fences erected by the company have been removed by residents.

“It does not appear that any change is taking place in that land. There are currently 10 court cases pending, due to which it will be difficult for the relevant company to proceed with the project,” Mr. Withanage said.

According to the data by the Sugar Research Institute (SRI) of Sri Lanka, the annual sugar consumption in the country is estimated to be about 650,000 metric tonnes. This is equivalent to per capita consumption of about 30 kilograms per year. Despite being a significant producer of sugar, with major factories including Sevanagala Sugar Industries, Pelwatte Sugar Industries, Higurana and Ethimale, the country falls short of meeting its sugar demands through local production alone.

According to the statistics provided by the SRI, in 2020 the Sevanagala produced 16,071 metric tonnes while Pelwatta produced 23,582 metric tonnes and Hingurana produced 20,790 metric tonnes. Sugar production from Ethimale is not available for 2020.

The SRI's data for 2020 reveals that local sugar production, totaling 60,443 metric tonnes, accounted for only about 8.13% of the country's annual consumption. In 2021, Sevanagala produced 17,796 metric tonnes, Pelwatta 30,300 metric tonnes, Higurana 22,628 metric tonnes and Ethimale 10,917 metric tonnes. Accordingly, the total local sugar production in 2021 increased to 81,641 metric tonnes and accounted for only 12.88% of the country's annual sugar consumption.

Despite being a significant producer of sugar, with major factories including Sevanagala Sugar Industries, Pelwatte Sugar Industries, Higurana and Ethimale, the country falls short of meeting its sugar demands through local production alone.