The Pelwatte Sugar Factory in Buttala, run by the state-owned Lanka Sugar Company, is facing a serious financial and operational crisis as unsold sugar stockpiles and plummeting ethanol prices drive the facility into the red. The factory, once a pillar of Sri Lanka’s domestic sugar production, is now reeling under a massive bank overdraft of Rs. 12 billion, raising alarms about its sustainability.
Chief Operating Officer Nuwan Dharmaratne revealed that 16,500 metric tons of sugar remain unsold in factory warehouses, creating a looming storage crisis just as the new sugarcane harvest begins. With warehouses near capacity and nowhere to stock incoming production, the operation may soon grind to a halt.
Currently, the wholesale price of sugar sits at Rs. 218 per kilogram, yet despite competitive pricing, local sugar is being undercut by the annual import of 60,000 metric tons of foreign sugar, making it nearly impossible for the local product to compete in the market.
Adding to the pressure, the ethanol market once a lucrative secondary revenue stream has collapsed. The price of ethanol has fallen from Rs. 1,200 to just Rs. 580 per litre, significantly cutting into profit margins. While all ethanol has been successfully sold, Dharmaratne confirmed that the reduced prices have drastically lowered the company’s overall earnings.
As financial burdens mount, the factory now owes Rs. 3 billion in liabilities, including payments due to the Employees’ Provident Fund (EPF) and the Employees’ Trust Fund (ETF). Despite this, the 2025 target for sugar production remains at 34,000 metric tons, raising concerns over whether the company can meet its goals under current constraints.
Sugarcane farmers are paid Rs. 10,000 per metric ton, plus a transport allowance, but labor inefficiencies have also become a concern. Factory operations are reportedly bloated with excess staff, contributing to rising operational costs.
Workers and stakeholders are urging the government to step in immediately calling for a halt or reduction in sugar imports, and the implementation of a national strategy to prioritize local sugar distribution within the domestic market.
Deputy Minister of Trade, Commerce and Food Security R.M. Jayawardena, who also serves as Chairman of the Monaragala District Coordination Committee, acknowledged the situation, stating:
“The issue of unsold sugar at Pelwatte and Sevanagala is very real. We are in talks with the Minister of Industries and the President to devise a solution. There is no intention of privatizing these institutions. Instead, we will implement a program to protect both sugarcane farmers and factory workers while restoring profitability.”
With the next production cycle already underway and no clear strategy in place to offload the current stockpile, the fate of one of Sri Lanka’s largest sugar producers hangs in the balance.
