The Sevanagala and Pelwatte sugar factories, operating under Lanka Sugar (Private) Company, are incurring losses of approximately Rs. 50 for every kilo of brown sugar produced, according to internal sources familiar with the operations.
The cost of producing a kilo of sugar at these factories ranges between Rs. 286 and Rs. 290, while the same sugar is being sold in the local market for just Rs. 235 to Rs. 240. This stark difference between production cost and market price has left the institutions grappling with unsustainable financial deficits.
Industry sources attribute the growing losses to several factors, including the imposition of an 18% Value-Added Tax (VAT) on locally produced sugar. Additionally, the recent drop in ethanol prices a key byproduct that once helped offset production costs has compounded the financial strain.
Moreover, a general decline in sugar sales in the domestic market has further weakened revenue streams, making it increasingly difficult for the two factories to remain financially viable.
The situation poses serious questions about the long-term sustainability of domestic sugar production under current economic conditions and may prompt a review of fiscal policies and market interventions affecting the sector.
