Bank of Ceylon in billion rupee loan deal with Sri Lanka sugar maker Pelwatte

Dec 12 (LBO) – State owned Bank of Ceylon has tied up with Pelwatte Sugar Industries to give farmers over a billion rupees in soft loans and boost production at the country’s largest sugar plantation.

Bank of Ceylon said Tuesday that it would give 15,000 sugar cane growers cultivating 150,000 hectares, up to 150,000 rupees each to increase production.

The loan would be given in three instalments at nine percent interest per year. Pelwatte will guarantee the loans and advance the monthly interest due on behalf of the borrowers.

The sugar plantation company will prepare the land, provide all the necessary inputs and buy back the entire produce, Ariyaseela Wickramanayake, Chairman of Pelwatte said.

“We hope to expand our current production from 42,000 metric tonnes of sugar to 100,000 metric tonnes per year, crushing one million tons of sugarcane,” Wickramanayake said.

The company also hopes to make Sri Lanka self-sufficient in rectified spirits, which made from molasses which is a by-product of sugar cane processing.

If all goes well production of molasses is to go up from 30,000 metric tonnes to 70,000 metric tonnes a year, resulting in an over 125 percent increase in alcohol production to 18 million litres, which will be sold to the local liquor industry.

“We currently meet 70 percent of the country’s requirement of spirits and by next year we will be self sufficient in alcohol,” Wickramanayake said.

The sugar plantation is currently spread over 16,000 hectares and has been managed British to Chinese firms before it was privatised in 2002 to Master Divers.

Sugar is vulnerable to weather and low rainfall which has frequently disrupted yields and production at Pelwatte. At present international sugar prices are relatively high, but at times local production costs have been higher than imports.

But analysts say diversification of activities would allow it to cushion risks associated with running an agri-based industry dependant on one crop.

The Pelwatte factory is the single largest sugar factory in Sri Lanka that is still in operation.

Bank of Ceylon will also aid development of a dairy processing factory that is currently being built at Pelwatte, through a 185 billion rupee soft loan channelled through the bank from Danish aid agency DANIDA.

The plant that is being constructed within Pelwatte in the Moneragala district is to turn out 100,000 litres of milk a day, producing butter, cheese and milk powder for the local market.

The processing plant is to cost 780 million rupees, with additional funding from Bank of Ceylon for transportation needs, import of cows to be given to farmers and cooling facilities.

Meanwhile, Pelwatte Industries has also tied up with US real estate firm Richard Ellis to set up luxury bungalows within the Pelwatte estate costing a billion rupees, with seaplane landing facilities and overlooking a reservoir and a golf course.

The luxury bungalows, with 68 rooms initially, are to be opened for tourists ahead of the peak winter tourist season in November next year, Wickramanayake said.