The Hon. Sunil Handunnetti - Minister of Industry and Entrepreneurship Development

¶ 01 Hon. Speaker, before replying to the question by Hon. Ravi Karunanayake (asked under Standing Order 27(2) on 26.09.2025), I wish to express condolences on the sudden demise of Mr. Mahesh Nishantha Edirisinghe of the Ayurveda Unit of Parliament, who served nearly 15 years. On behalf of Members and staff, we extend our sympathies to his family.

¶ 02 Sustainability of the Sugar Industry: My reply is as follows.

¶ 03 1. This is not a private opinion but a statement based on the principles and policies contained in the National People’s Power manifesto “Prosperous Country - Beautiful Life.” Our economic policy is a participatory, productive model in which benefits are fairly distributed. The State’s role is not undermined; nor do we expect the State to run the entire economy. The State intervenes to provide essential enablers and incentives for broader public participation.

¶ 04 Rather than the State running everything, we move to regulating the economy with interventions founded on social justice. The manifesto’s economic democracy gives primacy to humanity, participation and inclusion, ensuring fair distribution of economic gains. Under that, policies on fiscal measures, external stability, the IMF programme, investment promotion, State-owned enterprises, domestic and foreign trade are elaborated in Chapter 3 “A Productive Economy” (pp. 102–109). Industrial and entrepreneurial development, and bio-centric approaches, are detailed around p. 149.

¶ 05 To overcome the crisis, we must strengthen domestic production and pivot to an export-led productive economy, leveraging location, human capital and natural resources, with a long-term industrial plan and committed leadership. Goals include reviving local industries, enhancing export competitiveness, developing services, capturing global markets through new capabilities, attracting FDI under a national plan, creating a conducive investment climate, and providing low-cost infrastructure and inputs. Policy domains include national planning and facilitation, taxation and productivity, expanding markets and efficiency, industrial zones and infrastructure, MSMEs, traditional crafts and handlooms, sustainable development interventions, digitalisation and technology, and doing-business reforms (pp. 149–155).

¶ 06 We submitted these answers earlier; updated BOI data indicate further improvements. From Jan–15 Sept 2025, approved projects total USD 1,304 million; Jan–Aug 2025 FDI inflows USD 1,048 million; domestic investment USD 496 million; 1,319 jobs; and exports USD 6,969 million then—now approaching USD 10 billion.

¶ 07 On sugar:

¶ 08 Currently, Sri Lanka produces only brown sugar. In 2024, 81,000 metric tonnes were produced domestically; estimated brown sugar demand is about 120,000 MT. The daily crushing capacity of the four factories is 7,750 MT. The sugar recovery (rendement) averages 7 percent. At 200 crushing days, brown sugar output can reach around 100,000 MT. To push recovery above 8 percent we need improved cane varieties from the Sugarcane Research Institute (SRI), proper agronomic practices, and factory upgrades. We have tasked SRI to identify higher-recovery varieties; existing high-yield varieties have lower sugar content (4–5 percent recovery), but we now aim to reach 8 percent and beyond quickly.

¶ 09 At recovery above 8 percent, the four factories could produce about 124,000 MT of brown sugar—exceeding the 120,000 MT local need for brown sugar—enabling exports. We are discussing value addition—infused, organic sugar, sugar cubes—with SRI and factories to improve competitiveness and reduce unit costs, though we do not expect to meet total national demand for refined white sugar. Many industries require white sugar; we are discussing partial substitution with brown sugar, and Cabinet has decided to promote brown sugar in State institutions (Tri-Forces, Prisons, etc.). Lanka Sugar Company (Pvt) Ltd—wholly State-owned—operates the Sevanagala and Pelwatte factories. In the Gal Oya Plantations (Pvt) Ltd PPP, 51 percent is owned by the State. Brown sugar from these is for domestic use.

¶ 10 Our long-term goal is to significantly increase domestic production to reduce imports and save foreign exchange. Present local brown sugar meets only about 10–12 percent of national demand. The Government intends to make State-owned factories more sustainable and profitable. We categorically state there is no intention to close, privatise or convert Pelwatte or Sevanagala into joint ventures; they will remain State-owned, with private participation where appropriate (e.g., tourism promotion on 500 hectares as approved by Cabinet, not related to sugar manufacturing).

¶ 11 Farmers are paid Rs. 10,000 per metric tonne of cane regardless of quality variances, ensuring a fair price. On 21.07.2025, Cabinet approved a Rs. 1 billion advance to Lanka Sugar to address financial constraints, to be released in tranches by the Treasury Secretary; Rs. 200 million has already been released for farmer payments. Additionally, Government approved compensation of Rs. 7,000 per MT for cane damaged by fires (regardless of cause), with Treasury allocating approximately Rs. 133 million. A committee has been appointed to furnish a report; final payments (advance 100 percent paid) are to be settled by 30 November, per agreement with farmer organisations.

¶ 12 Regarding taxation on imported and domestic sugar: imported sugar carries a Special Commodity Levy of Rs. 50 per kg; domestic sugar is subject to 18 percent VAT and 2.5 percent SSCL. There is no separate certification regime specific to sugar at present. Policy decisions on revitalising State-Owned Enterprises will be presented to Parliament in due course.

¶ 13 Locally produced brown sugar is being supplied through Sathosa to enhance public access. Plans are underway to rebrand domestic brown sugar as “organic sugar” for export to buyers in China, Iran and several African countries. Sri Lankan brown sugar, produced with minimal arsenic and low fertiliser inputs, qualifies for organic labelling under international standards; discussions are ongoing.

¶ 14 Thank you.