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Sri Lankan sugar: Drug smugglers and shortages, but some dare to hope

By RJ Whitehead , 13-Dec-2016

© iStock
© iStock

Sri Lanka’s sugar industry faces a “severe crisis”, with prices likely to be increased, partly due to cocaine smuggling from Brazil.

A long-time collapse in local sugar production has meant that almost all of the commodity must be imported from abroad to meet the country’s annual demand—by some estimates almost 900,000 tonnes a year.

However, shipments from Brazil have been halted after it was found that drug smugglers have been hiding cocaine inside consignments from the world’s biggest sugar exporter. 

Finance minister Ravi Karunanayake said that shipments from India and Thailand would go some way to make up the shortfall in supply, though three of Sri Lanka’s four main sugar refineries have been inactive for decades. 

The Sugar Importers Association believes these supply barriers may well drive up the price of sugar in the near future in spite of the decision in June to reduce customs duty to US$0.25 per kilo.

According to Hemaka Fernando, its convenor, suppliers were then able to sell sugar to the public at about around LKR90 (US$0.61) per kilo. Yet Sri Lanka’s low-priced stocks are now on the brink of depletion, a matter exacerbated by dwindling overall sugar reserves. 

Now that most of these available reserves are of sugar imported before the June customs decision, Fernando believes that prices will shoot up to compensate for the higher rate of duty.

Experts believe that government policy over the last 25 years has led to the destruction of the sugar industry in Sri Lanka, which produces only 10% of the island’s needs.

They say that moves towards ad hoc privatisation in the 1990s and again in 2002 were done without sufficient oversight, leading to the industry’s rapid decline. This was further aggravated by short-term profiteering and politics, according to Abhaya Weragoda, former chairman of the Sri Lanka Sugar Cane Research Institute.

Though ministers identified domestic sugar production as a lucrative segment more than a decade ago, with the potential to manufacture half of Sri Lanka’s needs, the previous government did little to follow through.

The future for the industry and sugar-loving Sri Lankans is by no means bleak, though. Businesses hope that a different policy course by the Ranil Wickremesinghe government, having replaced the 10-year regime of Mahinda Rajapaksa last year, will encourage overseas investors to develop the sugar industry with the promise of attractive incentives.

The government now hopes to set up 15 new production plants and begin manufacturing sugar in sizeable quantities by 2020. Finance minister Karunanayake hopes private-sector participation will make the country self-sufficient by 2025.

In October, one of north Africa’s biggest refiners announced it was ready to invest EUR150m (US$159m) to resurrect the island’s sugar industry by building a new refinery in the south. 

Algerian firm Cevital said such a move would be the first large-scale foreign sugar investment since the Czech government stepped in to revive the industry in 1960s by building Sri Lanka’s biggest plant, the Hingurana factory, which has since closed.

Cevital’s founder, Issad Rebrab, reportedly Algeria’s richest man, said that his company still required government approval before it could set out to process local sugar on a large scale. Another private development has already been rubber-stamped, officials have said.

 

More stories from South Asia...

Roha to gain more natural colours after Italian acquisition 

Roha has acquired Essential, a plant and fruit extracts firm from Italy, for an undisclosed price tag as it continues its push into new organic segments within the colours market.

The Indian colours major, one of the fastest growing companies in its field, has been focused on westwards expansion, and in September announced both the opening of a regional base in Germany and a natural colour facility in America. 

From its Mumbai headquarters, Roha has ramped up its links with global markets. It now operates 12 other manufacturing centres in the Americas, Europe, Africa, Asia and Australia.

The Essential deal is to tap into the “increasing awareness throughout the world about the use of nature-based sustainable ingredients”, the company said in a statement. 

The trend towards clean-label products continue to drive the innovation in colouring and flavouring ingredients in Europe and globally, and with this strategic acquisition, Roha will also be able to be an important player in this fast-growing segment of the market,” it added.

The acquisition will help expand Maharashtra-based Roha’s product portfolio by bringing natural colouring and aromatic ingredients. Founded in Tuscany a decade ago, Essential will be charged with develop new formulations to be marketed internationally.

 

International research task force formed to tackle food security in Bangladesh

Bangladesh’s food ministry will join the International Food Policy Research Institute (Ifpri) and an American university to launch a comprehensive food security research programme to address food security in the country.

The Bangladesh Integrated Food Policy Research Programme will combine policy research with capacity strengthening to find solutions to boost the long-term availability of food in a country that is prone to natural disasters that can wipe out stores of cereals, said food minister Qamrul Islam. 

The government is committed to protecting the poor and vulnerable with the use of modern engineering and information technology,” he added.      

The five-year research programme, involving academics at the University of Illinois, Urbana-Champaign, is designed to meet the food policy needs of a growing Bangladesh population.  

Specifically, it will set out to improve the food value chain, find ways to increase public food stocks, boost disaster responses and enhance price stabilisation by using effective digital technologies. 

Its research activities will focus on a range of food policy considerations, including storage and transport, market and policy analysis, and capacity-building and outreach.  

As the programme’s lead partner, Ifpri will provide overall guidance on analytical work and assess best policies and practices on grain storage management. 

In the last half of the twentieth century, food policy in most Asian countries focused on ensuring the availability of cereals,” said Shahidur Rashid, an Ifpri researcher and the programme’s lead. 

But sufficient cereal availability and rapid economic growth in many of these countries, including Bangladesh, has highlighted the need to upgrade the food policy architecture with modern technology and stronger institutions; so, it is crucial we use a sound analytical basis to build and manage the new policy architecture.”  

The programme will also work with government institutions, including the food ministry’s policy monitoring unit, and the private sector.  

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