Aditya Birla group eyes Jaffna cement plant
Wednesday, 23 January 2008, 20:30 IST
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Colombo: Undeterred by the deteriorating security situation in northern Sri Lanka, a leading Indian company is hoping to revive a disused but large cement plant in Jaffna district. "The Aditya Birla group had sent us a proposal to revive and run the state-owned cement plant at Kankesanthurai. A delegation from the group is meeting me on Jan 24, and the president, the next day," Sri Lankan Minister for Construction Industries Rajitha Senaratne told IANS. He refused to give details, saying negotiations were still at a preliminary stage. There was also competition, he hinted. News reports had earlier said that Holcim - the leading cement producer with 35 percent of the market share in Sri Lanka - had wanted to take over the plant. The Aditya Birla Group's UltraTech Cement already has a presence in Sri Lanka. It has a packaging plant with a capacity of 0.6 million tonne and a market share of 16 percent, according to company sources. However, there is some confusion in the press here, as to which of the Birla companies has shown interest in the cement plant in Kankesanthurai. Some reports mentioned the M.P. Birla group, while Minister Senaratne said that it was the Aditya Birla group. Adding to the confusion, UltraTech's officials in Sri Lanka were clueless about the move. UltraTech and Grasim are big players in the cement market in India, with a capacity of 32 million tonnes, while the M.P. Birla Group is smaller with a capacity of 6 million tonnes. The Kankesanthurai plant was the first cement plant built in Sri Lanka, but it ceased to function in 1990 because of the civil war, the Tamil militants' destructive approach to state-owned industries in the Tamil-speaking north and east, and the conversion of vast areas into High Security Zones by the Sri Lankan military. The plant is located in the Valigamam North High Security Zone, where there are severe restrictions on the entry of people, especially local Tamils. However, the Mahinda Rajapaksa government is keen that the Tamil-speaking north and east should develop economically, so that peoples' attention is diverted from political extremism, separatism and terrorism. President Rajapaksa, who is also minister of nation building, has announced many infrastructure projects worth millions for the eastern province since throwing out the Tamil Tiger rebels last year. The north is also earmarked for development, and the revival of the Kankesanthurai cement plant may well be the first step. However, there are practical difficulties in getting the plant started again. Efforts to restart the plant in 2002, immediately after the truce with the Tigers was signed, had failed because of political and military uncertainty. The then Minister for Enterprise Development Rohitha Bogollagama had said that through public-private collaboration, the plant, with 150,000 tonnes of clinker lying in it, would be revived within three months. But his efforts were in vain. The security situation in the Jaffna peninsula has deteriorated since then. The Sri Lankan forces are now trying to break through the LTTE's forward defence lines in Muhamalai in south Jaffna, and in the Madu region of Mannar in the west. But they are facing stiff resistance. If the conflict intensifies, there will be artillery shelling from the Pallay airfield. Harbours like Kankesanthurai and Point Pedro would become targets for the LTTE's artillery, gunboats and aircraft. The other difficulty is the availability of the key raw material, limestone. The idea in locating the cement plant at Kankesanthurai was to be able to access the harbour and the limestone in Mannar. But Mannar is now a war zone and is unlikely to stop being one in the foreseeable future, cement industry sources told IANS. While the Indian company in question may well be weighing the pros and cons of taking over the plant, the Sri Lankan government under president Rajapksa is pushing for Indian investment and economic activity in the troubled northeast. Political observers and diplomats say that the government wants India to develop a stake in the maintenance of peace in the terror-ridden northeast through major economic and business investments. For example, Colombo is keen that India should build and run a 500 MW coal-fired power plant in Sampur, a recently captured area east of the Trincomalee naval base. But the Indian public sector power utility, NTPC Ltd, is wary. NTPC is keen on getting the originally allocated site in China Bay near the Trincomalee harbour.
Source: IANS
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