Embilipitiya Paper Mill
Sri Lanka’s Embilipitiya Paper Mill : A
Colossal Failure?
Introduction
During colonial times all categories of paper
& board were imported mainly from Britain & a few other countries,
including the United States. A US Publication of the Department of Commerce gives details of imports
in the years 1923-1925 & refers to the existence of a paper factory in
Moratuwa, which produced only gray wrapping paper, printing paper and paper
bags. An extract from this publication is given below:
“FOREIGN AND NATIVE COMPETITION
The United Kingdom leads in supplying all
classes of paper to Ceylon, with the exception of tissue paper. Austria
supplies most of the tissue paper and holds second place in the importation of
printing paper. Sweden is the second largest supplier of printing, writing,
wrapping, and tissue papers. Germany is second in the importation of blank
books, third in that of writing paper, wrapping paper, tissue paper, and paper
manufactures, and fourth in printing paper. Norway follows Germany in wrapping
paper receipts and holds sixth place in printing-paper imports. The United
States ranks second in the importation of manufactures of paper. The
Netherlands leads in supplying strawboard and also furnishes small quantities
of writing and printing paper to Ceylon. There is a market for American paper
and paper products in Ceylon, but the considerable difference between the
prices for most kinds of American paper and those of British and European
manufacture makes it impossible for the United States to compete to any great
extent.
Local manufacture has practically no bearing on
imports. There is only one paper factory in Ceylon (the Ceylon Paper Mills at
Moratuwa), which produces coarse gray wrapping paper, printing paper, and paper
bags. “
This
publication also reveals that there was a favourable trade balance in 1923
& 1924.
“Imports into Ceylon during the year 1924 amounted
to $96,094,116. compared with $89,522,920 in 1928. Domestic exports in 1924
were valued at $119,705,821 against $105,145,948 in 1923, showing favor-able
trade balances for both years. Foodstuffs represent 46 per cent of the total
imports, followed by cotton manufactures. coal, iron and steel manufactures,
and manufactured oils, fats, and resins. The principal exports of the Colony
are cacao, coconuts, spices, tobacco. teas oilseeds, and rubber.”
Background
With the dawn of Independence in 1948, the future development of the country became the responsibility of the newly formed Cabinet of Ministers.
In 1950, a cement factory was established in Kankesanturai under the Department of Industries and was converted to a Public Corporation in 1956, being named the Kankesan Cement Works.
The Ceylon Paper Mills at Moratuwa which was functioning in the early 1920s appears to have faded away, after a few years.
First Paper Mill
In the 1970s, the Valaichchenai mill had around 3,000 employees. In 1972 the Board machine was commissioned. It progressed steadily until the 1990s when its operations were affected as a result of the civil war.
Since then, it has been an uphill task to keep the mill running & many attempts made to revive the mill did not last long.
In December 2015, it was reported that the Prime Minister has the intention to convert the Valaichchenai Paper Mill into a golf course in addition to a 100 acre industrial zone & that it will take off within two years.
Read about it here:
https://www.ft.lk/article/511723/Govt
However, it does not seem to have materialized.
Again, in June 2020, it was reported that that the Valaichchenai Mill is to be given a new lease of life & that a test-run to re-open the factory was completed. Certain other ventures were also proposed.
Read about it here:
https://archives1.dailynews.lk/2020/06/01/finance/219763/new-lease-life-valaichchenai-paper-mill
The present position is that the mill is producing limited quantities of paper products.
Second
Paper Mill
In the meantime, the government had identified the need to establish a second paper mill in the Southern Province & entrusted the preparation of a feasibility study to Sandwell & Co. of Canada who had been providing technical assistance to the Valaichchenai Mills. Their study was completed in 1969 & Technical Report No. P2246/1. titled New Mills Survey, Embilipitiya Mills, by Sandwell Co. was submitted to the government.
Capacity of the proposed Mill
Pulp Mill – Capacity to produce 36 m/t /day of pulp from rice straw by the soda process. Two pulpers each with a capacity of 30 tons to be installed to dissolve long fibred pulp & broke from the finishing house.
Paper
Mill – Capacity to produce 50 m/t/day of fine printing & writing paper with
basis weight in the range 30 – 120 gsm using rice straw pulp with admixing of
bleached kraft long fibred pulp. (Amarasinghe, 1991)
Proposed Output, Location & Raw Material
The proposed mill was to produce 15,000 t/a & the tentative location proposed was close to the river sea outfall at Ambalantota . The raw material to be used was rice straw and it was estimated that 30,000 t/a would be required to produce 15,000 t/a of paper.
It was envisaged that the rice straw requirement could be met from around 150,000 acres of paddy land, which would come under cultivation with the completion of the Udawalawe Irrigation Scheme, where work on the new reservoir had already been completed. The expectation was that the quantity of straw required could be collected from within a radius of 30 miles. The caustic soda process was to be used.
The original tentative site recommended had to be abandoned following the inauguration of the Udawalawe scheme and a new site at Tunkame was selected based on the availability of water supplies at Chandrikawewa & Kachchigal tank. (Amarasinghe, 1991).
While there was some delay in commencing work on the Project, due to the ongoing insurgency in 1971, this was also the incentive to commence the project as early as possible as it would provide employment opportunities to the youth of the area, paddy farmers would receive an additional income by supplying straw, which was going waste, & the area would be economically developed.
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| Straw Transport (Courtesy Alamy & Shutterstock) |
Investment
The investment on
the mill was a loan from West Germany of DM 53.5 million & a non-repayable
fund of Rs. 250 million from the government. Loan repayments were the
responsibility of the government. The loan was to be repaid in 10 years in
half yearly instalments. (Amarasinghe 1991)
Construction
Construction of Embilipitiya Paper Mill commenced in 1973. Accordingly, construction work was entrusted to the State Engineering Corporation & the River Valleys Development Board & P. P. Manickam, a former General Manager of the State Engineering Corporation, was appointed as the Manager of the Project. The work involved preparation of the site, construction of buildings & installation of equipment, construction of buildings to house the various grades of employees to be recruited, internal roads & other infrastructure required for a project of this magnitude. etc.
Commissioning
The Embilipitiya Mill commenced operations with experienced staff drawn from the Valaichchenai Mills & they were quite capable of running the mill. The first Mills Manager was Asoka Subasinghe. In addition, they had the assistance of Consultants from Sandwell, who were stationed at the mill. In 1980, there were around 10 Sandwell Consultants with expertise in different areas of paper mill operations. They provided training & guidance in operating the mill.
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| Straw Baler & Bales |
Problems faced by the
Mill
Unfortunately, the mill faced a number of operational problems, which
could/should have been foreseen at the time of the feasibility study & it never performed to its full potential.
The following reports provide in detail the process & environmental issues faced by the mill :
Y. R. Amarasinghe in article titled “The Embilipitiya Mills in Sri Lanka” appearing in the publication Small Pulp and Paper Mills in Developing Countries edited by Jörg Becker & published by Concept Publishing Co, India in 1991. Pages 89-96.
Small Pulp and Paper Mills in Developing Countries - Google Books
Some of the problems the mill faced from the beginning based on the above reports are summarized below:
Capacity Utilization
From its inception up to 1985, the mill was running at a loss, as
its capacity utilisation was between 30 % to 50%, due mainly to inadequate raw
material supply, increasing cost of production, competition from imported
products & process problems. From 1986 to 1991 capacity utilisation rose to 67.4%. (Amarasinghe, 1991).
Raw Material Supply & Usage
The envisaged straw collection of 30,000 M/T could not be achieved
& the average annual supply amounted to about 10,000 M/T annually.
The mills management was forced to use imported pulp to keep the mill running.
In order to keep the costs down, it also used locally available eucalyptus wood
pulp, which had to be transported from upcountry areas, while implementing
various measures to increase straw collection. (Amarasinghe,
1991).
Chemical Recovery System (CRS)& related problems
(Amarasinghe,
1991) describes the problems faced by the CRS as follows:
“The CRS at Embilipitiya was erected in 1979
but the holding of the first performance trial was delayed till
February 1982 due to certain necessary modifications to the process and
equipment. The objective of the system was to eliminate the polluting effluent
black liquor and to recover at least 75 per cent of the pulping
chemicals. Even after the first trial run further modifications were added and the
final tests done in October 1983.
During
the trial-run many problems were encountered. Most of these problems were
related or associated with the high silica content of the rice straw black
liquor. The lime mud could not be burnt as a result of high silica
content. A constant supply of furnace oil became necessary due to low
solids in heavy black liquor and low calorific value of rice straw
black liquor. High silica content caused scaling and the evaporator had
to be cleaned very frequently. On the whole, the recovery process
turned out be extremely expensive and the recovery efficiency very low. The
cost of caustic soda recovered during the trial run was about 4 1/2 times the
locally purchased caustic soda. Consequently, the CR system has
not been put into use, although several more millions of rupees have been spent
since on further modifications and maintenance.”
The failure of the CR system is definitely one of the most pressing problems confronted by the Embilipitiya factory. It has serious implications for the cost of production, raw
material usage, and the environmental situation. The factory has to bear
the cost of an investment of Rs. 175 million
(on CR system), without having had any
contribution to the production system. A staff of 75 recruited for CR work is being maintained.”
In
view of the above, the mill was forced to use imported pulp & wastepaper
to keep the mill running. The CRS turned out to be a white elephant.
Affluent Disposal & Environmental Problems
Amarasinghe
(1991) describes these as follows:
"The
arrangement for the disposal of effluent at Embilipitiya has led to some
problems. Non-black liquor effluent is channelled through a pipeline to the
nearby river, after collecting in a settling-pond and an aeration lagoon. Most
of this effluent is utilized profitably by cultivators living on high ground
along the path of the pipe-lint. Agricultural authorities do not sanction this;
nevertheless, the practice continues. As yet, no one has studied the possible
adverse effects of this practice.
The
black liquor effluent, which is also emptied to the river from the two
collecting ponds from time to time, is not so acceptable. Its disposal causes
protests from the locals and the National Environmental Authority. It is
alleged that the disposal of black liquor to the river affects fish and
disrupts water intakes down river. The National Paper Corporation has reacted
to these protests by directing the mill to use less of black liquor producing
raw materials or resort to imported pulps."
·
A fairly
substantial feasibility study was carried out by Sandwell in 1969, eight years
before the mill was commissioned. This study had recommended the establishment
of the mill near the mouth of the Walawe River. Had this been done, the impact
on the upstream ecosystem may have been avoided though it may have created
marine-related environmental problems. The change of the site was forced by
other events which pre-empted the use of the original site. These events were
predictable.
· Both the
feasibility study and the change of the site do not seem to have taken
environmental considerations into account.”
Sandwell defects
· “Like most feasibility studies the Sandwell report considered the "economic" justification for the mill, made a technical evaluation of the process and raw materials for use in that process and in the light of these two, made a tentative site selection. Although alternative processes, sites and industrial options were considered, environmental impacts and alternatives were not. The original site became unavailable because of environmental changes caused by another development project upstream. These changes should have been foreseen and taken into account in the site selection.
·
Even in the analysis of the
"process" for the mill, the Sandwell report was defective in as much
as it did not investigate the special features of rice straw as a raw material
and the impact of its use on the CRS. At the heart of the
present environmental problem is the failure to investigate the chemical
properties of rice straw and its effect on the CRS. Had this been done,
industrial process solutions could have been recommended to avoid or mitigate
the resultant "economic" loss.
·
There appears to have been a near
total absence of consultation with the affected people in the area and other
relevant state and local agencies. The Hambantota water supply scheme has been
affected and traditional fishing grounds destroyed. Agencies involved in the
management of the river system (except the Irrigation Department) do not appear
to have been consulted.
·
No compensation has been paid to the
affected parties nor has the cost to the Hambantota water supply scheme been
defrayed. In short, the environmental costs of the mill have been externalized
and passed on to the people of the area and to the state.
·
The extent to which political
expediency played a role in decision making is unclear, although there appears
to have been an industrialization thrust and a need to develop new industries in
the Southern Province following the 1972 insurgency.
·
A subsequent study by Arel (1991) has
recommended an action program to rehabilitate the mill, but whether the mill
has committed itself to carry out the program and fund it is unknown.”
Cost of Production
Amarasinghe
(1991) makes the following points.
The average cost of production at the mill is moderately high. In
1986 the cost of production of a tonne of pulp was Rs. 14,631. If the mill
operates at full capacity the cost can be as low as Rs. 10,785. Still, when
compared with the price of imported pulps, the economics of producing pulp
locally are considerable. In 1987 the average cost of imported short and long-fibre
pulp per tonne was its. 18,000. The main reason for the increasing
cost of production is the extensive use of imported pulp, which was more
expensive in 1987. For instance, the cost of imported short and long-fibre in
1986 was US S 400 whereas in 1987 it was about US S 600. The cost of production
of the finished product has also been rising gradually. Apart from the pulp and
other direct material used in production, the expenditure on steam, power, mill
overheads and depreciation arc also considerable. In
1986 the cost of paper per MT was Rs. 23,482.01.
Investment & Viability
Amarasinghe
(1991) observes as follows:
“The
basic investment is a loan from West Germany of DM 53.5 million, and a
non-repayable fund of Rs. 250 million from the government of Sri Lanka. The
West German loan was to be repaid in 10 years in half-yearly instalments. Of course, the loan is repaid by the government and not the mill, and 15
instalments have been paid so far. The outstanding loan is DM 14.2 million and
the last payment is due in 1990. The Embilipitiya mill
had been running at a loss till 1985 when a profit of Rs. 4.12 million was achieved.
Since then, profits have been increasing. In 1986 the profit was Rs. 283
million. This figure was obtained after paying the loan interest instalment and
business turnover tax (10%) to the government. However, this falls short
of the loan instalment (Rs. 513 million) in 1985. What the mill has to pay to
the government keeps accumulating in the books, and the figure had reached a
staggering Rs. 577 million by the end of 1987. The rate
of profits that the mill is making now is totally inadequate to take care of
all these liabilities in the immediate future. The viability of the mill
should not be measured purely on the basis of its ability to generate adequate
returns for the investment. As a public enterprise the Ernbilipitiya mill has
contributed to the economy in many ways. The main economic benefits could be
identified as follows:
(i) Employment: Over 1300 of all categories
are employed by the mill directly. The number employed indirectly and the other
income generating activities related to the mill are also great.
(ii) Foreign Exchange Savings: Reduction of
imports due to local production and a resulting saving of foreign exchange are
substantial. At a rough estimate the foreign exchange saved in 1986 was about
Rs. 107 million.
(iii) Business Turnover Tar: In 1986 the
government received over Rs. 32 million on Embilipitiya products.
(iv) Dividends paid to the Treasury: In 1985
this amounted to Rs. 5 million. “
Lalanath
de Silva (1993) observes as follows:
"Expected gross return
on the investment was estimated at either 17.2% (before interest, depreciation
and taxes) oi at 10.4% (after interest and taxes). Though this return was
unattractive the estimated annual foreign exchange savings amounted to an attractive
Rs. 20.35 million.
The two major environmental problems that surfaced
subsequently are both inextricably linked to the industrial process that was
adopted and the raw material used. The two problems were:
1) a fairly localized problem to residents caused by air pollutants and
emissions from the treatment ponds and stacks; and
2) a serious water pollution problem caused by the discharge of waste into the
Walawe
Both problems have their genesis in "process", "raw
material", and "waste recovery" issues.
The basic pulp and paper process involves the cooking of raw natural fibres
(usually wood, but in the Embilipitiya case mostly rice straw) in a chemical
solution, the main component of which is caustic soda. The resultant pulp is
then separated, and the remnant liquid is called "black liquor".
Thereafter the pulp is bleached through chlorination and other processes and
subsequently rolled into paper. The bleaching process also results in the
discharge of the wash which contains chlorine compounds and other known
toxics. This wash is called "white water'.
Normally, the black liquor is not thrown away but rather concentrated through a
chemical recovery system (CRS). The purpose of doing so is to recover as a
significant quantity (75%) of the caustic soda as possible for re-use in the
process. The economic viability of the process is generally increased by the
use of a CRS. Unfortunately, straw has a relatively high silica (14 - 17%)
content. The silica which gets into the black liquor then causes scaling in the
evaporator tubes forcing frequent shut-downs of the CRS.
Frequent shutdowns of the CRS led to:
1) the gradual conversion of the raw material used from the originally
planned straw to wood and later a mixture of both; and
2) the establishment of large aeration lagoons to store the black liquor and
white water and later to discharge this waste into the Walawe Ganga 7.6 km
away.
The impact of this action caused the environmental and human health problems
described above, but it also made the industry less economically viable. The
discharges into the Walawe Ganga caused adverse impacts on the river ecosystem,
evidenced by major fish kills and the closure of the Hambantota water supply
scheme downstream. These symptoms manifested themselves each time the black
liquor was released into the river. Such releases were common occurrences but
have been reduced after public and press protests.
There were several pollution control measures that were possible. Some of them have since been adopted. The use of wastepaper as a raw material, the operation of the CRS, and better management of the waste are but a few. The siting of the Embilipitiya complex could also have been done in an environmentally sensitive way."
Progress
of the Mill
1976 – 1985
Mill was running at a loss. Capacity utilization was between 30% & 50%. (Amarasinghe, 1991)
The CBSL 1980 report records the following transfers for capital & current expenses: 1978 - 44.2 m; 1980 - 106.7 m.
1985
The CBSL report records an increase in output of 22% at the National Paper Corporation.
1986-1991
1990
Approval was given by the Cabinet for the conversion of a number of public
enterprises into limited liability companies. The National Paper Corporation
was one of them.
Data could not be traced. However, a report on the Embilipitiya Mill had been prepared by Dr. J.A.P. Mathes of the CISIR for NAREPP/IRG, 16.12.91. (unpublished).
The National Paper Corporation was converted into a limited liability Company as National Paper Company Ltd. (NPCL) under Company’s Act No. 17 of 1992. NPCL was the only local manufacturer for Duplicating, Duplo Colour, U.B. Printing, Cream Laid, Cover Paper, Test Liner, Manila Board, Bristol Board, Box Board. (NPCL website).
Data could not be traced.
1994 & 1995
The CBSL
report records that the production of the National Paper Co. Ltd. increased by 15
per cent in 1994. Adequate supplies of raw materials resulted in an increase in
the output.
In a tribute to the former General Manager of National Paper Co.
Ltd. Mr. M. A. Justin who joined as an engineer, it is recorded that under his
leadership, the National Paper Company Ltd achieved the highest level of profit
since its inception amounting to about Rs. 115 million a year at that time and
won National Productivity Awards for this incredible performance in 1994 &
1995. He left the Company in 1996. ( https://www.prometsl.com/about-us/m-a-justin/ )
The CBSL
report records a drop in the output of
the National Paper Company by 10 per cent.
Increased competition in the domestic market following the reduction of import
duty on paper products was mainly responsible for the reduction in the output
of the National Paper Company Ltd. .
The
following comment is made in respect of the Valaichchenai mill in the NPCL
website:
“NPCL was the market leader and having most of
the market shares until the implementation of the open market policy and waving
off the 35% tariff on the importation of paper and the board in 1994 it became
bad to worse, and the profit started to drop. One more reason for waving off the
tariff was the Paper Mill was in the war zone but it’s now time to rethink and
change the polices for the upliftment of the local industry and save nearly 300
families who are directly employed and some 200 indirectly employed and the
Mill could contribute a larger portion to the GDP as well.”(NPCL website)
Data could
not be traced.
1998
The CBSL
report records that the output of the National Paper Co. Ltd. declined by 23
per cent due to the disruption to the power supply in the Valaichchenai mill and
the frequent break down of machinery at Empilipitiya.
1999
The CBSL report records that the drop in output at the National Paper Co Ltd. was 47 per cent. Reasons given are that the National Paper Co Ltd. experienced marketing difficulties in the face of greater competition from imports, high cost of production and relatively poor quality of final products arising from outdated production processes.
2000
The CBSL report records that the output of the National Paper
Company Ltd. continued to decline in the face of intense competition from
imported paper and the lack of raw materials. The Valaichchcnai paper mill,
which used wastepaper as its main raw material, was seriously affected as a
result of increased exports of wastepaper to India.
2001
National Paper Company Ltd.
received more wastepaper for processing in 2001.
2002
Data could not be traced.
2003
Embilipitiya mill operations came to a standstill. The mill was closed in 2003 and factory assets worth millions of rupees were sold to settle the workers’ dues. Among the reasons listed for the closure of the mill in 2003 are:
- the accumulated electricity bill amounting to Rs. 29 million;
- the lack of raw materials at both Valaichchenai & Embilipitiya,, especially wastepaper which was then being exported to India.
- the need to upgrade machinery
- imports of paper products at lower prices due to reduction of import tax from 40% to 10%
Read about it here:
http://archives.dailynews.lk/2004/10/20/bus03.html
Ups & Downs of the Embilipitiya Mill after its Closure in 2003
Chronological List of Important Events
2003 - 2010
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| Vandalized Equipment |
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| Abandoned Buildings |
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| Abandoned Fuel Pump & Building |
A news item in the Daily News announced a
decision made by the Minister of Infrastructure Development (Eastern Province)
to reopen the Embilipitiya Mill.
It was reported that the NPC was losing around Rs 150 million per annum
& the Treasury was footing the salary bill of Rs. 11 million monthly.
Read about it here:
http://archives.dailynews.lk/2004/10/20/bus03.html
However,
this initiative was not successful.
2006 April 23
Mill was
apparently closed from 2003 onwards.
It was reported that the Minister of Industrial
Development appointed a committee to find out and report on the possibility of
re-opening the factory.
The committee comprised senior company officials,
public and private sector executives with specialist knowledge in the paper
field and retired officers of the sector. Once the committee submitted its
proposals, the Minister directed the relevant officials to activate the company
on a step-by-step basis.
Accordingly, as an initial step around 400
employees of the Embilipitiya Factory were to be employed to cut and pack the
paper produced at the Valaichchenai factory.
Read about it here: https://archives.sundayobserver.lk/2006/04/23/bus04.html
This
initiative too has not been successful.
The CBSL report records as follows:
"The government either imposed or increased Cesses on several imports from
the Budget 2009 to facilitate and promote domestic industries.
..........Further, a 5 per cent Cess was imposed on paper imports to encourage
domestic paper products by making commercially viable the products of two paper
factories in Embilipitiya and Valaichchenai which have been
modernized......"
2008
September 24
The mill resumed operations in September 24, 2008,
with a capital investment of Rs. 35 million as envisioned in the ‘Mahinda
Chinthana’ to make State resources productive.
The factory was declared open on September 24, 2008, by Minister of Nation Building Basil Rajapaksa, and Paper Corporation Chairman, Siripala Amerasinghe.
However, it was closed down after 8 days, due to lack of funds to pay employees
their salaries, & purchase fuel. Read about it here:
Read about it here:
https://www.sundaytimes.lk/081102/News/sundaytimesnews_10.html
Paper jam as state factory grinds to a halt
2009
The mill resumed operations at some stage but date
could not be ascertained. The newspaper report is as follows:
Embilipitiya functioning
smoothly:
Environment-friendly paper factory
Raja Waidyasekera Tissamaharama special corr.
The
Embilipitiya Paper Factory is functioning smoothly after it was reopened
sometime back.
It
was President Mahinda Rajapaksa and the Senior Consultant to President,
Parliamentarian Basil Rajapaksa who intervened to reopen the Embilipitiya Paper
factory that was left abandoned.
Ever
since the Embilipitiya paper factory opened in 2008 it produced 205 metric tons
of paper last month alone.
The
National Paper Factory Chairman S. Amarasinha told the Daily News that the private
sector paper dealers have been requested to purchase the consignment of paper
at the Embilipitiya Paper factory.
He
said that a substantial sum of money could be saved in foreign exchange as a
result of producing paper locally.
He
said that the paper industry here is totally environment friendly because wastepaper is used in the production of paper.
http://archives.da/ilynews.lk/2009/05/05/news17.asp
However,
due to the poor quality/condition of the
machinery and the high cost of re-investing in machinery the plant was
compelled to close again in 2010. Despite its closure, the Government continued
to pay staff salaries amounting to Rs. 4.3 million monthly until November 2010.The remaining employees
continued to agitate for their salaries as stated here; https://www.sundaytimes.lk/100711/News/nws_43.html.
The
State Resources & Enterprise Development Minister stated that :
Rs.
1000 million was required to reactivate the mill; the state was unable to
provide this money.
· The 200 employees there could not be
absorbed elsewhere as these institutions also were overstaffed
· The treasury was unable to pay the
salaries or to implement a Voluntary Retirement Scheme.
2011 May 11
The Island newspaper reported that that the “ Embilipitiya Paper Mill
loss in 2011 over Rs. 100 Mn”.
“The Embiliptiya Paper Mill had incurred a loss of Rs 100,327,897.56 last year
alone, according to a document tabled in Parliament yesterday. The document
tabled by Chief Government Whip Dinesh Gunawardena on behalf of the Minister of
State Resources and Enterprises Development, said the mill had not been able to
earn profit since 2005. The document was tabled in response of a question
raised by UNP Kurunegala District MP Dayasiri Jayasekera. more.”.
2011
December
An
announcement was made in 2011
· Embilipitiya Paper Mill has resumed operations
under the National Industrial Re-Awakening Programme of the Government.
· 250 metric tonnes of paper will be produced daily,
and 350 direct employment opportunities will be created under the new
management
· Auslanka Paper Company (Pvt) Ltd was
the local entity incorporated with Perth Engineering and Maintenance (WA) (Pvt)
Ltd, an Australia based firm, to revive the paper mill at Embilipitiya on a 30
year lease period at a price of Rs.600 million.
Read
about it here : https://www.ft.lk/article/59439/Embilipitiya-Paper-Mill-resumes-operations
Accordingly, in 2011, Embilipitiya Paper Mill (EPM) was handed over to a
private investor to develop it on Long Term Lease Basis and initial payment
received from the investor was utilized to implement a Voluntary Retirement
Scheme (VRS) for the employees of the mill.
The expectations were however not realized as the company abandoned the business in 2012 without repaying a bank loan facility of over Rs.400 million.
It was alleged that:
- the foreign contractor gave up the contract due to corruption and malpractices.
- a Rs.100 million commission was paid by Auslanka to a top official of the State Resources and Enterprise Development Ministry.
A probe into this corrupt deal had been terminated inconclusively in
2013
2013 – 2016
Mill was apparently closed.
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| Abandoned Building |
2017
2017 June
After a lapse of 5 years another attempt to revive the mill by the
Founder Manager, Asoka Subasinghe , former Mills Manager & later General
Manager, M. A. Justin etc. was announced. Read about it here:
http://archives1.dailynews.lk/2017/06/26/local/120013/embilipitiya-paper-factory-be-revived
https://archives1.dailynews.lk/2017/07/05/local/120975/embilipitiya-paper-factory-be-reopened-soon
2017 October, 5
A high-level team of engineers led by S. Palaniyappan, Chief Executive and Managing Director of the Yeswi Industries, an Indian subsidiary of the German firm Voith in Heidenheim, Germany arrived in Colombo on October 5 to devise plans towards reviving the two paper factories at Valaichchenai and Embilipitiya under closure.
Read about it here:
2017 November 8
It was announced that the two mills were to be revamped with a grant of
US $ 20 million from South Korea.
Read about it here:
However, this initiative too appears to have failed.
2018-2023
2018
September 23
Once
again, in 2018, it was announced that in the wake of rising prices of paper in
the world market the government had decided to revive the defunct state paper
mill and that the Ministry of Industries and Commerce would lease the mill to a
local company named Korean SPA Packaging Pvt. Ltd. , who were planning to
invest Rs. 1.2 billion in order upgrade machinery and infrastructure to produce
paper and packaging material.
It
was reported that KSPA is a multibillion-rupee turnover
company engaged in the corrugated and flexible packaging industry catering to
the packaging needs of various industries including tea and garment industries
in the country since 1993.
Read
about it here:
However, no progress was made although Cabinet approval had been granted
for the lease of the mill with 111 acres, two roods and 33 perches
of land, apparently because the land was not regularized properly.
A report on the Rehabilitation & Augmentation of the Embilipitiya Mill was submitted by Uni Consultancy Services of the University of Moratuwa.
The justification for re-starting the mill was outlined as follows in the above report:
“
· Previous mill operation had
created adverse environmental consequences and as a result there was a negative
perception towards the paper mill among the public.
· The main reason was the
generation of a large quantity of wastewater containing lignin, called “Black
Liquor”, as a result of delignification of paddy straw which was the main
source of fiber for paper manufacturing.
· This black liquor was stored in three
artificial ponds covering a total area of 34 acres.
· When the ponds’ capacity exceeded during
continuous mill operations, the black liquor overflow was discharged to the
Walawe river through a cascaded pipeline which caused severe environmental
consequences as well as negative social impact towards the old paper mill.
· Presently, these black liquor
ponds are isolated without utilization for any purpose, however, still,
evidences confirm the leaching of black liquor from those ponds into the
immediate ground water table, thus urgent attention is needed for restoring the
effect.
· In particular, the
proposed industrial grade kraft paper manufacturing process eliminates the
formation of black liquor; thus, no requirements of NaOH and Cl2 for caustic
pulping and subsequent bleaching, because the delignification of paddy straw is
omitted as the “new raw material is recyclable paper”.
· Thus, the final
product of the old paper mill, which was fine grade paper will be replaced into
the industrial grade kraft paper as the throughput in the proposed paper mill.
·
Moreover, since there is no
black liquor generation and disposal of any untreated effluent, the proposed
technology is environmentally friendly and socially acceptable.
·
Not limited to that, usage of
the recyclable paper as the raw material promotes strategic waste management
practices under resources recovery which is also align with circular economy
principles.
·
Currently, around
120,000 MT of industrial grade kraft papers are imported annually to Sri Lanka
by the local packaging companies at an approximate cost of 70 million USD. With
the proposed paper mill, it is planned to produce 45% of this demand by producing
55,000 MT, annually, thus saving of 31.5 million USD annually.
·
The total annual quantity of
recyclable paper generation in Sri Lanka is around 160,000-200,000 MT, where
approximately 120,000 MT is exported to India. From the remaining portion of
recyclable paper, nearly 48,000-60,000 MT is consumed by the local industrial
grade kraft paper manufacturers. The raw material
estimation for the proposed paper mill reveals that approximately 60,000 MT of
local and imported industrial grade recyclable paper is needed to produce
around 55,000 MT of industrial grade kraft paper as the final product. Clearly,
this raw material requirement cannot be satisfied only from the locally
available recyclable paper, thus it is needed to import the raw material with
required quality (raw materials enriched with higher fiber content) from selected
countries like Canada, USA, and Japan.
· The importation of quality raw
material from selected countries adds two fold benefits to the company as well
as the country; (1) capability of producing high-quality (higher strength)
paper which opens up the entry to the foreign market (2) value addition to the
raw material which leads to overcome the importation cost. Thus, the proposed
paper mill will generate manufacturing-oriented business that is favorable to
the growth of national economy in Sri Lanka.
· The old paper mill used
furnace oil boilers for steam generation, which incurred additional foreign
expenditure for importing fuel oil. In contrast, the proposed paper mill plans
to operate a low-pressure steam biomass boiler fueled with Gliricidia, agro-
based wastes, and wood residues (paddy husk, wood chips, etc.). These biomass
fuels can be supplied from the surrounding agricultural lands, dedicated energy
crop plantations, and nearby timber processing facilities, which can be
referred as carbon neutral energy sources if extracted sustainably. More
importantly, biomass burnt boiler will generate low SOx, NOx, and CO emissions
as compared to the previous oil-fired boiler operations. Additionally, the
utilization of boiler ash mixed Gliricidia leaves compost mixture along with
the treated wastewater for horticulture and green belt cultivation around the
mill premises enhance the environmental sustainability of the proposed paper
mill.
·
According to the Embilipitiya
Development Plan 2019-2030, the paper mill site locates within the proximity to
an industrial zone where the permissible small, medium, and large-scale
industries are promoted and allowed to operate in this region.
·
Implementation of the proposed restructuring
and augmentation of the paper mill will generate many direct and indirect
employment enriching the socio-economic conditions of the area.
·
Thus, turning the abandoned
paper mill to a well-operating profit-making industry would flourish the
country’s economy by uplifting the livelihood of surrounding areas.”
2 March 2022
It was announced that “the Cabinet nod has been given to transfer over 111 acres of land to State-owned National Paper Company Limited on a 30-year lease to restart operations of the country’s second oldest paper mill Embilipitiya paper factory as a joint venture with Korean Spa Packaging (Pvt.) Limited.”
Read about it
here:
9
Mar. 2022
It was announced that “an Agreement was signed accordingly on 9 March 2022. The mill would be revived at an initial cost of Rs. 3.5 billion. It will start production within an year & produce 75,000 metric tons of paper per year.
Read
about it here:
https://www.industry.gov.lk/web/signing-the-agreement-relevant-to-reopening-embilipitiya-paper-mill/
It was announced
that the Embilipitiya Mill is due to resume operations after 10 years.
The report in the newspapers can be read here: https://www.themorning.lk/articles/207770
KSPA
is described as a 100% Sri Lankan owned, BOI accredited portfolio company of
Anunine Holdings; a highly diversified, privately held, family-owned group of
companies; active in the fields of packaging, tire manufacturing, sugar
manufacturing, renewable energy, trading, plastic and waste recycling, garment
accessories manufacturing, agriculture, nanotechnology, and blockchain
technology with a 30-year history in the export sector and with over 2,000
direct employees.
Their plans envisage:
- An investment of 16m in the first phase.
- Use of automated machines in an eco-friendly way.
- Manufacturing industrial grade papers for the direct & indirect export market by upgrading machinery & infrastructure.
- Generation of nearly 1000 direct & indirect employees.
- A second phase with the addition of a pulp mill to recycle wastepaper & produce wet pulp for export.
Read further about it here:
Conclusion
It is to be hoped that the latest initiative to resurrect the mill on the basis of a Public Private Partnership will be successful.
It is a fact that the Embilipitiya Mill turned out to be a disaster due solely to the failure to identify the process & environmental problems encountered in the operation of the mill at the time the feasibility report was prepared.
The reasons for the failure of
many state industrial corporations are mismanagement, inefficiency, corruption,
excess staff & political interference. However, none of these can be
attributed to the failure of the Embilipitiya Paper Mill which belonged to the
National Paper Corporation. From its inception, it had experienced &
committed managers, highly efficient, young & energetic engineering &
production staff, & a devoted workforce. There was hardly any
corruption, political interference & excess staff.
The first Chairman of the Corporation, K. C. Thangarajah, held office from 1958 to 1978 & during this period the Valaichchenai Mills steadily progressed & became a profit-making venture.
The second Chairman, Y. G. Edward held office from 1978 to 1992. During his tenure the Valaichchenai Mills continued to make profits, until mill operations were affected due to the civil war which spread to the Eastern Province, but the Embilipitiya Mills from the outset was affected by process & environmental problems, which were beyond the control of the Chairman & the staff. Nevertheless, attempts were made to run the Embilipitiya Mill economically, using a combination of straw & imported pulp, Eucalyptus wood pulp transported from over 100 miles away, & finally wastepaper, but it proved to be a losing battle.
It is pertinent to refer to a proposal
made by Garvin Karunaratne, PhD in Non-Formal Education
& Agricultural Economics, Michigan State University Formerly of the SLAS-
Government Agent, Matara in 1971-1973. This proposal is contained here:
https://www.lankaweb.com/news/items/2021/01/12/our-policy-has-to-be-import-substitution-with-the-motto-buy-sri-lankan-to-achieve-the-vista-of-splendour-our-presidents-aim/
This proposal is included here because the objective of setting up the Embilipitiya Mill was primarily to make use of paddy straw freely available in the area.
It is as follows.
” It is suggested that we get down a few small-scale paper and cardboard making
machinery from either China or India and establish these in our colonization
schemes. These will use straw and waste cardboard as the raw material. I have
also pointed out that Illuk grows wild in Mahavillachchiya and a Paper Factory
can easily be set up there. Making paper and cardboard is a cottage
industry in India and Bangladesh.
This is an industry that can be easily established within a few months and will
create employment and incomes and also reduce our imports of Paper and cardboard.
May I suggest that a few paper factories be established within two months? It
could take on the following form:
- An Administrative Officer from SLAS and a Mechanical Engineer to be handpicked and sent to India to see, study and identify small scale machinery for making paper,
- Ordering a few papers making Units to be purchased and brought to Sri Lanka.
- Suitable land to be identified immediately and the State Engineering Corporation or the Engineering Co of the Army to be requested to put up a temporary structure to house the factory.
- Selection of youths to work on the factory.
- A Project Manager with an engineering background preferably an engineering graduate to be recruited to be in charge of the project.
- The Project is to be worked as a cooperative which will be owned both by the workers as well as the community. This concept of Community Cooperatives is key to ensure that the cooperative is not moved away from the community.
Paper manufacturing units can be easily
established. There is absolutely no doubt. “
Another comment by Dr. Sarath Amunugama is appearing here : http://www.srilankaguardian.org/2012/07/under-margosa-tree.html?m=1
is reproduced below:
"Valaichchenai is a hub for the region’s paddy cultivation. In the days of Mrs. Bandaranaike, a massive paper factory had been set up there to make use of the large amounts of straw available. It was twinned with Embilipitiya which was supposed to gather straw from the Udawalawe and Chandrikawewa areas. Thus, Koralai Pattu in the East and Giruwa Pattu in the South were envisaged as great paper manufacturing centres by Minister T.B.Subasinghe. What he forgot was that straw was only one ingredient in paper manufacturing. All the other ingredients had to be imported. The paper manufactured in these giant plants could not be used as newsprint as the new rotary machines simply tore this product apart. Today after much needless spending they are "white elephants"; testimony to the inefficiencies of socialist planning.
It must be said that Valaichchenai Mill was started in 1956 & the feasibility report for the Embilipitiya Mill was submitted in 1969. It is correct that work on the Embilipitiya Mill commenced during Mr. Subasinghe's time as Minister of Industries."
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