Sri Lanka wants to encourage greater competition in local cement production and has given approval for Birla group officials to visit the site of a defunct northern cement plant the Indian group wants to invest in.
Minister of Construction and Engineering Services Rajitha Senaratne said the government was in talks with Birla on a public-private joint venture to revive cement production in northern Jaffna and ease a severe local cement shortage.
India’s Aditya Birla group had proposed reviving the defunct cement plant in Kankesanturai in the Jaffna peninsula following talks in Colombo earlier this year.
The plant is owned by Lanka Cement, a government firm listed on the Colombo bourse, whose share price has risen after reports of the Birla deal.
Senaratne said he was keen to revive the plant in Jaffna both to meet the current cement shortage and bring down high prices and also to provide youth of the peninsula employment opportunities.
The defence ministry has approved a site inspection by Birla officials in Jaffna which is cut off from the mainland as Tamil Tigers control the land route.
But Senaratne said there were ’problems’ in going ahead with the deal because of opposition from the industries ministry, under which comes Lanka Cement.
Birla was keen to work with his ministry but not with any other, he added.
He told LBO that Birla would have to sell cement at lower prices if it was to strike a deal to get the Jaffna cement plant.
Senaratne said Birla’s investment to revive the plant will help raise local cement production to 80 per cent of the island’s requirement from 40 per cent today.
The plant is sitting on a rich limestone deposit in Jaffna and had long drawn the interest of other cement producers such as Holcim, and Tokyo Cement, which is partly owned by Japan’s Mitsui.