Fate of KKS Cement Factory Hangs in the Balance

By Sulochana Ramiah Mohan | Published: 2:00 AM Apr 17 2021
Focus Fate of KKS Cement Factory Hangs in the Balance

By Sulochana Ramiah Mohan

The old plus new machinery, including a 110-metre-long kiln purchased from Germany, which came with a 100-year guarantee, belonging to the Kankesanthurai (KKS) Cement Factory have all vanished without a trace from 2010. Up until now, no one has yet been held accountable for the missing machinery.

Who sold them and for what purpose was the money used, is still a mystery, but the 20 odd shareholders of the cement factory are in a quandary because, their investments are unsettled.

Moreover, in February 2021, the Cabinet had approved the sale of all metals in the factory, but the Lanka Cement Limited (LCL), a subsidiary company of the Ceylon Cement Corporation, that had 40 per cent shares and ran the new cement factory from 1983, said they were not consulted about it.

Earlier, the Ministry of Industries had called for the tender to remove all the metals and that too without the consent of the LCL which had a major share.

In this backdrop, the people of KKS and Thellipalai are on the alert over anyone coming to remove the 40 per cent of the remaining factory machinery. 

Brief history of KKS cement factory

The KKS cement factory commenced in 1950 under the Department of Industries and was converted to a public corporation in 1956, named Kankesan Cement Works (KCW), which was later known as Cement Corporation. A new factory by Lanka Cement Limited (LCL) built-in 1983, on the same premises, had machines from Germany. The machines were valued at around Rs 450 billion!

The old and the new cement factory was operated and in full swing producing around 3,100 metric tons of cement per day when the production was abruptly suspended and on 15 June 1990 when the military took over KKS Cement factory due to the war.

However, the question that remains unanswered is what would be the fate of the KKS cement factory that is now occupied by the military? It is still unclear what the factory land would be used for if the machines in the factory are ordered to be sold.

The factory is located in the High Security Zone (HSZ) and just 1km from the KKS fishing harbour (now under the control of the Navy and the Sri Lanka Ports Authority) which has not been released to the civilians.

Nevertheless, the happy news is that, so far the Government has not expressed its intention to ‘sell’ or ‘lease’ the KKS cement factory, citing development of the country in the post-war era.

Currently, the officer-in-charge of KKS cement factory operations is seated there, representing the LCL, but has not been paid his salary for the past 33 months. He is issuing the EPF and ETF for those who have worked at the factory until the production was suspended in June 1990 on account of the war.

The LCL had purchased outright about 120 acres of the land out of the 450ha of the KKS factory premises.

On 27 April 2016, the then Minister of Industry and Commerce Rishad Bathiudeen sought to revive the Kankesanthurai Cement Factory (KCF) and toured the defunct KCF’s site.

Many countries such as Pakistan, India, China, and Korea were vying to clinch the cement factory and expressed their interest for a ‘joint venture’ or for running the cement production. Even UAE-based Ras Al Khaimah Cement expressed interest in reviving the Kankesanthurai Cement Factory with a USD 100 million investment but they were all dismissed.

According to information everything has been dismantled and taken away as scrap metals in some 540 lorry loads from 2010 and even now removal of parts of the machines is continuing. This was revealed by the CID when they probed the machinery theft.

In 2017, under then President Maithripala Sirisena, a Presidential Commission Investigating Alleged Acts of Fraud or Corruption (PRECIFAC) started investigations into an alleged fraud involving the dismantling and sale of machinery as scrap iron for over Rs 100 million by the army.

The Commission of inquiry has not seen a closure, however, without the knowledge of the KCW and LCL, and the stakeholders, the machines were dismantled, and little by little, it vanished from the premises. Currently, only 10% of the machine parts remain in the old cement factory and around 40% of metal parts remain at the LCL.

At the hearing, former Defence Secretary Gotabaya Rajapaksa (Now the President of the country) had said that he never approved the dismantling of the Kankesanturai (KKS) Cement Factory and Cement Company and sale of its machinery and equipment as scrap iron. He had also not seen any document granting approval for it signed by him either.

The German machinery and equipment carried a 100-year guarantee from the manufacturers. The CID revealed that this stock of iron had been sold to one Shiraz Mohamed and Yusuf Asthan and a retired Army officer named E.M.V. Ekanayake and there is no news of any arrests made so far.

Cement comparable to British standards

The special feature of the old factory was that it used raw material such as gypsum that was produced locally.

In 1950, a record crowd gathered to greet then Prime Minister Dudley Senanayake and Minister of Industries, Industrial Research and Fisheries G. G. Ponnambalam. The ceremonial opening was seen as a great era for Sri Lanka as it was one of the gigantic cement factories in Asia. The giant factory had a diesel station that supplied power to the cement factory was one of the largest in the country. There were 2,300 workers at the factory.

It had six marine 750 horse power diesel engines generating 450 kilowatts (kW) each and two 850 horsepower engines generating 525kw each. The raw limestone was brought in quarry in dumpers. There were huge jaw crushers that crushed the limestone.

There were long hammer mills too. The crushed limestone was mixed with clay. There were long mill silos too that was pumped in with the aid of compressed air that mixed the raw material. In addition, the kiln of the factory was an oil-fired kiln that was cheaper than a coal-powered kiln. The selling of the cement was very much low in price compared to those   were foreign brand.

The grounded cement was sent to the cement mill where it was further crushed into powder and conveyed through the pipe to the cement silos from where it was transferred to the packing plant. From there it was transferred by the railway wagon.

When the LCL was operating they purchased two train engines to transport the cement in bulk. Still, there are railway tracks inside the factory premises. The cement produced then was of the British standard specification. At the time of its closure, the plant’s production capacity was 115,000 tons per annum.

When the production was suspended due to the war in 1990 the factory remained dilapidated over the years. Around 400 workers were given VRS in 2002.

However, the machine parts were stolen from 2010 (after the war ended in 2009) and only in 2015 was it discovered chunks of that massive machinery were removed and sold off as scrap.

Riyaz Salley who was the working director of Sri Lanka Cement Corporation had said that no approval was sought from the legal owners of the factory to remove the machinery.

There was also, a suggestion that the factory should be moved from that place due to environmental hazard when it was operating to the maximum from 1950 without any hassle.

In 2016, then Minister Bathiudeen and Northern MPs have forwarded several proposals on KCF revival. They suggested to the government to import clinker (cement raw material) if feasible, rather than quarrying Kankesanthurai limestone deposits due to possible environmental hazards to Kankesanthurai.

Bathiudeen assured the revived KCF process would be different, and would revive it with environment-friendly latest cement manufacturing technology”.

It was then that Korea’s AFKO Group GMEX had expressed interest in reopening the Kankesanthurai (KKS) cement plant funding USD450 million. 

Existence of limestone deposits in Kankesanthurai for cement production was a major incentive in establishing the factory in KKS. It is reported that the huge limestone deposits exceeding 80 million MT in the area is sufficient for the manufacturing of cement for another 100 years – even if they are extracted at a rate of 3,500 MT a day.

It became a struggle for Lanka Cement Companies’ as they failed to pay the agreed-upon retainers compatible with the workers’ salaries, many Tamil employees fell into debt and tragically, some even took their own lives.

Investigations reveal that this stock of iron had been sold to one Mohamed, Asthan, and Ekanayake and Rs 75 million had been realised as proceeds from the stock sold to Ekanayake.

Brokers were brought to sell off the remaining metal parts of the KKS cement factory – P. Wimalanathan, Officer in Charge of Jaffna Operation for LCL

Officer in charge of Jaffna Operation for LCL P. Wimalanathan is still waiting for his 33-month salary that has not been settled. He is seated in a small room monitoring and maintaining the EPF and ETF of the staff who come to see him. As the premises are under the military, only he has been given a permit to enter the office in the premises.

The LCL plant was four-times larger than the factory that was built in 1950. Wimalanathan said that on 10 April 2021, several officials from Colombo arrived at the KKS cement factory. The LCL new Chair, the Industrial Ministry secretary, and some brokers on the purchasing of the remaining machines at the factory had arrived with the Divisional Secretary of Thellipalai. They were intending to sell those remaining machinery based on the Cabinet approval. I have fought to get my salary first of all and then to restart the operation of the factory.

“I was appointed to clear those who needed EPF and ETF and we have settled workers after giving them only six months’ salary. The LCL appointed me to continue to sort out the EPF and ETF but my salary for 33 months has not been paid. But they have planned to sell the machinery and evacuate me from here.”

He also said that he has informed the brigadier of 515 Brigade about the plight of the workers and the factory. I have no idea of the value of the old factory machinery but the LCL machines can be used for more than 100 years, he added. He also said the office room rental of Rs 1,500 has not been paid for the last 33 months. 

During his recent visit to the factory, Wimalanathan was asked to leave the premises as he did not obtain an MoD permit, he told the Tamil media in Jaffna.

It’s the Govt’s discretion whether to restart production and not by LCL – Mahesh Alahapperuma, Chairman LCL

Chair LCL said LCL has a land of some 100 acres at the KKS. To sell the machines it is the Ministry and the Ceylon Cement Corporation that has a say. They have agreed to sell the parts of the machinery that are now scrap material. 

He also was of the view that machinery that was purchased in 1980s was outdated and could be replaced. He said there are four silos that are good at present

He said the need to sell that machinery was to ‘settle’ their shareholders. 

“Even now, there are investors to run the KKS cement factory but it’s not so easy. However, it’s in the interest of the Cement Corporation and the Ministry that matter”. As a subsidiary company, LCL can hold discussions with the shareholders whether to continue running the factory or else, but the Cement Corporation and the Ministry of Industry under Minister Wimal Weerawansa has to decide it.

“We have closed operations and have settled almost all our workers’ dues,” Alahappperuma added. 

On the probe on the theft of machinery, he said ‘I think the Presidential Commission has closed its investigations as no one was summoned so far. But I must say it is not officially said whether the Presidential Commission on the investigation is over or not.”

He added that the former Chairmen of the cement factory when the production was halted imported cement from Pakistan and repacked and sold at the KKS factory. There is one official who is now working for LCL and he says he is yet to pay his salary. Those are the former Chair’s officers and not appointed by me, he noted. 

There was no tenders called for to sell those machine parts by the LCL but the overall discussion was that since we are not in the share market being a PLC listed company in a meeting it was discussed to settle the shareholders’ payments by selling those remaining machinery as we have a liability.

“There were discussions to restart cement production but it’s a policy-based decision by the Government. I have no say in that.”

By Sulochana Ramiah Mohan | Published: 2:00 AM Apr 17 2021

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