Sri Lanka’s bid to transform its mineral wealth into a major source of industrial growth has entered a critical phase, with State-owned Lanka Mineral Sands Ltd. (LMSL) seeking exclusive mining rights over 68 grids along the northeastern coastline. The request has placed a fundamental economic question before policymakers: should the country consolidate control of strategically valuable mineral deposits under a state enterprise, or preserve opportunities for qualified private investors under transparent, competitive rules?
The Parliamentary Sectoral Oversight Committee on Economic Development and International Relations has decided to issue recommendations on granting the requested rights. Chaired by MP Lakmali Hemachandra, the committee also considered operational support for LMSL, reviews of previously issued mining licences, action against irregular allocations and the possible transfer of relevant deposits to the state-owned company.
Information concerning certain recently identified irregularities has reportedly been forwarded to the Criminal Investigation Department (CID). However, the full extent of the alleged irregularities, the identities of those responsible and the potential financial losses have not been established in the information available. These matters require proper investigation rather than assumptions about wrongdoing.
Nevertheless, the developments highlight the importance of ensuring that Sri Lanka’s mineral resources generate maximum public benefit.
Industry assessments presented at a Mineral Sands Technical Conference indicated that the country possesses approximately 604 million tonnes of mineral sands. Yet experts have warned that the resource remains underexplored without a comprehensive islandwide geophysical survey. The International Trade Centre’s Export Potential Map estimates Sri Lanka’s mineral export potential at US$778 million, while a Pathfinder Foundation report suggests that the longer-term opportunity could approach US$2 billion if downstream processing and mineral-based manufacturing are developed.
The Government’s policy, outlined by Industry and Entrepreneurship Development Minister Sunil Handunnetti, seeks to move beyond exporting raw minerals towards establishing Sri Lanka as a competitive mineral-processing hub. In principle, LMSL’s demand for secure access to deposits could support long-term investment, reliable raw-material supplies and greater domestic processing capacity.
However, exclusive allocation also carries significant risks.
If the state-owned enterprise lacks sufficient capital, advanced technology, managerial capacity or access to international markets, concentrating deposits under its control could delay development and leave valuable resources commercially underutilised. Exclusive rights without measurable investment obligations could also prevent capable private operators from developing viable projects.
Conversely, unrestricted private allocation could allow investors to extract valuable minerals and export them with limited domestic processing, reducing the economic benefits retained by Sri Lanka.
The challenge, therefore, is not simply to choose between public and private ownership, but to establish conditions that maximise national returns.
The Chamber of Mineral Exporters has warned that previous allocation exercises disadvantaged companies with established processing facilities and export operations in favour of proposals promising sophisticated manufacturing that subsequently failed to materialise. Such experiences, it argues, have undermined confidence in regulatory decisions.
Australian High Commissioner Matthew Duckworth has similarly emphasised transparent regulation, predictable approvals, consistent policies and strong environmental governance as prerequisites for long-term investment.
The Government should consequently subject the proposed 68-grid allocation to independent geological assessment, transparent valuation, published selection criteria and clear performance targets. Any exclusive rights should be conditional on investment, production, environmental compliance and demonstrable progress towards value addition.
A multi-agency licensing mechanism could strengthen coordination, provided it operates with public accountability and independent oversight.
Ultimately, Sri Lanka’s mineral wealth belongs to the nation. Neither a state enterprise nor a private investor should receive preferential access without delivering measurable economic and environmental benefits. The success of this initiative will depend on whether the Government converts mineral deposits into sustainable industries, export earnings, skilled employment and lasting public revenue.
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