Prima originally operated as a contract miller when the flourmill was built in 1977 under a Build-Operate-Transfer (BOT) Agreement signed with the Government but the BOT Agreement never restricted or prevented the Government from constructing additional flourmills or any other party from building further flourmills.

Prima's role was to mill the wheat that was bought by the Government. Besides buying the wheat, the Government was entirely responsible for setting the selling price of the flour, and selling and distributing the flour. Hence the Government solely operated the flour business.

Therefore, as Prima was merely a contract miller, and as explained above, additional flourmills were allowed, there was no monopoly conferred on Prima by the Government. In fact, the Government itself operated the entire flour business.

The BOT Agreement was to expire at the end of December 2005.

By 2000, the Government felt that the flour industry had matured and should be totally liberalized. Also the Government did not want to continue to shoulder the burden and responsibility to operate the flour business, and was looking to privatize the business.

However, without first terminating the BOT arrangements, it was not possible for the Government to proceed with their plans. Under BOT, the Government could not relinquish its obligation in providing, selling and distribution of flour, and import of flour was disallowed.

Hence, even though the BOT arrangements would only terminate at the end of 2005, the Government approached Prima in 2000 to broach the termination of the BOT.

Although Prima had stood to lose five years of steady BOT operations, it conceded to the Government's request so that it could proceed with its privatization and liberalization programme.

Therefore after many months of serious discussions with the Government, the operation of Prima's flourmill was converted from BOT to Build-Own-Operate (BOO) with effect from 21 June 2001.

The Government was so happy and proud of its achievement that it called a press conference to announce the terms of the new BOO Agreement that it had signed with Prima.

The newspapers and the media reports published on or around 27 April 2001 stated that the Government was of the view that the new initiatives had far reaching benefits to the Government, its fiscal management, the consumer and the food industry in general. (vide advertisement published on this page)

As can be seen, Prima had been cooperative with the Government, and had even facilitated the Government's liberalization programme by agreeing to terminate the BOT Agreement five years before its expiry date.

Hence it is obvious that Prima was not against or afraid of competition. Prima accepts competition provided that it is fair competition.

All that was asked of the Government was that it ensures that there will be level playing field and no discrimination especially in that no party would be favoured at the expense of the Government. To ensure an orderly market, the Government should have in place anti-dumping or unfair trade practices legislations.

From its pioneering BOT days in 1977 till the present BOO operations, Prima had made many significant socio-economic contributions to the Government and people by its presence and operations in the country.

The country had managed to achieve complete import substitution in wheat flour, thereby saving substantial foreign exchange.

Through Prima's advice in structuring of the BOT arrangements, the Government was able to enjoy the benefits of the various Government to Government aid wheat programmes. These totaled about US$ 1.1 billion during the period 1980 - 2001 from USA, Canada and Australia.

In an extract of the World Bank Report of 1982, the World Bank stated that the commissioning of the Prima mill at Trincomalee contributed to the reduction of the current account deficit in Sri Lanka.

Converting from BOT to BOO also netted the Government significant benefits:

Cash payment of US$ 65 million was made to the Government in June 2001.

The Government was at an advantage to make use of US$ 65 million without itself being burdened with financing the interest and the costs of borrowing which would have been charged by the financial institutions.

The Government was freed from the financial burdens in maintaining stockpiles of wheat grain, wheat flour and other supplies, which amounted at that time to about USD 60 million. Indeed, based on today's wheat prices, this financial burden would exceed USD 120 million.

The Government also freed itself from the risk of any loss arising from terrorists' attacks on the wheat consignments or damage to vessels and cargo during the voyage. It is significant to note Sri Lanka is in the list of countries with on going war and therefore additional war risk premium coverage will be required.

Additionally, Prima now bears all the risk of adverse fluctuations in the exchange rate and price of wheat grain.

The Government was also freed from all commercial disputes with the wheat sellers and shipping disputes with vessel owners.

In terms of the benefit to the consumers in Sri Lanka, with the efficient distribution network established by Prima, fresh wheat flour was available and delivered to consumers' doorsteps. In addition, quality was maintained without deterioration as flour was no longer kept for months in Government's warehouses. Consumers had a choice of some 7 new types of flour as opposed to 3 previously and short-weight and pilferage had totally stopped.

Besides paying USD 65 million upfront to the Government, Prima also invested an additional USD 30 million since 2001 to upgrade and expand its flourmill and logistic infrastructure. This is to enable the milling and distribution operations to be made more efficient and productive to ensure an adequate supply of most competitively priced wheat flour to the people.

With this not only has Prima enabled Sri Lanka to be comfortably self-sufficient in wheat flour, but also for the very first time in Sri Lanka's history, Prima has been able to export wheat flour, in significant quantities. About 20% of Prima's milling capacity can be devoted to exports.

In 2006, export of wheat flour amounted to USD 46 million, and for this year up till now, Prima has exported to the value of USD 35 million. This USD 81 million is indeed a welcome boost to the country's foreign exchange reserve.

To put the size of these maiden exports in perspective, it is interesting to compare it with some of Sri Lanka's established exports. For 2006, Prima's flour exports in value were about 50% of total rubber exports, and about 5% of total tea exports. This is certainly a very good start for Sri Lanka and Prima.