Planters seek urgent response to stabilise tea production as Sri Lanka’s plantation sector faces mounting pressure from global disruptions, rising costs, and uncertainty across key export markets, particularly in the Middle East.
Planters seek urgent response to stabilise tea production amid export risks
The Planters’ Association of Ceylon has called for immediate policy intervention to review and streamline cost structures within the industry, warning that escalating geopolitical tensions in West Asia and the Strait of Hormuz are compounding an already fragile operating environment. The association stressed that the situation presents a serious threat to the sustainability of tea production and export performance.
Middle Eastern markets remain critical for Sri Lanka’s tea exports. Approximately 45% of annual tea export earnings—valued at around $680 million out of a total $1.5 billion—are generated from countries such as Iran, Iraq, the UAE, and Saudi Arabia. The heavy reliance on these destinations has heightened vulnerability, particularly as supply chain disruptions and demand-side uncertainties intensify.
Industry stakeholders note that both supply and demand pressures have escalated since the beginning of the year. These challenges are affecting not only large-scale Regional Plantation Companies (RPCs) but also thousands of smallholders who form the backbone of Sri Lanka’s plantation economy. The strain is being felt across tea and rubber sectors, reflecting systemic vulnerabilities.
Cost structures remain a central concern. Wages account for nearly 70% of the total cost of production, while input costs—including fuel, fertiliser, chemicals, and packaging materials—make up the remainder. The recent wage increase implemented from January 1, 2026, has further elevated production costs, intensifying pressure on already thin margins.
While the plantation sector has historically supported wage increases in principle, industry representatives argue that such adjustments must be aligned with productivity improvements and financial sustainability. Persistent inefficiencies and relatively low productivity levels in Sri Lanka’s plantation sector continue to challenge competitiveness in global markets.
The evolution of wage-setting mechanisms has also contributed to current complexities. Following the privatisation of plantation management in 1992, wages were determined through collective bargaining between RPCs, trade unions, and the Employees Federation of Ceylon. However, this framework shifted in recent years, with trade unions withdrawing and advocating for state-mandated wage increases.
Government intervention has since played a more prominent role. Wage hikes to Rs. 1,000 during 2021–2023 and Rs. 1,350 in 2024 were implemented through regulatory measures. Most recently, the Government introduced a partial subsidy to support the latest wage increase, raising daily earnings to Rs. 1,750, including a Rs. 200 contribution per worker per day. While this has improved worker incomes, it has also added complexity to industry cost dynamics.
The plantation sector’s current challenges are compounded by a series of external shocks experienced over the past decade. Policy inconsistencies related to fertiliser and agrochemicals, disruptions from the COVID-19 pandemic, the 2022 economic crisis, and the impact of Cyclone Ditwah have collectively weakened operational resilience. These cumulative pressures have left the sector highly exposed to new global risks.
Against this backdrop, Planters seek urgent response to stabilise tea production as concerns grow over the availability of critical inputs, particularly fertiliser. The ongoing conflict in the Gulf region threatens global supply chains for fertiliser production, raising doubts about Sri Lanka’s ability to meet its target of producing 300 million kilograms of tea in 2026. Without timely intervention, production shortfalls could further undermine export revenues.
The industry has emphasised the need for pre-emptive action to secure input supplies and stabilise operations. Key proposals include emergency measures to ensure fertiliser availability, enhanced working capital support—especially for smallholders—and improved mechanisms for managing unsold tea stocks. These measures are viewed as essential to maintaining continuity in production and safeguarding livelihoods.
Market diversification has also emerged as a strategic priority. While traditional Middle Eastern markets remain important, there is growing recognition of the need to expand into new regions where Ceylon Tea can command premium pricing. Strengthening brand positioning and accessing higher-value markets could help offset margin pressures and reduce dependence on a limited set of export destinations.
At a broader level, the crisis underscores the structural challenges facing the Sri Lanka plantation sector. Balancing wage growth, cost efficiency, and productivity improvements will be critical in ensuring long-term sustainability. Industry stakeholders argue that coordinated action between the Government, private sector, and labour representatives is necessary to navigate the current crisis effectively.
In this context, Planters seek urgent response to stabilise tea production not merely as a short-term measure, but as part of a broader strategy to reinforce the resilience of one of Sri Lanka’s most vital export industries. The trajectory of the sector in the coming months will depend largely on the speed and effectiveness of policy responses to these converging risks.