Govt. Allocates Rs. 2.5 Bn Extra Fertilizer Subsidy for Tea Sector Amid Gulf Tensions 📈

• Overall Emergency Support: The Government approved a second, emergency round of fertilizer subsidies worth Rs. 2.5 Bn for tea smallholders. This adds to the existing annual Rs. 2.0 Bn allocation (Rs. 4,000 per grower), providing an extra Rs. 5,000 per grower to counter rising production, energy, and fertilizer costs. • 1Q 2026 Setbacks: Hit by adverse weather and Middle East instability, 1Q 2026 tea production fell by 2.55 Mn/Kgs to 59.61 Mn/Kgs (vs 62.16 Mn/Kgs in 2025). Export volumes dropped by 2.85 Mn/Kgs to 60.36 Mn/Kgs. • Export Earnings: 1Q tea export earnings fell 5.22% YoY to US$ 351.58 Mn. March revenue dropped 17.34% YoY to US$ 114.57 Mn (down from US$ 138.83 Mn). However, rupee earnings held stable at Rs. 109.09 Bn (vs Rs. 109.90 Bn in 2025), supported by higher average FOB prices at Rs. 1,807.27/Kg. • Market Vulnerabilities: The Middle East (Iran, Iraq, UAE, Saudi Arabia) accounts for ~45% of annual tea exports, representing US$ 680 Mn of the sector's total US$ 1.5 Bn revenue. • Price and Auction Recovery: Colombo Tea Auction prices recovered sharply last week to Rs. 2,220/Kg from Rs. 1,135.59/Kg two weeks prior. Excess crop volumes improved from over 16% to near 10%. The National Sale Average for 1Q stood at Rs. 1,153.25/Kg. • Strategic Outlook: The Ministry is addressing delayed SVAT refunds with the Finance Ministry and maintains a 2030 target of reaching US$ 2.5 Bn in export earnings and 400 Mn/Kgs in annual production.