📈 Policy Reforms Crucial for Sri Lanka’s Plantation Sector

• Overall Sector Performance: Sri Lanka's broader agrifood system drives ~1/6 of national output, over 40% of employment, and ~30% of goods exports. However, first 7-month figures for 2026 show tea production down 3% YoY to 152.5M kg (tea export earnings fell from US$ 743M to US$ 701M), while sheet rubber dropped nearly 18% YoY. • Cost & Operational Pressures: Labor makes up ~65% of production costs (recent Rs. 200 wage hike added ~Rs. 6 Bn in costs). Fertilizer prices surged from ~Rs. 100,000 to Rs. 220,000/MT due to Strait of Hormuz disruptions, alongside rising freight, energy costs, and climate challenges. • Key Proposed Reforms: • Lease Extensions: RPCs have only 19 years left on original leases; restoring the remaining 46 years is essential to secure bank financing for long-term replanting and diversification. • Crop Diversification: Expanding high-value alternative crops like coffee, avocado, cinnamon, and oil palm (currently capped at 10,400 ha vs. 20,000 ha target). • Trade Policy & Value Addition: Value-added tea accounts for >50% of export volumes. Proposal to increase the local-content requirement for re-exports from 30% to 50% to support domestic producers. • R&D & Infrastructure: Strengthening tea, rubber, and coconut research institutes to combat climate risks, diseases (e.g., Pesta disease), and meet global testing/residue standards.