The Planters’ Association of Ceylon urges immediate intervention as Middle Eastern conflicts, soaring production costs, and climate shocks create an unprecedented existential crisis for Sri Lanka’s tea industry.
Sri Lanka’s tea industry, globally renowned for its Pure Ceylon Tea, is standing at a critical crossroads. The Planters’ Association of Ceylon (PA), the apex body representing the island’s plantation sector, has issued a stark warning regarding the industry’s future. Facing a severe combination of global geopolitical instability and mounting domestic financial pressures, the association urgently calls for a comprehensive review and streamlining of the sector’s operational cost structures. The unprecedented crisis unfolding in West Asia and the strategic shipping route of the Strait of Hormuz has cast a dark shadow over the industry. However, external shocks are compounding a series of deeply rooted internal challenges, threatening an agricultural sector that serves as a vital economic lifeline for the nation.
The Middle Eastern Market Shock
The geopolitical volatility in the Middle East represents a direct threat to Sri Lanka’s export revenues. Currently, an estimated 45 per cent of Sri Lanka’s total annual tea exports are shipped to Middle Eastern markets, encompassing key importing nations such as Iran, Iraq, the UAE, and Saudi Arabia. This significant market share translates to approximately $680 million of Sri Lanka’s total $1.5 billion annual tea export revenue. With the Strait of Hormuz acting as a critical artery for shipping, the ongoing conflict threatens to disrupt vital supply lines. The PA notes with concern that this volatility creates a perfect storm of supply and demand constraints. If routes are compromised, the industry faces skyrocketing freight charges, insurance premiums, and severe logistical bottlenecks. These external pressures pose an existential threat to Regional Plantation Companies (RPCs) and smallholder farmers alike.
The Burden of Soaring Production Costs
While international markets falter, domestic financial pressures are squeezing the profit margins of plantation operators. According to the PA, the sheer cost of production (COP) has reached unsustainable heights. The most pressing financial burden is labour, with worker wages currently accounting for a staggering 70 per cent of the total COP in the tea and rubber sectors. In addition to labour, the industry is grappling with escalating costs of input materials. Prices of fuel, fertilizers, agricultural chemicals, firewood, packaging materials, and physical goods have surged over recent years. This relentless inflation in input costs leaves producers struggling to maintain operational efficiency. The disparity between high production costs and relatively low rates of agricultural productivity creates a structurally fragile financial model that leaves little room to absorb economic shocks.
A History of Wage Disputes and Government Intervention
Labour compensation has long been a contentious topic within the Sri Lankan plantation sector. Following the privatisation of estates in 1992, wages were determined through collective bargaining between RPCs, trade unions, and the Employees Federation of Ceylon. This process collapsed in 2021 when trade unions unilaterally withdrew from negotiations. They successfully lobbied the government to invoke the Wages Board Ordinance, mandating a daily wage of Rs. 1,000 from 2021 to 2023, and Rs. 1,350 in September 2024. Most recently, a new wage hike took effect on January 1, 2026, pushing daily wages to Rs. 1,750 – a net gain of Rs. 400 for workers. In a historic first, the government intervened directly to partially subsidize this increase, contributing Rs. 200 per worker per day. While the industry supports living wages, it continuously advocates for financially sustainable mechanisms tied to productivity.
A Decade of Unrelenting Crises
The current predicament is the culmination of a decade marred by continuous systemic shocks. The plantation industry has barely recovered from one crisis before being thrust into another. The sector’s resilience was severely tested by ad hoc government policy decisions regarding the importation of chemical fertilizers, agri-chemicals, and crop diversification initiatives, which severely reduced crop yields. Following this, the industry faced the global disruption of the COVID-19 pandemic and its lockdowns, drastically hampering processing operations. This was closely followed by the devastating economic crisis Sri Lanka faced in 2022, which saw crippling fuel shortages and hyperinflation. Most recently, the agricultural sector was battered by the severe weather impacts of Cyclone Ditwah. Each event has systematically eroded the financial reserves and operational capacity of plantations.
A Call for Strategic and Coordinated Action
As these immense pressures converge, the planters’ association asserts that the entire sector is experiencing an unprecedented level of strain. Even if geopolitical conflicts in the Gulf Region de-escalate immediately, secondary effects on global supply chains – particularly the availability of essential fertilizers – remain a massive concern. The disruption of global fertilizer production threatens the industry’s ambitious target of producing 300 million kilograms of tea in 2026.
Recognising the gravity of the situation, the planters’ association urgently calls for coordinated, pre-emptive action. Priority measures include securing emergency fertilizer stocks, establishing robust working capital support mechanisms for smallholder farmers, and developing strategic plans for the management of unsold tea stocks. Furthermore, there is a desperate need for an accelerated national effort to diversify export markets, ensuring that Ceylon Tea can command the higher margins necessary to sustain this historically significant industry.
