Planters seek urgent response to stabilise tea production, key export markets

The Planters’ Association of Ceylon (PA), the apex body of Sri Lanka’s Plantation industry, yesterday called for an urgent review and streamlining of the industry’s cost structures in light of the unprecedented crisis in West Asia and the Strait of Hormuz. 

In a statement the PA said that currently, approximately 45% of Sri Lanka’s total annual tea exports – equivalent to approximately $ 680 million of Sri Lanka’s total $ 1.5 billion tea export revenue is generated from Middle Eastern markets across Iran, Iraq, UAE, and Saudi Arabia. 

Given the critical nature of these markets for Pure Ceylon Tea, the PA noted with concern that the combination of supply and demand side constraints emerging since the start of the year are creating unprecedented and existential challenges for the entire plantation industry – spanning Regional Plantation Companies (RPCs) and smallholders across tea and rubber. 

Wages account for nearly 70% of the total Cost of Production (COP) in tea and rubber. Input material costs such as fuel, fertiliser, chemicals, firewood, packing materials and other physical goods account for the rest of the COP. Until the most recent wage hike which came into effect from 1 January 2026, plantation sector wages had been a perennially contentious challenge for the industry. 

While RPCs had always agreed in principle with the need to increase worker wages, the industry had consistently called for financially sustainable mechanisms for implementing wage hikes, in light of the significantly higher costs of production, and lower rates of productivity prevalent across Sri Lanka’s plantation industry. 

Following the end of the era of nationalised management, and privatisation in 1992, plantation sector wages were set in accordance with a collective bargaining agreement between RPCs, trade unions, and the Employees Federation of Ceylon. 

In 2021, trade unions unilaterally withdrew from this process and successfully lobbied the Government to utilise the Wages Board Ordinance to mandate a daily wage of Rs. 1,000 in 2021-2023, and again up to Rs. 1,350 in September 2024. 

In a historic first, the current Government intervened to partially subsidise the most recent wage hike following a series of consultations with the Regional Plantation Companies, the Corporate Producer Sector of the Industry. 

The workers record a clear net gain, with daily wages rising by Rs. 400 to Rs. 1,750.00 from 1 January 2026 which includes a Government contribution of Rs. 200 per worker per day with the RPC’s accounting for the rest. 

Over the past decade, the Sri Lankan plantation industry has endured various crisis situations. These were caused by ad hoc decisions of previous governments on fertiliser, agri-chemicals and crop diversification. They were followed by disruptions arising out of the COVID lockdowns, 2022 economic crisis, and most recently, Cyclone Ditwah. Each of these events has already taken a significant toll on Sri Lankan plantations. 

“Combined with continuous increases to the cost of production, and within it the cost of wages, the entire plantation sector is experiencing unprecedented strain. It appears likely that all of the previous constraints we faced may hit Sri Lanka simultaneously even if the ongoing conflict in the Gulf Region were to de-escalate immediately,” the PA said. 

Uncertainty around the availability of fertiliser looms, raising further questions about the sector’s ability to meet its target of producing 300 million kilograms of tea in 2026. With the current conflict threatening supply lines for a significant share of global fertiliser production, pre-emptive action on input security is essential in securing the 2026 and 2027 production targets. 

In light of these converging pressures, the PA calls for coordinated action across several priority areas including but not limited to emergency measures to secure fertiliser stocks, establishment of working capital support – particularly for smallholders, strategic management and storage of unsold stocks and an accelerated effort to diversify markets where Ceylon Tea’s premium positioning can command higher margins.