History

Planters' Association of Ceylon - News Item

Excerpts from the speech made by Mr Sunil Poholiyadde, Chairman, Planters' Association of Ceylon, at the 171st PA AGM held on 29th Aug 2025

 

Sri Lanka’s Plantation Sector: From Resilience to Renewal

The Planters’ Association of Ceylon is Sri Lanka’s second-oldest chamber, in continuous operation since 1854. From its beginnings in Kandy, once the heart of the plantation world, it has evolved into the apex body representing 147 members across eight District Associations, including Regional Plantation Companies, private owners and management members. Over more than 170 years, the Association has remained a cornerstone of Sri Lanka’s plantation economy — an industry that continues to shape livelihoods, exports and rural development.

The Legacy of Privatization

The sector’s modern journey began with nationalization in 1976, followed by privatization in the early 1990s. At the time, the industry was in decline. The Treasury was absorbing annual losses of nearly Rs 5 billion — the equivalent of Rs 44 billion today — and debt had reached Rs 7 billion. In 13 out of 20 years under state management, plantations had made losses, while no taxes or levies were paid.

Privatization reversed that trajectory. Since 1995, the sector’s capital base has expanded from Rs 8 billion to Rs 113 billion. Net assets have grown from Rs 5 billion to Rs 97 billion, and market capitalization from Rs 2 billion to almost Rs 110 billion. Cumulative investment has reached Rs 136 billion, with Rs 93 billion channeled into replanting, Rs 39 billion into factory modernization, and Rs 4 billion into mechanization and renewable energy. Beyond shareholder returns of Rs 36 billion in dividends, government revenues have included Rs 13 billion in lease rentals and Rs 6 billion in taxes.

Navigating Policy and Market Realities

Diversification has been a consistent strategy, but often frustrated by policy uncertainty. Oil palm, for example, is not a new post-privatization crop. By 1995, 1,476 hectares were already cultivated in Galle and Matara. Since then, RPCs expanded plantings to 10,580 hectares. Yet the 2021 ban forced companies to discard 500,000 nursery plants, representing a sunk cost of Rs 500 million and foregone revenues of Rs 5.5 billion annually. The shortfall is now met by imports costing the country an estimated Rs 12.5 billion each year.

Commercial timber faces similar restrictions. RPCs manage 15,800 hectares of timber valued at Rs 54 billion, yet harvest bans prevent utilisation. Without structured harvesting and replanting, mature stands risk collapse and land degradation. A rational, monitored policy framework is urgently required.

Labour and wages present another structural challenge. Estate populations continue to rise, but the workforce is shrinking. Today’s daily wage of Rs 1,350, combined with EPF/ETF and other benefits, totals nearly Rs 39,000 a month — above the national minimum. Yet the daily-wage model is unsustainable. Without transitioning to productivity-linked pay, labour shortages will deepen and the industry will struggle to attract talent.

Climate, Competitiveness and the Global Benchmark

Climate change is accelerating the need for evidence-based crop strategies. Increased rainfall is reducing tapping days for rubber, while oil palm thrives in wetter conditions. Tea yields have also been hit by the recent fertiliser bans, which drove output below 300 million kg.

Globally, the message is clear. Japan’s experience after 1945 shows how technology adoption drives competitiveness. In tea, Japanese output has grown 300 per cent, while Sri Lanka’s has risen just 52 per cent. Japan sells high-value teas at around USD 21 per kg; Sri Lanka averages USD 5.5–6. The lesson is unmistakable: value creation comes from technology, quality and branding, not from tradition alone.

The Path Forward

For the sector to deliver its full potential, three enabling conditions are essential. First, recognition of Regional Plantation Companies as strategic agribusiness units. Second, adherence to Lease Clause 4(a), which provides for diversification and reasonable land use. Third, clarity on lease extensions beyond 2045, allowing long-term capital commitments for replanting and factory modernization.

In parallel, structural reforms are needed. Internationally, the minimum efficient scale for plantation operations is around 10,000 hectares. Sri Lanka continues to run many small estates with layered hierarchies that hold back productivity. Consolidation, leaner management, and mechanization must be prioritised.

A Call for Renewal

Despite policy shocks, climate pressures and labour challenges, Sri Lanka’s plantation companies have proven remarkably resilient. Eighty per cent of those privatized three decades ago remain in operation. Through war and pandemic, the industry maintained employment and contributed to national revenues.

That resilience is a platform to build upon. With policy certainty, science-based diversification, productivity-linked pay, and investment in technology, the plantation sector can deliver far more than volume. It can move decisively up the value chain, align with global benchmarks, and secure a sustainable future — not only for companies, but for the hundreds of thousands of Sri Lankans whose livelihoods depend on plantations.