Sri Lanka, home to some of the world’s highest-quality vein graphite, is once again at a crossroads in revitalising its graphite industry.
The government’s recent decision to seek investors to develop the Kahatagaha mine under a public-private partnership marks a significant policy shift.
Minister Nalinda Jayatissa confirmed that the state will retain ownership while private partners will be invited to invest in exploration, processing, and value addition.
The move is seen as an attempt to inject capital and modern technology into an industry that has underperformed in recent years.
Kahatagaha Graphite Lanka Limited, the state-owned operator of the 102-acre mine, remains one of Sri Lanka’s oldest industrial assets.
It produces graphite primarily for export markets, but officials admit that outdated exploration technology has hindered accurate reserve assessment and large-scale commercial development.
The government hopes fresh investment will help unlock deeper veins, improve processing, and diversify into high-value graphite products essential for global electric vehicle batteries, renewable energy storage, and electronic components.
Despite the strategic importance of graphite globally, Sri Lanka’s export earnings from the mineral remain modest. According to trade data, graphite exports generated around US$13 million in 2024, a figure largely unchanged from the past three years.
By mid-September 2025, export earnings are estimated at just under US$10 million, raising doubts about whether the country can break past the stagnation seen since 2020.
This is particularly concerning as global demand for battery-grade graphite has surged, with major producers like China and Mozambique capturing larger market shares.
Industry insiders point to several systemic challenges. First, the sector lacks a clear national strategy for value addition. Most exports are in raw or semi-processed form, depriving the country of higher margins available from refined graphite or spherical graphite used in lithium-ion batteries.
Second, the licensing system has been criticised as opaque and prone to malpractice. Several small-scale operators have allegedly exploited loopholes to secure export permits without proper investment in processing facilities, contributing to inefficiencies and underreporting of revenue.
Experts argue that Sri Lanka risks being left behind unless urgent reforms are introduced. A stronger regulatory framework, greater transparency in issuing exploration and export licenses, and incentives for downstream processing could help attract serious investors.
The government’s pledge to protect existing jobs at Kahatagaha is politically important, but analysts stress that modernisation must not be delayed by bureaucratic caution.
Comparisons with past performance underscore the missed opportunities. In the late 1970s, graphite exports brought in more than US$25 million annually, even without today’s advanced industrial demand. Adjusted for inflation, current export earnings reflect a steep decline in global competitiveness.
For Sri Lanka, the choice is clear: either continue exporting raw graphite with limited gains or move decisively toward value addition and industrial partnerships. If the Kahatagaha experiment succeeds, it could set the tone for broader reforms.
But without a crackdown on malpractice and a transparent investment regime, the industry risks repeating decades of stagnation, missing the graphite boom now reshaping global supply chains.
