Sri Lanka’s tea industry is enjoying one of its strongest export performances in over a decade, yet beneath the surface, structural weaknesses and policy uncertainty threaten to blunt its momentum.
Customs data analysed by Asia Siyaka Research shows that in the first eight months of 2025, tea exports rose to 174.5 million kilograms, a 7 percent increase compared to the same period in 2024.
Export earnings climbed to Rs. 306 billion (around US$1.2 billion), up from Rs. 288 billion (US$942 million) a year earlier.
This makes the January–August 2025 dollar earnings the highest since 2014, despite total export volumes that year being significantly higher. The free-on-board value per kilogram reached US$5.88, edging past last year’s US$5.80 and well above the 2014 average of US$5.09.
A closer look at the export structure reveals an ongoing shift toward value-added products. Bulk tea accounted for 42 percent of shipments, while packeted tea rose to 45 percent, up from 40 percent a year earlier.
Exports of tea bags remained stable at 10 percent, but volumes increased marginally. High-value categories such as instant tea grew steadily, lifting the overall share of value-added tea exports to 58 percent, compared to 53 percent in 2024.
The global market map for Sri Lankan tea is also shifting. Iraq retained its position as the largest importer with 26 million kilograms, or 15 percent of all shipments, while Russia remained in second place though volumes slipped slightly.
The standout destination this year has been Libya, where exports surged 198 percent to 14.3 million kilograms. Other major destinations included the UAE, Turkey, Iran, Chile, China, Azerbaijan and Saudi Arabia.
Yet industry leaders caution against mistaking this export surge for long-term stability. Producers are under intense pressure from soaring costs.
A government-mandated 70 percent wage hike has raised estate workers’ daily wages to Rs. 1,700, a move that producers warn could increase overall costs by nearly half, undermining competitiveness in global markets.
Fertilizer and fuel costs, coupled with high inflation, have further squeezed margins, leaving both corporate plantations and smallholders vulnerable.
The sector is also grappling with the legacy of erratic government policies. The fertilizer ban imposed in 2021, though later reversed, left lasting damage to yields and confidence.
More recently, planters complain of inconsistent decisions on subsidies, taxation, and mechanization support, with state-owned plantations remaining significantly less productive than their private counterparts.
Climate change has compounded the challenge, with erratic rainfall and prolonged droughts hitting yields and quality. Meanwhile, labor conditions remain under scrutiny.
Academic studies have flagged risks of labor exploitation and weak protections in certain plantations, raising ethical concerns that could jeopardize Sri Lanka’s access to premium international markets.
The government of President Anura Kumara Dissanayake has pledged large-scale support for the industry, including a Rs. 312 billion package aimed at clearing debts and upgrading quality.
While this marks a significant commitment, details of how the funds will be deployed remain vague. More broadly, critics argue that the administration’s tea policy remains reactive, guided by short-term political considerations rather than long-term restructuring.
For now, Sri Lanka’s tea sector stands at a delicate crossroads. The export surge of 2025 provides much-needed revenue and a boost to national morale, but it risks masking the deep fissures in the industry.
Without coherent reforms, sustained investment in technology, and careful balancing of wage demands with global competitiveness, the sector’s current success may prove fleeting. The Ceylon Tea brand may still carry prestige abroad, but at home, the foundations of the industry remain perilously fragile.
