Ceylon Tea in decline as replanting slows, bushes age: World Bank

Sri Lanka
By Editor_1
-economynext.com

COLOMBO ‒ Sri Lanka’s most famous export is facing a long-term decline, with tea bush replanting running at just a fraction of the level required to keep estates productive, the World Bank said in its latest Sri Lanka Development Update October 2026, titled ‘From Recovery to Transformation’.

In a special chapter on agribusiness in its October Development Update, the lender noted that tea production has fallen by around 25% since peaking in 2013. The crop still brings in about 1.5 billion US dollars a year, accounting for roughly 9% of national export earnings and supporting some 418,000 smallholders along with an estimated one million livelihoods.

“Tea shows how insufficient reinvestment erodes a competitive position,” the report said.

Replanting covered just 912 hectares in 2022, representing only 17% of the recommended annual replacement rate of 2%. As a result, at least half of smallholder fields have passed their prime productive age, and 20% of tea bushes are now classified as senile or unproductive. High upfront costs and delayed returns continue to discourage growers from renewing their crops.

“Replanting costs about LKR 4.5 million per hectare and earns nothing for at least three years,” the World Bank noted.

For Regional Plantation Companies (RPCs), which manage 26% of the country’s tea land, state leases are set to expire in 2045. With replanting investments carrying an eight to 10-year payback period, justifying these capital outlays becomes harder with each passing year.

Domestic policy has added further pressure on growers. Between 2013 and 2022, farmgate nominal rates of protection averaged around minus 33% for tea—functioning as an effective tax—even while local crops like potatoes and onions enjoyed protection rates above 50 percent.

These structural challenges have eroded Sri Lanka’s global market standing over the past two decades. The country lost its spot as the world’s top tea exporter by volume to Kenya in 2004, and fell behind China in both volume and value in 2015. In July 2026, tea export volumes dropped 17.2% year-on-year.

Despite the headwinds, the island retains a pricing advantage. Value-added, packaged Ceylon Tea commands an average free-on-board (FOB) price 37% higher than bulk auction prices, yet approximately 45 % of exports are still shipped in bulk.

To reverse the slide, the World Bank pointed to specialty and single-origin teas as significant untapped opportunities, while urging authorities to extend plantation company leases beyond 2045 and channel export levies back into dedicated replanting funds.

-economynext.com

Editor_1
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