Business
New IPS publication, ‘Palm Oil Industry in Sri Lanka: An Economic Analysis’
Q&A Explainer with Author
Featuring:Dr Erandathie Pathiraja
Research Fellow – Institute of Policy Studies of Sri Lanka
- The palm oil industry in Sri Lanka saves USD 17 million annually in foreign exchange and contributes to the economy through employment and capital investments.
- Oil palm cultivation was allowed initially to reduce reliance on imported palm oil, but concerns over environmental and health impacts led to a decision to phase out cultivation within ten years.
- Environmental concerns associated with oil palm cultivation involve deforestation and water degradation and health risks from edible oil consumption include concerns on cardiovascular diseases.
- While the evidence remains inconclusive, there is clearly a need for robust and unbiased technical analysis on this hotly disputed issue.
Dr Erandathie Pathiraja, Research Fellow at the Institute of Policy Studies of Sri Lanka (IPS), provides valuable insights into the recently published IPS study, ‘Palm Oil Industry in Sri Lanka: An Economic Analysis’. The study authored by Dr. Erandathie Pathiraja, Ruwan Samaraweera, Hiruni Fernando, and Jaan Bogodage, offers a comprehensive analysis of the economic and environmental impacts of the palm oil industry in Sri Lanka.
In the following Q&A session, Dr Pathiraja shares her perspectives on the reasons behind the ban on oil palm cultivation, the potential impact on the economy and environment, the industry’s economic contributions, environmental concerns and their mitigation, health issues related to edible oil consumption, and alternative solutions to meet the local edible oil demand.
Q: In light of the recent ban on oil palm cultivation in Sri Lanka, there has been much debate surrounding the decision. Could you share your insights on the reasons behind the ban and its potential impact on the economy and environment?
The palm oil industry in Sri Lanka has been an import substitution policy initiative aimed at reducing palm oil imports and boosting the economy. The 2021 ban on oil palm cultivation in Sri Lanka was primarily driven by concerns over its long-term environmental impact, owing to “soil erosion, drying of springs thus, affecting biodiversity and life of the community”. The policy further directs systematically removing the existing plantations and nurseries at an annual rate of 10% and replacing these with rubber or any other cultivation favourable for water resources.
The ban aims to shift the country towards more sustainable agricultural practices and protect Sri Lanka’s natural resources. In addition, by diversifying agricultural production, Sri Lanka aims to reduce its dependence on palm oil imports and strengthen domestic industries.
The ban on oil palm cultivation has generated mixed opinions and sparked debates. Some argue it could negatively affect the economy, as palm oil contributes to Sri Lanka’s edible oil requirements. The ban may increase reliance on imports, potentially impacting the country’s trade balance and food security. Furthermore, the ban has raised concerns among the Regional Plantation Companies (PRCs), who have already invested in cultivation and processing. Against such a backdrop, our study aims to revisit the reasons for the ban on oil palm cultivation and arguments against the ban focusing on economic, environmental, health and social factors.
Q: The study reveals that the palm oil industry in Sri Lanka contributes significantly to the economy. Could you shed some light on the economic aspects highlighted in the study and the potential benefits to the country?
Certainly, the study demonstrates that the palm oil industry in Sri Lanka currently saves approximately USD 17 million annually in foreign exchange outflows and meets around 6% of the domestic edible oil demand. Moreover, it generates employment for over 33,000 individuals and attracts a capital investment of LKR 23 billion. These numbers illustrate the industry’s positive economic impact, but we must also consider the long-term sustainability and environmental impacts.
Q: Environmental concerns surrounding oil palm cultivation have been a major point of contention. What are some of the specific environmental issues associated with the industry, and how can they be addressed?
Oil Palm cultivation has faced criticism globally due to its environmental impacts primarily linked to deforestation. Some of the specific criticisms include groundwater depletion, water quality degradation, regeneration, siltation, floods, landslides, and palm oil mill effluent handling. These issues directly affect the surrounding communities and ecosystems.
In Sri Lanka, RPCs were allowed to cultivate oil palms in marginal rubber lands. Therefore, deforestation is not relevant unless rubber is considered a forest tree. Environmental issues are common to any agricultural land use and are observed in oil palm cultivation. However, the degree of impact varies depending on factors such as high input consumption (due to high oil productivity), vertical and horizontal root systems, and management practices. Global literature on these studies remains inconclusive due to their context-specific nature and lobby group research. Therefore, conducting further investigations and closely monitoring these issues within the local context is crucial to make informed decisions.
Implementing sustainable management practices, periodic monitoring, and potentially financing the environmental costs through mechanisms like import Cess or domestic levy can mitigate the negative externalities. However, monitoring smallholder cultivations would be challenging in the absence of policy provisions. Balancing economic benefits with environmental sustainability is key to a responsible palm oil industry.
Q: The study also mentions health concerns related to edible oil consumption. Could you elaborate on these concerns and propose possible solutions to address them effectively?
The study highlights that local edible oil consumption in Sri Lanka poses serious health risks due to improper processing, storage, and potential adulteration with repeatedly used oils. Therefore, addressing these issues at the forefront is crucial to overcome these hazards. This can be achieved by enforcing proper quality checks during importation and local edible oil production, ensuring adherence to processing and storage regulations, and avoiding repeatedly used oils. Additionally, it is equally important to raise public awareness about these aspects. By prioritising these measures, we can mitigate the health hazards associated with edible oil consumption and ensure public safety.
Q: Given the ban on oil palm cultivation, what alternatives exist to meet the local edible oil demand in Sri Lanka?
Meeting the local edible oil demand in Sri Lanka is indeed a challenge without imports. Nearly 74% of the demand is met through imports. Local palm oil supplies 6% and the rest is through local coconut oil, which varies with annual coconut production. While coconut oil is often considered a substitute, the current coconut production capacity is inadequate and does not remain a perfect substitute for industrial needs owing to different properties and prices. Given the limited land availability for expanding commercial cultivations in Sri Lanka for coconut and oil palm, productivity improvements would support partially bridging the gap. This can be facilitated by lowering the import tariff on edible oils, easing the burden on consumers. Adopting modern and safe oil production technologies such as virgin coconut oil and promoting high value-added products such as lauric acid for the export market are crucial to mitigate the impact on the coconut oil industry. Considering the economic crisis and foreign exchange deficit, a comprehensive evaluation of feasible alternatives is necessary.
Erandathie Pathiraja is a Research Economist at the Institute of Policy Studies of Sri Lanka (IPS) with research interests in the analysis of industries and markets, competitiveness and SMEs. She holds a BSc in Agriculture from the University of Peradeniya, an MPhil in Agricultural Economics from the Postgraduate Institute of Agriculture, and a PhD in Agricultural Economics from The University of Melbourne, Australia. (Talk with Erandathie – erandathie@ips.lk)
Business
Beyond arrivals: Can tourism and hospitality power Sri Lanka’s next growth phase?
The Australian High Commission in Sri Lanka recently hosted the latest edition of its ConnectED Thought Leadership Series at the Australian High Commissioner’s Residence in Colombo, bringing together senior leaders from Sri Lanka’s tourism, hospitality, travel, events, education and related sectors.
The discussion, themed “Beyond Arrivals: Can Tourism and Hospitality Power Sri Lanka’s Next Growth Phase?”, focused on the role of tourism and hospitality beyond visitor arrival numbers, examining how the sector could contribute to Sri Lanka’s broader economic development.
The distinguished panel comprised Shiromal Cooray, Chairman and Managing Director of Jetwing Travels; Angeline Ondaatje, Chairperson of Tangerine Beach Hotels PLC, Royal Palms Beach Hotels PLC and Tangerine Tours; and Grant Dreher, Chief Executive Officer of William Angliss Institute Australia.
The discussion was moderated by Wayne Crosbie, Director – International and Business Development, William Angliss Institute Australia, who facilitated the conversation around the evolving needs of the tourism and hospitality industry and the importance of connecting education, skills development and workforce readiness with industry demand.
Adding a practical and experiential dimension to the evening, students from the Colombo Academy of Hospitality Management (CAHM) played an active role in delivering the cocktail reception for the distinguished guests.
Business
SL’s ‘Global Destination Marketing and Communication Campaign’ gets into top gear
A high-level discussion on the implementation of Sri Lanka’s Global Destination Marketing and Communication Campaign, supported by the World Bank, was held at the Ministry of Foreign Affairs, Foreign Employment and Tourism. The initiative marks a significant step towards strengthening Sri Lanka’s position as a competitive and attractive destination in the global tourism marketplace.
The meeting focused on the importance of adopting a long-term, data-driven approach to destination marketing, underpinned by comprehensive analysis of tourism demand and supply trends, visitor behaviour, destination branding, and international marketing strategies. Discussions also highlighted the need for a transparent procurement process and institutional capacity-building to ensure the successful implementation and sustainability of the campaign.
Participants welcomed the technical expertise and strategic guidance to be provided by MTI Consulting and Skift Inc./JD, whose support will contribute to the development and execution of a globally competitive destination marketing programme. Through strong collaboration between public and private sector stakeholders, the initiative seeks to establish a sustainable roadmap to guide Sri Lanka’s tourism promotion efforts and enhance the industry’s competitiveness in key international markets.
The campaign is expected to play a vital role in strengthening Sri Lanka’s tourism sector, supporting increased visitor arrivals, generating economic opportunities, and contributing to broader national economic growth.
The discussion was attended by Aruni Ranaraja, Secretary to the Ministry of Foreign Affairs, Foreign Employment and Tourism; Chairpersons and Chairmen of tourism institutions under the Ministry; representatives of SLAITO, TAASL, the Tourism Advisory Committee, the World Bank, MTI Consulting, and Skift Inc./JD; as well as H.P. Somathilaka, Director General of National Planning.
Business
Labour shortages are pushing Plantation Companies towards machines, data and a different kind of worker
Sri Lanka’s plantation sector is entering a new phase of transformation, as technology and innovation reshape how estates operate, manage resources and sustain productivity. Across the country’s tea estates and other plantations, machines are increasingly complementing skilled workers in tasks once done almost entirely by hand, while software and data bring new precision to decisions traditionally guided by experience.
Automated harvesters, pruning machines and drones are being deployed alongside GIS mapping, digital weighing systems and enterprise software. Though the technologies vary, they point to a common shift: plantations are finding smarter ways to meet rising demands with a changing workforce.
Mechanisation, however, is not without challenges. Sloping terrain, fragmented fields and crop variability limit where machinery can be effectively deployed. Still, as operating costs rise and labour availability tightens, the ability to combine human expertise with technology is becoming essential to sustaining productivity, competitiveness and the long-term viability of the industry.
Addressing the labour shortage
Sri Lanka’s plantation companies face a labour market that has changed from the one on which the industry was built. Migration, demographic changes and attraction from other sectors have made it increasingly difficult to retain workers for plantation work.
That is why mechanization is spreading beyond the most obvious applications. At Bogawantalawa Tea Estates PLC, machinery is being used for land preparation, pruning, weeding, harvesting, and agrochemical application. Selective machine harvesting and mechanical pruning have been introduced in tea, while mechanized and semi-mechanized methods are being extended to other crops.
Agarapatana Plantations PLC has taken a similar approach. Fuel-powered and battery-operated harvesters are being used in the field, while backhoes assist with uprooting and levelling new clearings. Drones are being deployed for foliar spraying. In factories, automation and energy efficient machineries are being introduced where production volumes justify the investment.
The changing face of plantation technology
Beyond mechanisation, plantations are steadily evolving into data-driven businesses, with RPC’s increasingly adopting technologies that are reshaping day-to-day operations. Agarapatana Plantations is rolling out automated green-leaf weighing systems with facial recognition and planning fertigation-based irrigation. Ten factories already operate on solar power, with six of them being carbon neutral.
Likewise, Elpitiya Plantations PLC has introduced Ballotronix tea-leaf readers to assess leaf composition, supported by iHarvest and Microsoft Dynamics 365 Business Central, giving managers real-time visibility across thousands of hectares.
Talawakelle Tea Estates PLC has similarly pursued transformation since 1992, introducing hot-water boilers across all factories from 2008, electronic weighing with real time data collection since 2015, as well as tablets, computers and a new payroll system for employees. Rooftop solar along with three in-house hydro power plants located in Palmerston, Radella and Somerset estates provide renewable energy. State of the art, modern colour separators have been provided to its Low Grown factories. Since 2025, drones are been used for chemical/ foliar spraying. These developments highlight how the plantation sector has steadily embraced technology for greater efficiency and sustainability.
The technological shift does not stop at the edge of the field as factories are becoming increasingly automated, giving special emphasis to energy efficient equipment. At Elpitiya, more than 80% of their factories are mechanized with state of the art machineries, with the intention to raise both capacity and efficiency.
On the other hand, Malwatte Valley Plantations PLC illustrates another possibility. After expanding its cinnamon cultivation, the company encountered a shortage of skilled peelers. Its engineers responded by developing and patenting cinnamon-peeling machinery.
That is more than a labour-saving exercise. It shows how a constraint can encourage technological innovation- and potentially allow an industry to expand beyond the limits imposed by the supply of specialised labour.
The company is also investing in automated factory systems and machinery for “matcha” production. Technology, in this case, is being used not merely to reduce costs but to strengthen value addition to products.
Machines will not make workers obsolete
Workers are being trained to use harvesters, pruning equipment and spraying machinery, while new roles are emerging around upkeep, data collection and digital reporting.
Horana Plantations PLC, for instance, has introduced machine plucking to address labour shortages. The company reports improvement in yields, consistency and labour productivity, while technology-driven harvesting has also been used to make plantation work more attractive to younger workers.
“Technology has become a prerequisite requirement for the plantation sector as we deal with labour shortages and the need to improve productivity,” Secretary General of the Planters’ Association of Ceylon, Lalith Obeyesekere stated. He noted that priority should be given to technologies suited to Sri Lankan conditions, supported by training and enabling workers to use them effectively. “That is a more useful way of thinking about mechanisation than simply counting the jobs a machine might replace”, Obeyesekere went on to note. He is confident that these changes will raise the productivity and profitability in the sector.
The next harvest
The direction of travel is becoming clearer. Precision agriculture, digital crop forecasting, automated weather monitoring, smart irrigation, digital traceability and further mechanisation are likely to become more common.
That does not mean the end of the plantation worker, nor the disappearance of generations of agricultural knowledge. It means that both will increasingly operate alongside technology.
For an industry whose competitiveness has long depended on its ability to extract value from land and labour, the new imperative is simpler: create more avenues, waste less and make each worker- and each hectare- more productive.
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