Sri Lanka’s Tea economy: issues and strategies

Abstract

While the competitiveness of the Sri Lanka’s tea is declining in the global market, it is very important for Sri Lankan tea to evidently identify the reasons for declining competitiveness and how Sri Lanka can face this challenge fulfilling the demand of global market. The Sri Lankan tea industry has lost its market leadership position in the global market. With declining production, increasing cost of production, low farm productivity and price competition in the international market, Sri Lankan tea industry has lost its competitive advantage. Secondary data and primary data have been used for this study. 53 interviews have been conducted for this study in Sri Lanka and in India. Despite the fact that Sri Lanka is one of the major producers of tea, the local tea industry does not earn enough to be viable. Global consumers are paying more than ten times the price received by the Sri Lankan producers. The value addition is taking place in the consuming countries and the economic benefits of higher price for value added tea products go to the consuming countries. In this context the viability of the Sri Lankan tea industry makes it imperative to adopt production of value-added tea products, promoting local brands in the global market and marketing the products in the international market. The government should also provide further supports to this tea industry to be uplifted in the country.