Extend leases now or risk future investments: PA warns govt.

By Nishel Fernando

The Planters’ Association made a strong call to the government to fast-track the extension of Regional Plantation Company (RPC) leases, warning that on going uncertainty could derail billions of rupees in long-term investment in the country’s plantation sector.

PA Chairman Sunil Poholiyadde described the industry as being at a “critical juncture,” noting that the current 53-year leases, signed in 1992, will expire in 2045. 

He said the remaining 20-year window is insufficient to secure investor confidence for projects with long gestation periods.

“The confidence of the investor takes at least 15 years for a return on investment,” Poholiyadde said at the PA’s 171st Annual General Meeting in Colombo on Friday.

“A tea crop has a productive life span of approximately 30 years, and rubber over 40 years. The decision on the extension of leases is essential right now. If you don’t act, investor confidence will be lost.”

Highlighting the performance of RPCs since full privatisation in 1995, Poholiyadde contrasted it with the era of state management. He said plantations recorded losses in 13 of the 20 years prior to 1992, requiring government subsidies equivalent to Rs.44 billion annually in today’s value.

Since privatisation, RPCs have boosted the sector’s financial health. Capital bases rose from Rs.8 billion in 1995 to Rs.113 billion in 2025, with total investments reaching Rs.136 billion—Rs.93 billion for replanting and new planting, Rs.39 billion for factory development, and Rs.4 billion for mechanisation and renewable energy projects.

Market capitalisation of listed RPCs climbed from Rs.2 billion in 1995 to Rs.110 billion today. RPCs have also contributed Rs.13 billion in lease rentals, Rs.6 billion in income tax, and Rs.36 billion in dividends to shareholders.

“The current companies have done a good job and that should be recognised,” Poholiyadde said.

He flagged key challenges including labour shortages, climate change, and the impact of sudden policy decisions. Labour costs have risen faster than tea prices, yet worker numbers continue to decline.

Poholiyadde proposed a shift from daily wages to a productivity-based system to sustain the workforce.

He also went on to highlight the financial impact of abrupt policy bans. The 2021 oil palm cultivation ban forced RPCs to discard 500,000 nursery plants, causing an annual revenue loss of Rs.5.5 billion and a missed opportunity to save US$12.5 million in edible oil imports. He expressed hope the ban would be reversed, citing scientific evidence, and criticised previous bans on glyphosate and restrictions on felling commercial timber.

Looking ahead, Poholiyadde called for modernisation and technological adoption, pointing to Japan’s tea industry, which has increased productivity 300 percent since 1945 through technology, compared with Sri Lanka’s traditional practices.

“We need to be more professional, more practical in approaching decisions,” he said, urging focus on economies of scale, crop diversification into cinnamon, and renewable energy projects.

Poholiyadde concluded that the future of the plantation sector depends on tenure security, calling on the government to provide a clear, immediate pathway for extending RPC leases to safeguard one of Sri Lanka’s most strategic industries.

Meanwhile, addressing plantation leaders at the AGM, Senior Economic Adviser to the President Duminda Hulangamuwa acknowledged the sector’s contribution, noting that it generates over US$1 billion in export revenue and provides employment for 1.5 million people.

However, he highlighted persistent challenges. Overall land under cultivation has declined since 1992, and tea production from RPCs has fallen by 34 percent. He also stressed the sector’s severe labour shortage.

“Labour will not stay at Rs. 1,350, which is US$ 3 a day. Labour will go for jobs and professions that will pay more,” Hulangamuwa said. 

“You have to find some way of replacing labour with machinery, otherwise how are you going to run your business? The industries will have to find solutions.”