Sri Lanka’s Plantation Sector Today: Rising Costs, Low Productivity, and a System Under Pressure

For decades, Sri Lanka’s plantation sector survived by relying on tradition, resilience, and sheer hard work. Tea, rubber, coconut, cinnamon, and oil palm continued to generate foreign exchange and rural employment even as productivity stagnated and global competitors moved ahead.

Today, that survival model is under serious strain.

The sector is facing a convergence of pressures: rising wages, labour shortages, climate volatility, ageing plantations, and a cost structure that no longer aligns with global realities. What was once manageable inefficiency is now a structural risk.

This article looks candidly at where the plantation sector stands today, why costs are rising faster than productivity, and why incremental fixes are no longer enough.

The Cost Reality: Wages Are Rising — Productivity Is Not

In 2024, the minimum daily wage for estate workers was set at Rs. 1,350. Current policy discussions and proposals point toward total daily earnings of around Rs. 1,750, combining base wage and attendance-linked incentives.

This increase is morally justified and socially necessary. Plantation work is physically demanding, and decades of under-investment in worker welfare cannot continue.

However, the economic reality is unavoidable:

When wages rise without a corresponding increase in productivity, cost per unit output rises sharply.

Across many estates today:

• Labour accounts for 55–65% of total production cost

• Output per worker has remained largely flat for years

• Cost per unit of output continues to rise

This is not a wage problem. It is a productivity problem.

This divergence did not emerge overnight. It reflects decades of structural choices that prioritised continuity over productivity — while regional peers steadily redesigned their plantation systems.

Low Productivity: The Core Issue We Rarely Confront

Productivity challenges in Sri Lanka’s plantations are structural, not seasonal. Some of the most common contributors include:

1. Ageing Plantations

• Large extents of tea, rubber, and coconut exceed their optimal productive age

• Replanting cycles were postponed repeatedly due to cost, labour concerns, and policy uncertainty

• Yield decline is gradual — and therefore often ignored until it becomes severe

2. Sub-optimal Harvesting Practices

• Harvesting intervals driven by labour availability rather than crop readiness

• Inconsistent gang deployment across fields

• Limited field-level measurement of output vs effort

3. Manual, Delayed Decision-Making

• Paper-based registers still dominate field operations

• Data arrives days or weeks later — after decisions are already made

• Field officers spend more time compiling data than acting on it

4. Labour Utilisation Gaps

• Idle time between tasks

• Over-allocation in some divisions, under-allocation in others

• Skill levels vary widely, with limited feedback loops

Individually, these seem manageable.Together, they create a system where higher wages amplify inefficiency instead of rewarding performance.

A Regional Comparison: Why Others Absorbed Wage Growth Better

Sri Lanka is not alone in facing rising labour costs.The difference lies in how other countries responded.

Malaysia & Indonesia

• Treated plantations as agri-industrial systems, not just farms

• Invested early in:

  • Mechanised field tools

  • Yield forecasting

  • Structured labour productivity metrics

  • Estate-wide planning supported by GIS and analytics

Result:

• Higher output per worker

• Lower cost per tonne despite higher absolute wages

• Ability to absorb wage increases without eroding margins

  
  

Vietnam

• Rebuilt agriculture almost from scratch in the 1990s

• Focused on:

  • Replanting at scale

  • Farmer training

  • Digital advisory services

  • Export-oriented quality benchmarks

Result:

• Rapid productivity growth

• Strong alignment between wages, output, and profitability

Sri Lanka, by contrast, largely tried to protect the existing system instead of transforming it.

The Cultural Barrier: Why Change Is Harder Than It Looks

One of the most underestimated challenges in plantation reform is mindset. Across estates, resistance often appears as:

• “This is how we’ve always done it”

• Fear that measurement equals punishment

• Digital tools seen as extra work, not decision aids

• Disconnect between head-office expectations and field realities

Change threatens comfort, hierarchy, and familiarity. But the truth is uncomfortable:

A system designed for low wages and abundant labour cannot survive in a high-wage, labour-scarce future.

Where RPCs Stand Today

The Regional Plantation Company (RPC) model has achieved stability compared to the state-run era:

• Better financial discipline

• Diversification into cinnamon, timber, fruits, and oil palm

• Sustainability certifications and compliance

• Improved housing, healthcare, and worker services

Yet RPCs now face a new equation:

• Costs are rising faster than prices

• Productivity gains are marginal

• Climate risk is intensifying

• Labour is harder to retain

Survival will no longer come from endurance alone.

A Quiet Inflection Point

Sri Lanka’s plantation sector is approaching a quiet but decisive inflection point.

The choice is not between tradition and technology. It is between managed transformation and gradual decline.

Higher wages demand:

• Better planning

• Better measurement

• Better use of labour

• Better decisions, made faster

Without these, even the most well-intentioned wage increases will become unsustainable — harming workers and companies alike.

The sector does not need slogans. It needs honesty, discipline, and courage to change.