Sri Lanka’s export earnings from spices and essential oils totalled $ 449.9 million in 2025, and the industry has a long-term target to double this figure to $ 1 billion by 2030. While maintaining a global reputation for quality and unique products like Ceylon Cinnamon, the sector also faces several bottlenecks, including land fragmentation, labour shortages, and inconsistent Government policies.

In an interview with The Sunday Morning Business, Spice Council of Sri Lanka Chairman Viraj De Silva explained that achieving the billion-dollar milestone required a cohesive national strategy focused on increasing farmer productivity and improving infrastructure, while also emphasising the need for stable policy frameworks to encourage value-added investments.

Following are excerpts: 

Could you provide an overview of the current status of the spice industry, such as the impact of the ongoing tensions in the Middle East?

The current situation in the Middle East has certainly caused both a direct and indirect impact on the Sri Lankan spice industry. While the cinnamon industry has not been drastically affected, mainly due to consumption of Ceylon Cinnamon in the Middle East being generally low, the demand for other spices such as nutmeg, pepper, and cloves has dropped significantly. 

When the Middle East market closes or demand disappears, it creates a ripple effect on other major importers of Sri Lankan spices, such as India. As their demand drops, our price points fall accordingly. If the current situation continues, we anticipate a decline in prices of pepper, nutmeg, and cloves this year.

Various industry stakeholders have noted that productivity in certain spices, specifically nutmeg and cloves, might be declining. If compared with regional or general productivity of other spice-producing nations, how would you describe Sri Lanka’s standing?

Specifically for cloves, the last couple of seasons have not been favourable at all due to unfavourable weather conditions, leading to a significant drop in production.

With pepper, the season is just beginning. While the industry expects a larger crop than last year, which saw a significant decline, challenges in terms of dollars when it comes to exports are anticipated. 

Approximately 95% of Sri Lankan pepper is exported to India, and currently, demand from both India and the wider global market is lower. Thus, there is certainly a notable impact from the conflict in the Middle East on our spice industry.

Pepper productivity has actually increased over the years, as has cinnamon, and these spices are witnessing growth. Turmeric is also growing, largely due to imports being banned, forcing Sri Lanka to become self-dependent. Turmeric is now produced entirely locally, and most of it is consumed within the country.  We are not, however, seeing any productivity increases or new plantations for nutmeg and cloves. 

Apart from cinnamon, most of our spices are grown in a home garden system. In this setup, a small property, perhaps a two-acre plot, will house a variety of plants, such as nutmeg, cloves, pepper, arecanut, and jackfruit. Farmers do this to ensure they have a product available for harvest throughout the year to maintain a stable income. 

This is where the productivity issue lies. Due to this fragmented system and shocks such as last year’s heavy rains, where trees were washed away or fell, productivity has dropped. We expect it to decline further from current levels in the coming years. For cloves specifically, production has been trending downward for the last two or three years. The industry hasn’t had a truly good season in three years now.

You noted that cloves have struggled. Is the long maturation period for these spices a deterrent to farmers who might otherwise replant?

The concern of the time duration it takes for these trees to mature and provide proper yields remains. There is very little interest from farmers in replanting or regrowing these specific trees. Consequently, we are still relying on old trees and technically exhausting them, and the replanting process for cloves and nutmeg is very slow.

Sri Lanka underwent a significant climate crisis due to Ditwah. How have climate changes impacted spice output over the last few years?

Spice production is cyclical. If there is a bumper crop one year, the yield invariably drops by roughly 50% in the following year. This is what happened with pepper. Last year’s season saw low output, but the year prior saw the highest crop we have ever recorded. 

We expect it to rise again by next year, as a bumper crop usually occurs every three years. Cinnamon is more stable because it isn’t as dependent on weather, flowering, or fruit cycles, and is thus more versatile. Nutmeg has also remained relatively stable. Cloves, however, have been problematic. Production has been very low for three years, and I believe that is climate-related. 

Another issue frequently raised in industry circles is land fragmentation. What other key hurdles impact the industry’s competitiveness, and what measures are required from relevant authorities to effectively address such technical and organic farming issues?

Land fragmentation is a significant issue, especially since families are increasingly depending on smaller lots to survive, and as their cost of living rises, they must maintain high price points to sustain themselves. When these farmgate prices rise, Sri Lanka loses its competitiveness in the world market. 

Solutions to such issues impacting competitiveness, especially regarding spices in high demand, such as cardamom, have not been achieved. 

Sri Lankan cardamom was attacked by a disease called thrips. Due to the lack of solutions, many have simply abandoned cardamom cultivation. There is a substantial demand for Sri Lankan cardamom because it is distinct from Indian or Guatemalan varieties, but we cannot meet it. 

As there are no major cultivations, it is harvested as a forest product, and current regulations prevent individuals from entering forest reserves to harvest it. This is a revenue source that can be easily utilised. These aren’t issues exporters can fix alone, as they require Government policy to help the farmer, the exporter, and the entire value chain.

The industry undergoes several issues with organic products and various spices. Given Sri Lanka’s limited geographical size, it is not possible to compete on volume, and hence, the country must specialise in quality and differentiation. 

Cinnamon has a niche market due to being differentiated. Sri Lanka also had a strong market for pepper as a result of its focus on high-quality organic exports. However, unresolved issues pertaining to certain non-organic compounds have caused important organic export markets, such as Germany, to decline. The Government, along with value chain stakeholders, should follow up on these technical hurdles and push for solutions on an urgent basis.

Since this sector falls under the purview of multiple ministries and departments, what specific policy reforms or Government proposals do you believe are required?

It is essential to address the fundamentals. The farmer should be supported to farm, achieve high yields, and increase productivity. There have been instances of compelling farmers to export directly, which is rather impractical. 

Each node in the value chain, be it the farmer, the middleman, or the exporter, serves a specific purpose. If a single shipment goes wrong, their finances could be heavily impacted. However, exporters are able to take on that risk. Thus, what is essential is effectively addressing hurdles and ensuring the means to improve productivity and yield growth.

For instance, Sri Lanka’s limited and poor storage conditions remain a major bottleneck. One solution would be providing farmer clusters with proper storage facilities, or companies could create community storage hubs that are leased out. These solutions must be operationalised systematically in consultation with all key stakeholders. 

Importantly, promoting products unique to Sri Lanka is also essential. The country requires a targeted policy that identifies where its future lies, promotes those specific areas, and aggressively increases productivity there.

In terms of expanding spice cultivation, are there any regions in Sri Lanka that remain unexplored or hold untapped potential?

Cinnamon cultivation is already expanding beyond its traditional roots. However, nutmeg and cloves are different – their cultivation is geographically restricted to regions like Matale and Kandy due to specific climate requirements. 

While some cloves are grown in the southern belt’s hilly areas, the quality differs – the buds are smaller and generally not as high-grade as those from the Kandy District. Beyond climate, the industry faces a land constraint; with the demand for housing increasing, the land available for spice cultivation is being drastically reduced.

Turning to the labour shortage, it is well known that the cinnamon industry struggles with a lack of peelers. Do other sectors face similar shortfalls and how is this impacting the industry?

The labour shortage is a major hurdle across the board. For cloves, people are required to physically climb the trees to pluck the crop. If the yield is low, it doesn’t make financial sense to pay a high daily wage for someone to climb a tree that might only produce a few kilos, so the crop often goes unharvested. 

Thus, there is a need to find machinery that allows for plucking from the ground. Maintaining estates is also difficult; finding labour for general maintenance or factory work is becoming a significant challenge.

In the cinnamon sector, peeling is the main bottleneck. As we expand production into the North and North Central Provinces, workers need to be trained in those regions. While the Cinnamon Training Academy and the Department of Export Agriculture offer vocational training, the issue goes beyond just technical skill, it is also about quality control. 

Unlike the tea industry, where leaves are sent to a centralised, certified factory, cinnamon is often peeled right in smallholders’ homes. While there is a slight shift where people sell sticks by weight to peeling centres, many of these centres might lack proper certification and quality control. This formalisation of these centres and enforcing standards to solve the labour and quality issues simultaneously are essential steps.

Regarding value addition, how much does the industry depend on imported raw materials for processing, and what are the barriers to moving beyond bulk exports to expand value addition?

Currently, the industry hardly imports. Close to 95% of Sri Lankan spices are exported in bulk, and 90% of expenditure is in local rupees, with only packaging materials being imported. However, increasing the industry’s value-added range will require importing higher-quality packaging and specialised machinery. This is where Government incentivisation is necessary. The spice industry in Sri Lanka is mature, but remains underdeveloped in terms of technology.

Many exporters are held back by thin margins and a tax structure that makes importing modern machinery too expensive. Even a simple step like appealingly packaged ground spices is out of reach for many because of equipment costs. Thus, there is a need for an overall strategy for the entire value chain, not just for the farmer or the exporter.

You’ve pointed to the need for long-term consistency. How does the current policy environment affect investment in R&D and marketing?

The lack of a consistent five-year plan is one of the biggest problems in Sri Lanka, as policies tend to change whenever the government changes. If a business invests in expensive machinery based on a specific incentive and the policy is reversed three years later, that investment becomes a white elephant. This makes Sri Lankan businesses extremely conservative. 

Marketing and R&D are the engines of value addition, but they are high-risk. If the rules change mid-stream, you lose money you can never recover. Innovation cannot be promoted if the regulations change with each new administration.

What are the specific policy interventions needed to improve productivity and stability? Do we need a national spice development plan?

Sri Lanka is certainly in need of a unified policy. The country has unique agricultural problems that require local expertise. We also need aggressive diplomacy. For years, Ceylon Cinnamon was banned in China. The Government successfully got that ban reversed, which was a great step, but it’s incomplete. 

Currently, only quills are approved, and even then, they are banned for retail sale in supermarkets for human consumption. We have taken the first step, but we need to move faster on the secondary steps. If we can remove these bureaucratic and trade barriers, the spice industry could easily become a billion-dollar industry. 

When I became Chairman of the Spice Council, the target was to hit that mark by 2030. Given the current pace of policy movement, I’m concerned it might not be achievable, but I remain hopeful that we can pick up momentum.