Sri Lanka’s new National Mineral Policy – after 27 years since its predecessor policy – has officially come into effect after being approved by the Cabinet, Minister of Industry and Entrepreneurship Development Sunil Handunnetti said on 11 June, addressing a press conference.
The new policy is the long awaited national framework for managing and regulating the country’s mineral wealth that remains largely untapped. Sri Lanka’s mineral resources were previously shaped by the Mines and Mineral Act No.33 of 1992, National Mineral Policy of 1999, and National Environmental Policy of 2003.
While this is not the first national mineral policy for Sri Lanka, the fact that it comes 27 years after its predecessor in 1999 underlines why a new and updated policy was an urgent need, especially in the context of contemporary realities of the global mineral industry and Sri Lanka’s own challenges in navigating it.
Sri Lanka is the exclusive global exporter of exceptionally high-grade graphite, called vein graphite, notably found in the Kahatagaha mine, while high-grade phosphate is extracted at the Eppawala mine. Moreover, Sri Lanka’s northeast and northwest coasts are rich in heavy mineral sands containing minerals such as rutile, ilmenite, monazite, and zircon.
In addition to coastal and inland mining, Sri Lanka is also eyeing deep-sea mining along its extended continental shelf for known cobalt reserves.
Despite such promising mineral resources, the country’s progress in the industry has been slow. Historically, Sri Lanka has been confined to exporting raw minerals, depriving the country of a significant export revenue. Lack of capital, technical expertise, and advanced research and development capacities have further constrained Sri Lanka’s mineral ambitions so far.
The new policy aims to address these structural gaps and ensure that the country’s mineral wealth is sustainably sourced and undergoes domestic value addition before it leaves its shores.
Key takeaways
Although not explicitly defined, the 2026 National Mineral Policy stresses the ‘intrinsic quality’ of local minerals, referring to their true worth after value addition, thereby placing greater emphasis on domestic value addition.
The policy has been built on seven principles and corresponding goals that include the State’s role, socio-economic and environmental concerns, domestic value addition, sustainable mining, research and development, governance framework, and land management.
One of the most salient features of the new policy is the creation of a national inventory of mineral resources that informs and updates the State on the potential of the mineral resources both onshore and within Sri Lanka’s maritime jurisdiction. The inventory will include data gathered by both public and private entities and will be updated regularly through research activities.
The policy also prioritises domestic value addition and product development to maximise the economic benefit of local minerals, but it does not establish a baseline percentage of local value addition before export.
It mentions that the export policy should “consider the country’s long-term requirements and prohibit the export of minerals in a minimal or non-value-added form”. Although the language is not explicit, the repeated emphasis on the importance of domestic value addition and product development is noteworthy.
Another notable inclusion relates to offshore mineral resources which have largely been excluded from the national mineral targets so far. The policy not only acknowledges that “Sri Lanka will have a vast seabed area to administrate with rich mineral resources,” but also calls for the “necessary administrative and legal framework” to manage deep-sea mineral reserves.
What’s new and what’s missing
The new policy is largely an upgrade from the previous policy proposed in 2023. While some of the main strategies like domestic value addition are present in both documents, the 2026 policy is broader and forward-looking.
For example, it is structured as an actionable roadmap with goals, objectives, and strategies under each of the seven policy principles, in contrast to the 2023 policy which only included objectives and principles.
The line ministry which proposes the policy is another deviation between the 2023 and 2026 versions. The 2023 policy was proposed under the Ministry of Environment, which underlined environmental goals. The 2026 policy, in contrast, is presented by the Ministry of Industry and Entrepreneurship Development, which steers the mineral policy towards economic and industrial development.
Another notable addition is rural development as a requirement in mining areas where large or small-scale mining operations have been established, in order to facilitate local economic upliftment. This commitment – a common inclusion in the policies of other mining states – is entirely absent in the 2023 policy.
However, the new policy stops short at merely encouraging rural development initiatives, rather than making it a mandatory requirement unlike in more established and mature mining policies globally, such as the Mining Code of the Democratic Republic of the Congo which mandates mining companies to allocate at least 0.3% of the annual turnover on local development in their mining areas.
The 2026 policy explicitly mentions Free, Prior, and Informed Consent (FPIC) for the protection of indigenous rights, aligning the policy with international human rights standards. The FPIC reference, which is conspicuously absent in the 2023 policy, signals the broader awareness of the global best practices.
The 2026 policy, however, seems to have omitted an important provision mentioned in the 2023 policy that calls for “an apex body” that “will be established to restructure organisations that address these policy principles” if necessary. The 2026 policy only mentions the enactment of corresponding regulations and acts signalling a potential institutional fragmentation.
This could be a major challenge when implementing the policy, given that the mineral sector in Sri Lanka is already split across different institutions, authorities, and ministries.
A window of opportunity
The policy is well timed given the rising global interest over critical minerals, including the minerals essential for green technologies like electric vehicle batteries. The indispensability of critical minerals for both everyday technological devices and strategic technological applications compounded by the risk of a value chain disruption have heightened the global quest to secure a stable critical mineral supply.
This urgency is particularly high for Western nations that are actively seeking to derisk their supply from China’s dominance. While this global competition presents fresh opportunities for Sri Lanka, it may expose the country to undue geoeconomic coercion. Having a well-defined and robust national policy can provide Sri Lanka with a comprehensive roadmap to navigate this geoeconomic fragmentation.
The inclusion of seabed mineral resources in the new policy is similarly important given Sri Lanka’s long-held ambitions over deep-sea cobalt mining prospects in the Afanasy Nikitin Seamount (ANS). The ANS, a vast undersea mountain ridge, is rich in minerals like cobalt, nickel, and manganese, highly sought-after critical minerals.
It is currently caught in a legal stalemate due to a dispute raised by India against Sri Lanka’s 2009 claim to extend the limits of its continental shelf, which if approved would include the ANS. Although it is still unclear how the dispute will be resolved, having a national policy that clearly defines Sri Lanka’s authority and regulations on managing deep-sea mineral resources will allow both Sri Lanka and India to arrive at a transparent and mutually beneficial arrangement.
Structural constraints and the road ahead
Sri Lanka’s mineral industry’s slowed progress is the result of a combination of structural constraints that can be broadly categorised into three interlocking challenges: capital and investment deficit, infrastructure and energy deficits, and governance and institutional challenges. The achievement of the country’s mineral ambitions therefore hinges upon how these challenges are addressed.
The mineral industry is extremely capital-intensive, and for a country like Sri Lanka with limited State capital, a lucrative mineral industry cannot be built without external capital investment. Most foreign investments however come with strings attached, often favouring the investing state rather than the resource-rich developing state, as evident in many mineral-endowed African states.
Although the new mineral policy recognises the need for foreign partnerships to develop the mineral prospects in Sri Lanka, it doesn’t state how Sri Lanka can safeguard its resource sovereignty while attracting foreign investments.
Sri Lanka has historical precedent on how the absence of proper legislations governing resource sharing agreements adversely affect the environment and the communities. In the 2000 Eppawala phosphate case, the Supreme Court ruled that granting a private consortium exploration and mining rights to the Eppawala phosphate deposit violated the fundamental rights of the citizens.
As Sri Lanka is inviting foreign investors back, drafting robust legislative frameworks to ensure that the country receives a fair bargain when negotiating mineral investments with foreign entities should be a critical priority.
Similarly, although the mineral policy does mention “promoting mineral investment by providing a conducive regulatory framework,” its implementation strategies don’t include what concessions investors will receive.
For example, Sri Lanka could consider setting up special economic zones with tax concessions in mining areas like other economic zones targeting the apparel sector. But the new policy’s silence on such investor concessions is something accompanying legislative frameworks must resolve to prevent an ambiguity and hesitance among potential investors.
A mining venture cannot sustain itself without complementing infrastructure and utilities connecting the mines with the end markets, another substantial aspect the new policy omits. Sri Lanka could consider developing the underutilised Trincomalee Harbour, which is conveniently located near the mining sites on the country’s northeast coast.
High energy cost is another pressing challenge Sri Lanka’s mineral sector encounters, left unaddressed in the new mineral policy. Downstream mineral processing typically requires a massive, stable electricity supply, which Sri Lanka’s grid would struggle to reliably provide.
To develop local mineral processing and value addition capacities, Sri Lanka must therefore ensure that mining companies have access to a stable and affordable electricity supply that would ensure the end products retain a competitive price and profit margin.
Then there is the institutional fragmentation which is a recurrent issue in Sri Lanka’s State sector. The new mineral policy fails to establish a central point of authority, which is a significant oversight given that Sri Lanka’s mineral governance is currently fragmented across multiple institutions.
For a more holistic and systematic mineral policy it would be beneficial to have a dedicated body overseeing all aspects from exploration, mining, value addition, and research and development to export.
This would consolidate multiple services under one authority for a smoother, more effective, and efficient implementation of the mineral policy instead of fragmenting it among several institutions. It would also make the process more convenient for foreign investors and avoid repetitive bureaucracy at multiple institutions.
Finally, a comprehensive legal framework must be introduced to complement the National Mineral Policy. The current legislation was introduced in 1992, predating even the preceding National Mineral Policy of 1999, signalling a significant gap between the new policy’s targets and the legal provisions available to facilitate its practical enactment.
As the new policy is not legally binding, its goals will largely remain aspirational if not effectively backed by accompanying legislation.
Sri Lanka’s new National Mineral Policy arrives at a moment of rare convergence of a global critical mineral rush, a domestic imperative to diversify and expand export revenue, and a deepening competition among industrial states to derisk their critical mineral supply chains from geoeconomic shocks.
This new policy, while ambitious in its vision and progressive in its principles, provides Sri Lanka with a reliable roadmap to navigate this moment. But the policy would only be as impactful as the strength of its implementation strategy, both legal and institutional.
Sri Lanka’s mineral history – notably the Eppawala case – established what it can’t afford to repeat. It is therefore imperative that corresponding legislation, regulations, and institutional structures collectively address what the policy has left unanswered, to ensure that Sri Lanka builds a lucrative mineral industry without sacrificing its resource sovereignty in the process.
The 2026 mineral policy has correctly understood in which direction the country’s mineral wealth must be steered, but whether it arrives there will be decided not by the policy itself but by the legislative and institutional structures to follow it.
(The writer is an independent researcher from Sri Lanka, specialising in geoeconomics, critical minerals, and the political economy of resource-endowed states in the Global South. Her work examines how asymmetric trade interdependence, domestic political and economic structures, and historical legacies shape the strategic agency of developing states)
(The views and opinions expressed in this article are those of the writer and do not necessarily reflect the official position of this publication)