The Planters’ Association of Ceylon (PA), a representative body of the plantation sector, has reiterated its call for an urgent reversal of the ban on oil palm cultivation, levelled by the government in 2021, in order to unlock growth for the plantation industry.
Imports of palm oil and local cultivation had been banned under the administration of former President Gotabhaya Rajapaksa in 2021, citing findings from a Central Environmental Authority’s (CEA) report published in 2018, claiming the crop had adverse effects on environments.
The ban mandated a 10-year period for phasing out all cultivations. However, the confectionary industry was permitted to import the ingredient under licensing.
For confectioners, palm oil’s semi-solid, heat-stable nature helps with maintaining confectionary texture, shelf-life, and flavour - a cost-effective alternative to cocoa butter, and as a base for shortenings.
According to the PA, following the government’s abrupt ban on oil palm cultivation in 2021, this lucrative crop that was once considered as the nation’s most valuable strategic diversifications instead became a symbol of policy inconsistency and lost economic opportunity.
Palm oil cultivation was first introduced to Sri Lanka in 1968, but only began to gain traction in the early 2000s when RPCs sought alternatives to loss-making rubber.
Recognising the crop’s immense potential, the Government at the time promised to extend tax concessions for establishment of new oil palm cultivation in 2009 and even formally endorsed expansion up to 20,000 hectares by 2016.
Encouraged by these strong positive signals from the Government at the time, plantation companies such as Watawala, Namunukula, Elpitiya, Agalawatte, Horana, Kegalle, Malwatte Valley and Kotagala invested billions in nurseries, milling facilities and research.
The PA noted that despite these expansions being strictly restricted to marginal and degraded rubber lands, and nearly six prior decades of oil palm cultivation in Sri Lanka without any notable documented instances of negative environmental impacts, the expansion of oil palm cultivation faced persistent opposition from a variety of vested interests.
The 2021 ban has already led to the destruction of over Rs. 550 million worth of seedlings, with nurseries fully written off.
Additionally, the policy reversal has placed approximately Rs. 23 billion in sectoral investments, including plantations, mills, and future revenue, at serious risk, all without any form of compensation.
“This was particularly damaging because palm oil was by far the most profitable crop in the sector, delivering average net margins of 49% and contributing in some cases to more than half of RPC profits. The abrupt prohibition has eroded profitability, diminished investor confidence and crippled a once-thriving segment of the industry.” PA Secretary General Lalith Obeyesekere stated.
More than 5,000 direct jobs and 21,000 dependent livelihoods were tied to the sector, with oil palm workers earning nearly double the wages of their counterparts in tea and rubber.
The industry contributed over Rs. 2.5 billion annually to plantation households, providing a steady source of income in regions where poverty is deeply entrenched. Its sudden halt has pushed many families into financial insecurity at a time when the national economy is already under strain.
The ripple effects have been felt across industries as well. Refiners and manufacturers who depended on steady supplies of local crude palm oil now face delays, higher costs and heavy reliance on imports secured through cumbersome licensing.
The bakery and confectionery industry, valued at over Rs. 200 billion, has suffered shortages and price hikes in staples such as bread, biscuits and margarine. Pharmaceuticals, personal care and industrial sectors have also been disrupted, leaving bottlenecks that impact both businesses and consumers.
The ban has also deepened Sri Lanka’s foreign exchange crisis. Annual consumption of edible oils is around 264,000 metric-tonnes (MT), yet local production meets only a quarter of this demand.
The shortfall is covered through imports, costing an estimated $ 35 million annually in lost reserves. Substituting with coconut oil undermines a lucrative export industry that earned Rs. 63 billion in 2020.
Over five years, the ban could cost more than 175 million dollars in foreign exchange which is an unsustainable burden for a nation in economic recovery.
Environmental concerns, often used to justify the policy, are largely misplaced in Sri Lankan context. Globally, palm oil is recognised as the most efficient oil crop, producing 40% of vegetable oil on just 6% of land.
Countries like Malaysia and Indonesia have embraced cultivation while enforcing sustainability standards such as RSPO and ISPO certifications, smallholder integration and zero-waste technologies.
In Sri Lanka, oil palm was grown mainly on old rubber lands that had already completed their economic cycle and not on virgin forests. With the right regulatory framework and commitment to global best practices, Sri Lanka could develop a sustainable palm oil sector without environmental compromise.
Palm oil’s nutritional and health benefits are another overlooked dimension. Naturally trans-fat free, rich in vitamin E and antioxidants and widely used in food manufacturing, palm oil offers a healthier alternative to hydrogenated oils.
Recognised by the WHO and WWF when produced responsibly, it is a proven, safe and efficient choice for food security. Sri Lanka can revive its palm oil sector by lifting the ban and adopting sustainability standards, integrating smallholder farmers, reforming import taxation and investing in R&D and traceability systems.
India has already moved decisively in this direction, expanding palm oil cultivation by 45% in five years with ambitious plans to reach 1.7 million hectares by 2030. Sri Lanka, with ideal growing conditions, is well-positioned to follow this example.