• Spice industry in Sri Lanka plays a crucial role in the country’s economy
• Sri Lanka ranks as the ninth most important exporter of spices globally
• Primary spice exports are cinnamon, pepper, cloves, cardamom, nutmeg
• Beneficial to restrict imports during periods of high local production
• Imports for re-exports important during periods of low domestic production
• Main spice exporters around the world often blend spices with other origins
• Actors in Sri Lankan spice value chain encounter numerous challenges
• Several measures can be taken to address the issue of spice adulteration

With Sri Lanka being renowned worldwide for its high-quality spices and unique taste, any decisions regarding spice imports should prioritise preserving the unique quality of Ceylon spices while safeguarding local farmers and promoting local value addition, asserted Institute of Policy Studies of Sri Lanka (IPS) Research Economist Dilani Hirimuthugodage, in an interview with The Sunday Morning.

Noting that importing for re-exports when local production was insufficient had several positive impacts, which could increase market value and profitability for exporters while ensuring a smooth flow of trade, and citing examples from spice hubs around the world that often blend spices with other origins, she however emphasised that it was essential to weigh the potential benefits against the risks and ensure that such practices were conducted in a sustainable and socially responsible manner, especially in maintaining the good quality of Ceylon spices.

Commenting on the Geographical Indication (GI) certification Ceylon Cinnamon received in 2022, Hirimuthugodage said it was a remarkable milestone that Ceylon Cinnamon had become the first GI product from Sri Lanka and the first Sri Lankan Protected Geographical Indication (PGI) in the European Union. 

“After several years of struggle, this achievement stands as a historic moment for Sri Lanka, elevating Ceylon Cinnamon to the same status as other renowned PGIs worldwide. With the attainment of the GI certificate, consumers are assured that they are purchasing high-quality, 100% pure Ceylon Cinnamon produced under specific guidelines and rigorous quality control measures,” she added.

She added that Sri Lanka boasted several potential GIs, with the success of Ceylon Cinnamon PGI paving the way for other spices, particularly pepper: “Background work for the pepper GI is nearing completion, and it will be locally registered once the local GI registry is established by the National Intellectual Property Office in Sri Lanka. Additionally, studies are underway to explore the potential of Ceylon Coffee as a GI product. Beyond spices, Ceylon Tea is poised to submit a PGI application to the European Union in the near future. Moreover, the Ceylon Golden Pineapple has also completed its background work for local GI registration.”

In the course of the interview, Hirimuthugodage also spoke on factors affecting local production and steps to address the issue, the impact climate change is having on the industry and strategies to overcome the challenges, the adulteration of spices, challenges facing local producers in terms of value addition, arresting the drop in international orders, and attracting large-scale investments.

Following are excerpts of the interview:

The spice industry is currently facing a conundrum over importing for re-exportation. The argument against importing is that it will discourage local farmers, affect industry production, and negatively impact the quality of local spices. How do you view this?

The spice industry in Sri Lanka plays a crucial role in the country’s economy, contributing 14% of the country’s agricultural exports and accounting for 3% of the total exports. Presently, Sri Lanka ranks as the ninth most important exporter of spices globally, primarily for cinnamon, pepper, cloves, cardamom, and nutmeg. 

Most of these spices are seasonal crops, with harvest or production occurring once or twice a year. During periods of high production, it is beneficial to restrict imports for re-export to ensure a good income for local farmers. Simultaneously, imports for re-exports have become particularly important during periods of low domestic production. 

Additionally, to meet the taste demands of foreign buyers, exporters may sometimes need to blend local spices with those from other origins, a practice that must be executed with stringent quality control measures.

Sri Lanka is renowned worldwide for its high-quality spices and unique taste. Therefore, any decisions regarding spice imports should prioritise preserving the unique quality of Ceylon spices while safeguarding local farmers and promoting local value addition.

The argument for enabling imports for re-export is that doing so will promote a hub concept, open up opportunities for market access, and enable Sri Lanka to add value and re-export when local raw materials are insufficient. How do you view this?

Importing for re-exports when local production is insufficient has several positive impacts. According to a gazette from June 2020, re-exports should comprise 35% or more of the local value addition, such as processing, blending, and packaging. This can increase the market value and profitability for exporters while ensuring a smooth flow of trade. 

The main spice exporters around the world, renowned as main spice hubs due to their significant production and trade, include cities such as Kochi (Cochin), Mumbai, and Delhi in India; Ho Chi Minh City in Vietnam; and the City of Guangzhou in China. These hubs often blend spices with other origins to access a wider variety of products, catering to diverse consumer preferences and market demands. 

Importing spices for re-export and the hub concept can bring economic opportunities and market diversification. However, it is essential to weigh the potential benefits against the risks and ensure that such practices are conducted in a sustainable and socially responsible manner, especially in maintaining the good quality of Ceylon spices.

Sri Lankan spices hold high standing in the world market, but falling production means the industry is at risk. What are the key factors affecting local production and what are the steps that need to be taken to arrest this situation?

Several factors affect the production of Ceylon spices. One of the main factors is the availability of skilled labour for spice cultivation, harvesting, and processing. Another challenge is the access and affordability of quality inputs, including seeds, fertilisers, pesticides, and agricultural machinery. The availability of fertile soil and suitable land is also essential for spice production.

Moreover, technology and farming practices – such as improved planting techniques, use of high-yielding varieties, mechanisation, and efficient farming practices – contribute significantly to productivity. Climate and weather conditions also play a vital role in spice production.

However, when considering the production pattern since 2014, it has fluctuated due to the aforementioned factors. To ensure a smooth production pattern, it is necessary to attract skilled labour by providing sustainable income opportunities and fostering a sense of identity. 

Moreover, efforts should be made to attract youth to the industry, promote producers to maintain their own nurseries with quality seeds, locally develop pest-resistant and drought-tolerant spice varieties, and improve cultivars. Additionally, promoting good agricultural practices, introducing low-cost production techniques, and enhancing the effective involvement of agricultural extension services are crucial steps.

How is climate change impacting the industry and what strategies can it adopt to overcome the challenges?

Climate change has significant impacts on the spice sector, mainly affecting the production, quality, and sustainability of spice crops, including cinnamon, pepper, cardamom, cloves, and nutmeg. Changes in rainfall patterns and temperature predominantly affect plant metabolism, flowering, and fruiting processes, impacting production, harvesting, and storage.

Both short-term and long-term measures are available to address these challenges. In the short term, efficient water management techniques such as soil water conservation methods, low-cost rainwater harvesting systems, the development of perennial water resources in the fields, and the provision of subsidised minor irrigation equipment are some viable options. However, long-term strategies necessitate proper research to develop spice varieties that are more tolerant to heat, drought, pests, and diseases, thereby increasing their resilience to climate change.

Moreover, it is crucial to implement climate-smart agriculture techniques, establish systems to monitor weather patterns, and provide early warning alerts for producers to mitigate potential damages. It is also essential to provide training and extension services for producers through public extension officers and agricultural experts to share knowledge and innovative strategies to adapt to climate change.

Sri Lanka obtained its first-ever GI certification for Ceylon Cinnamon in 2022. How has this helped, how important is GI certification, and are there moves underway to obtain GI certification for any other spices?

It is a remarkable milestone that Ceylon Cinnamon has become the first GI product from Sri Lanka and the first Sri Lankan PGI in the European Union. After several years of struggle, this achievement stands as a historic moment for Sri Lanka, elevating Ceylon Cinnamon to the same status as other renowned PGIs worldwide. 

With the attainment of the GI certificate, consumers are assured that they are purchasing high-quality, 100% pure Ceylon Cinnamon produced under specific guidelines and rigorous quality control measures.

According to international literature, obtaining a GI certificate typically results in price increases of 20-50% for the final product, as consumers are willing to pay premium prices for quality-assured products. GI, being an Intellectual Property Right (IPR), benefits consumers by protecting them from false and deceptive usage. The effective legal protection of GIs also fosters investment in GI-protected sectors. As a policy instrument, GIs hold potentially positive implications for protecting indigenous knowledge and generating livelihoods and income.

Sri Lanka boasts several potential GIs. The success of Ceylon Cinnamon PGI paves the way for other spices, particularly pepper. Background work for the pepper GI is nearing completion, and it will be locally registered once the local GI registry is established by the National Intellectual Property Office in Sri Lanka. Additionally, studies are underway to explore the potential of Ceylon Coffee as a GI product. Beyond spices, Ceylon Tea is poised to submit a PGI application to the European Union in the near future. Moreover, the Ceylon Golden Pineapple has also completed its background work for local GI registration.

To what extent does the adulteration of spices take place in Sri Lanka and how can this be addressed?

Several measures can be taken to address the issue of spice adulteration. Firstly, there is a need to strengthen regulations and enforcement mechanisms to prevent and detect adulteration. This involves implementing testing protocols and imposing penalties for violations. Additionally, it is essential to implement mandatory standards for spices.

Secondly, quality control measures should be implemented throughout the supply chain. This includes regular testing of spices to assure purity and authenticity.

Furthermore, it is important to provide support and incentives for small-scale spice producers to adhere to quality standards and sustainable practices. This can help reduce the economic pressures that may lead to adulteration.

Overall, a comprehensive approach involving regulatory measures, quality control, and support for producers is necessary to tackle the issue of spice adulteration effectively.

Currently around 80% of Sri Lanka’s spice output is exported as raw materials to the global market. In terms of adding value, what are the challenges facing local producers? Is there sufficient access to knowledge, technology, equipment, and capital?

True, a higher percentage of spices are exported as raw materials. Addressing these challenges requires concerted efforts from Government agencies, industry associations, and development organisations to provide technical assistance, financial support, and capacity-building initiatives for spice producers. 

Improving infrastructure, promoting technology transfer, enhancing market linkages, and strengthening regulatory frameworks can help unlock the potential of Sri Lanka’s spice industry and enable producers to add value to their products effectively.

The actors in the Sri Lankan spice value chain encounter numerous challenges in adding value to raw spices through processing, packaging, branding, and marketing. Among the key hurdles is the lack of access to modern processing facilities such as grinding mills, drying facilities, and packaging units, all of which are crucial for enhancing the value of raw spices. Additionally, maintaining quality standards throughout processing, storage, and transportation poses difficulties that necessitate proper infrastructure, equipment, and skilled labour.

Furthermore, limited access to modern technology and innovative techniques adds to the challenges faced by these actors. They also struggle to meet regulatory requirements and international quality standards for food safety, hygiene, and labelling. Compliance with stringent regulations often demands significant investments in infrastructure, certification, and training, which can be particularly challenging for small-scale producers.

Sri Lankan spice value chain actors face various obstacles in their efforts to add value to raw spices, which highlights the need for targeted support and investment to address these challenges effectively. Therefore, it is important that Government agencies, industry associations, and development organisations provide technical assistance, financial support, and capacity-building initiatives for spice producers. Improving infrastructure, promoting technology transfer, enhancing market linkages, and strengthening regulatory frameworks can help spice producers to add value to their products effectively.

The sector has recorded a drop in international orders and is struggling to maintain export momentum. How can Sri Lanka increase its exports, retain current buyers, and reach more markets?

Export earnings of spices in Sri Lanka have fluctuated over the years. For example, it contributed 18.2% to total agricultural exports in 2015 but dropped to 15% in 2016, and in 2020 it was nearly 17%. Therefore, it is essential to introduce strategic measures aimed at enhancing production efficiency, product quality, market access, and value addition to increase its exports.

Primarily, there is a need to enhance the efficiency of the spice production and distribution system through improved infrastructure, including processing facilities, storage, and transportation networks. Ensuring consistent quality and compliance with international standards and certification systems is crucial. Developing value-added products such as spice blends, extracts, and essential oils can create opportunities for higher-margin exports. Additionally, exploring new markets and diversifying export destinations through effective marketing and branding strategies is imperative.

Moreover, Sri Lanka should work towards improving trade facilitation measures and provide targeted support to spice exporters through export promotion programmes. By introducing effective strategies to increase its exports, Sri Lanka can unlock the full potential of its spice sector and position itself as a leading exporter of high-quality, value-added spices in the global market.

Why hasn’t the local spice industry seen any large-scale investments by international entrepreneurs or collaborations with international brands? How can this be addressed?

Several factors may contribute to the limited large-scale investments by international entrepreneurs or collaborations with international brands in the Sri Lankan spice industry. 

One of the reasons could be challenges related to infrastructure, including processing facilities, storage, transportation networks, and port facilities, which may hinder large-scale investments. Inadequate infrastructure can increase production costs and logistical challenges, making it less attractive to international investors. Similarly, regulatory hurdles such as import and export restrictions, licensing requirements, and foreign ownership restrictions may deter potential investors.

Additionally, since some Sri Lankan spice producers face challenges in consistently meeting quality standards and certification requirements, this can also negatively affect international investor interest. Moreover, the main spice-producing countries such as India, Vietnam, and Indonesia offer comparatively favourable investment opportunities. This competitive landscape can make it challenging for Sri Lankan spice producers to attract international investments or collaborations.

However, with the GI certification system, which provides legal protection, and also with effective and proper strategies addressing barriers to international investments, Sri Lanka can provide a more conducive environment for investments in the spice sector.