Project Name Tea Development Project
Project Number 29600-013
Country Sri Lanka
Project Status Approved
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Strategic Agendas
Drivers of Change
Sector / Subsector

Agriculture and Natural Resources - Agricultural production

Gender Equity and Mainstreaming
Description The Project aims to increase the income of tea smallholders and private estates on a sustainable basis and to improve the environment at the same time. To fulfill the objectives, the Project will (i) undertake institutional reforms to improve the effectiveness of tea-related institutions and rationalize the cess rebate to benefit the smaller holdings; (ii) provide credit financing for replanting and infilling on smallholdings and private estates, establishment of nurseries, rehabilitation of tea factories, and handling of green leaf; and (iii) improve social infrastructure such as workers' housing and rural feeder roads as well as afforestation. The Project is expected to replant 9,600 ha and infill 35,800 ha of tea; establish 455 tea nurseries; rehabilitate 85 tea factories; improve 5,000 workers' housing and sanitation facilities; improve 250 km of feeder roads; and afforest 1,000 ha of degraded land.
Project Rationale and Linkage to Country/Regional Strategy The tea smallholder and private estates subsector contributes 56 per cent of total tea production and 70 per cent of export earnings of tea. The 206,000 holdings provide a livelihood for 1 million family members and 100,000 workers. Although the smallholders and private estates enjoy higher productivity and profitability than the plantations, about 50 per cent of their land is still under old seedling tea that requires replanting. The current replanting rate of less than 1 per cent is not sufficient to maintain the yield and, if allowed to continue, will have serious implications for the productivity of the subsector and competitiveness of Sri Lanka vis-a-vis other tea-producing countries. Any decline in the tea industry will have serious social implications in view of the large number of people dependent on the subsector. The Sri Lanka Tea Development Project (STDP) was designed to arrest the decline through provision of financing for replanting and new planting on smallholdings, factory rehabilitation, and nursery establishment. The STDP was only partially successful in introducing credit to the smallholders because of implementing limitations, but the experience gained serves as lessons useful for the formulation of the Project. The Project will address the weaknesses in the institutional framework to provide an environment conducive to the development of the smallholder subsector. The legislative and institutional framework of the tea industry dates back to the time of public ownership of plantations and is not responsive to the needs of both smallholders and privatized plantations. The Boards of the tea-related institutions lack private sector representation. The institutions are subject to the same control and terms of employment as in public agencies and administrative staff. Legislative changes and rationalization of the administrative expenditure will ensure efficiency of the institutions and allow more cess funds to be directed to replanting on smallholdings.

Project Outcome

Description of Outcome
Progress Toward Outcome
Implementation Progress
Description of Project Outputs
Status of Implementation Progress (Outputs, Activities, and Issues)
Geographical Location All tea-growing areas covering 13 districts in the southwest region of Sri Lanka: Kandy, Galle, Matara, Ratnapura, Badulla, Nuwara Eliya, Kegalle, Matale, Kalutara, Hambantota, Monaragala, Colombo, and Kurunegala.

Safeguard Categories

Environment B
Involuntary Resettlement
Indigenous Peoples

Summary of Environmental and Social Aspects

Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation

Business Opportunities

Consulting Services A total of 10 person-months of international consultants and 46 person-months of domestic consultants will be engaged individually by the Project Management Unit in accordance with the Bank's Guidelines on the Use of Consultants and other arrangements satisfactory to the Bank.
Procurement Goods and services for implementing the Project will be procured in accordance with the Bank's Guidelines for Procurement. The portion of the loan earmarked for credit will follow procurement procedures applicable to Bank loans for development finance institutions. Civil works will be undertaken through local competitive bidding in accordance with procedures acceptable to the Bank.

Responsible Staff

Responsible ADB Officer ADB Disclosure
Responsible ADB Department South Asia Department
Responsible ADB Division Environment, Natural Resources & Agriculture Division, SARD
Executing Agencies
Ministry of Plantation Industries (MPI)
J. Abeywickrama
55/75 Vauxhall Lane, Colombo 2
The Central Bank of Sri Lanka
Mr. W.M. Karunaratne
30 Janadhipathi Mawatha, Colombo 1


Concept Clearance -
Fact Finding 30 Mar 1998 to 21 Apr 1998
MRM 28 May 1998
Approval 10 Nov 1998
Last Review Mission -
PDS Creation Date 14 Feb 2007
Last PDS Update 23 Feb 2007

This page was generated from on 28 June 2016