29600-013: Tea Development Project

Project Data Sheet (PDS): Details


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.

Safeguard Categories

Environment: B
Involuntary Resettlement:
Indigenous Peoples:

Summary of Environmental and Social Aspects

The smallholders and private estates enjoy higher productivity and profitability than plantations. However, about 50% of their land is tilled under old seedling tea that requires replanting. The replanting rate (1%) at the time of appraisal was insufficient to maintain the yield and, if left alone, would have had serious ramification to over-all tea productivity and the competitiveness of Sri Lanka relative to other tea producing countries. In addition, poor tea industry performance can have serious social implications given the large number of people dependent on it.

Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

Project Data Sheets (PDS)


30 Mar 1998 to 21 Apr 1998

Management Review Meeting
28 May 1998

10 Nov 1998