Palm Oil policy paralysis threatens key Sri Lankan exports
View(s):By Bandula Sirimanna
Sri Lanka’s prolonged ban on new oil-palm cultivation and crude palm oil (CPO) imports has evolved into a costly economic dilemma, draining scarce foreign exchange, weakening export competitiveness, and placing thousands of livelihoods at risk.
What began as government policy rooted in environmental concerns has now created a widening economic gap one that industry stakeholders warn could take years to repair without urgent government intervention, industry stakeholders said
Since the CPO import ban came into effect in April 2021, Sri Lanka has spent over US$175 million importing edible oils to meet domestic demand-an expense the country can ill afford amid its ongoing balance-of-payments pressures.
Although a functioning oil-palm industry once supplied part of the almost-264,000 metric tonnes consumed annually domestically, the nation continues to depend nearly wholly on imports
The fallout has been especially severe for Board of Investment (BOI) enterprises that relied on CPO as a key raw material for exports.
These manufacturers once regular suppliers of hydrogenated palm-oil products such as vanaspathi ghee, bakery shortening, CBS fats and chocolate fats have collectively incurred losses estimated at $40 million.
Their export pipelines collapsed after access to CPO was cut off in 2022, despite preferential market access under the Indo–Sri Lanka Free Trade Agreement (ISFTA).
Ironically, India Sri Lanka’s largest trading partner has recently reopened the same HS codes for palm-oil-based imports, while simultaneously increasing its own edible-oil tariffs.
The result is a surge in demand for Sri Lankan processed palm-oil exports, but domestic producers remain paralysed without access to CPO.
Industry representatives, in a detailed submission to President Anura Kumara Dissanayake, have called for an immediate policy reset.
They seek approval for BOI-registered companies to import CPO (HS Code 1511.10) through a tightly regulated licensing mechanism.
Such a step, they argue, would restore export production, support domestic edible-oil supply chains, and generate an estimated $75 million annually in new export revenue.
The appeal goes beyond short-term import relief. Plantation companies are also urging the government to lift the nationwide prohibition on new oil-palm cultivation a ban introduced in 2022 that abruptly halted a sector specifically developed to reduce Sri Lanka’s edible-oil deficit.
They propose a structured replanting programme of 10,000 acres annually, projecting that the country could achieve edible-oil self-sufficiency and even generate an export surplus within six years.
Their argument is rooted in regional trends. India, which imports nearly eight million tonnes of palm oil annually, has already launched a massive programme to cultivate oil palm on five million hectares-a signal that palm cultivation, when regulated, is strategically valuable for food security.
As Sri Lanka prepares for its 2026 shift from the Special Commodity Levy to a more predictable ad valorem tax structure for imported oils, one question lingers on: will policy reform come soon enough?
The answer might mean life or death for manufacturers, plantation workers, and rural communities whose livelihoods depend on the sector.
Hitad.lk has you covered with quality used or brand new cars for sale that are budget friendly yet reliable! Now is the time to sell your old ride for something more attractive to today's modern automotive market demands. Browse through our selection of affordable options now on Hitad.lk before deciding on what will work best for you!