Sri Lankan government fertilizer ban policy’s impact on tea exportation

Abstract

The recent policy of the Sri Lankan government, banning chemical fertilizers, has sparked discussions and concerns regarding its impact on several industries. Among them, the tea industry draws utmost attention due to its contribution to Sri Lanka’s export revenue. Sri Lankan tea is worldwide renowned for its high quality, and tea exports significantly contribute to Sri Lanka's economic growth. Since Sri Lanka's economy relies heavily on tea exports, it is crucial to examine the possible outcomes of the government policy on fertilizer importation. Although the objective of this move by the Sri Lankan authorities is to advance organic farming in order to maintain environmental sustainability, the immediate effects on tea production and exportation have to be well studied. Since independence, the Sri Lankan government has followed numerous policies in the agricultural sector. Tea has earned a greater attention of government agricultural policy since it is the single most important crop next to rice. While there is limited research specifically addressing the impact of government fertilizer ban policy on tea exports in Sri Lanka, there is a timely requirement in studying the impact on the tea industry due to government policy changes. The significance of this study lies in its potential to revise the agricultural practices as well as the economic dynamics of one of the country’s key industries. Since Sri Lanka is globally renowned for its high-quality tea, any policy involved in its production procedure has considerable implications. The aim of this study is to evaluate the impact of the Sri Lankan government's fertilizer ban policy on tea exportation. This research analyzed how the policy has influenced export volumes and trends, utilizing quantitative methods to assess the short-term and long-term effects on the tea industry. Tea export data, tea production data, and fertilizer import data from 2012 to 2022 were used in this study. As the methodology, time series approaches were used in this study in order to separately identify the short-term impact of Sri Lanka’s government fertilizer ban policy. Granger causality tests were conducted, and long-term relationships were checked using co-integration tests. The ARIMA and ETS models along with VAR models and VECM were built to identify the effects of fertilizer banning. There was clearly a short-term relationship between fertilizer imports and tea exports as well as tea exports and total tea production. Based on the findings of the analysis, we can conclude that the ban on fertilizer importation impacts tea exportation more significantly than tea production. This is likely because quality of tea, which is crucial for exportation, is more directly affected by the availability of fertilizers than the overall quality of tea produced. Usually, tea exports have to be of high quality. Due to the fertilizer import ban, there must be a lack of fertilizer used, resulting in a quality drop in tea produced