By: Staff Writer
February 10, Colombo (LNW): The government’s suspension of heavy mineral mining and exploration licenses marks a decisive and divisive intervention in Sri Lanka’s mineral sector. Framed as a reset to correct decades of mismanagement, the move has instead exposed the fragility of policy-driven governance in a sector that relies on continuity, certainty, and investor confidence.
Industry and Entrepreneurship Development Minister Sunil Handunneththi recently said the decision will remain in effect until Cabinet approval is obtained, relevant guidelines are gazetted and the policy is presented to Parliament. The suspension applies to all heavy mineral exploration and mining licenses, excluding minerals required for housing and construction activities.
It makes clear that the suspension will remain until Cabinet approval, gazette notification, and parliamentary presentation of the National Mineral Policy are completed. Yet no definitive timeline has been offered. For an industry already contributing only about USD 389 million in exports against a potential of USD 778 million, this uncertainty is proving damaging.
Supporters of the decision argue that drastic action was unavoidable. The minister acknowledges widespread illegal mining, unpaid royalties, and political interference under past governments. The claim that no new mineral extraction approvals have been granted under the current administration is presented as proof of a clean break from the past.
But this “zero-approval” approach has consequences. By halting all heavy mineral licensing regardless of compliance history the government has effectively punished regulated operators alongside illegal ones. Exploration companies, which operate on long investment horizons, say Sri Lanka is now viewed as a high-risk jurisdiction.
The policy’s stated objective of ensuring maximum national benefit is undermined by its failure to address value addition, export diversification, or downstream processing. The document focuses heavily on control and enforcement but offers little insight into how the new framework will expand exports, raise unit values, or move Sri Lanka up the mineral value chain.
The planned special enforcement unit may help curb illegal activity, but enforcement alone does not generate revenue. Without parallel reforms such as faster approvals for compliant operators, transparent royalty structures, and incentives for processing the industry risks shrinking rather than reforming.
Another concern is institutional capacity. The Geological Survey and Mines Bureau, already overstretched, will be central to implementing the new policy. However the document does not outline how staffing, technology, or funding constraints will be addressed raising doubts about effective enforcement and administration.
The suspension also sends mixed signals to investors. While the government speaks of transparency and accountability, sudden policy freezes without transition frameworks suggest unpredictability. In global mineral markets, predictability is often as valuable as resource quality.
Sri Lanka’s mineral sector does require reform few dispute that. But reform achieved through prolonged suspension risks becoming self-defeating. Each delayed project, each lost export order, and each diverted investor erodes the very national benefit the policy claims to protect.
The challenge for the government is clear: move swiftly from control to clarity, from suspension to structure or risk turning a reform agenda into an industry downturn.
The post Reform or Regression? How Sri Lanka’s Proposed Mineral Policy is backfiring appeared first on LNW Lanka News Web.
