Last Month in Impact - August 2025

Dear Reader,

This month, we feature an article based on detailed research and scoping by our Livestock team covering the state of the Sri Lankan dairy industry and what needs to be done to decrease reliance on imports and prepare for a massive increase in domestic demand.

We hope you learn a lot from it.

Sincerely,

Emaali Gunasekara
CEO

Every morning, as Sri Lankans pour milk into their tea, few pause to consider that more than half of that milk is not Sri Lankan at all. In 2023, Sri Lanka spent over Rs. 105 billion (USD 350 million) on dairy imports, with powdered milk continuing to dominate both household consumption and institutional supply chains. Local farmers, meanwhile, produced only 504 million litres, meeting less than half of national demand, which exceeded 1.1 billion litres.

By 2035, demand for dairy is projected to double, making today’s structural weaknesses tomorrow’s crises if not urgently addressed. This is not merely an agricultural shortfall. It is a drain on foreign exchange, a missed opportunity for rural livelihoods, and a strategic vulnerability in national food security.

The Promise of Dairy: More Than Milk

Dairy is not just about what we drink. It sustains more than 250,000 rural households, predominantly smallholder families who depend on 1-5 cows for supplemental income. Strengthening this sector means reducing poverty, empowering women and youth, and building resilience in rural communities.

Globally, dairy has been a proven pathway for inclusive growth. India’s White Revolution, for example, showed how smallholder farmers, when linked to cooperatives and provided with veterinary services and feed, could transform a nation’s nutrition and income landscape. Sri Lanka, with its strong agricultural traditions and committed farmer base, stands at a similar threshold.

Yet the obstacles are stark:

• Low productivity: The average Sri Lankan cow produces just 2.66 litres of milk per day, far below regional peers in India (4-6 litres) or Thailand (7-10 litres). Leading local farms, such as Ambewela, demonstrate that with the right genetics and feed, yields can reach 20-24 litres per day.

• Weak animal health systems: Outbreaks of lumpy skin disease and mastitis have crippled herds, with veterinary services stretched thin across districts.

• Feed insecurity: Over 85 percent of cattle feed is unenhanced, leaving animals undernourished and farmers vulnerable to seasonal price shocks.

• Policy gaps: While the National Dairy Policy articulates lofty goals, it lacks the operational clarity and costed implementation plans needed to enable real change.

• Data voids: Sri Lanka still lacks a national cattle identification and traceability system. Without digital IDs for animals, outbreaks spread unchecked, farmers miss targeted subsidies, and investors cannot trust herd data.

Pathways to Transformation

Despite these challenges, the opportunities for transformation are immense. Our recent landscape analysis of the sector - drawing on field visits, key informant interviews, and global best practices - identifies seven pillars of change:

• Dairy Hubs for Smallholders - regional clusters equipped with chilling tanks, AI services, and veterinary care.

• Farmer Training & Extension - building technical capacity on climate-smart practices and herd management.

• Animal Health Systems - nationwide vaccination campaigns, disease surveillance, and preventive care.

• Feed Security - silage expansion and affordable, high-quality local feed production.

• Financial Inclusion - credit, insurance, and risk-sharing for smallholders.

• Digital Integration - an Animal Identification and Traceability System (AITS) linked to national agricultural databases.

Case Study 1: Digital Livestock IDs in India

In 2021, India launched the National Digital Livestock Mission, creating unique digital IDs for every cow and buffalo. These IDs track the animal’s life cycle from birth to vaccination, breeding, and milk production. The system enables targeted veterinary interventions, reduces disease spread, and helps farmers access subsidies. For Sri Lanka, a similar platform could transform traceability, disease control, and farmer access to finance.

Case Study 2: Stellapps and the Power of IoT

Stellapps, an agritech startup in India, uses IoT sensors, AI, and data analytics to digitize the dairy supply chain. From measuring milk quality at chilling centres to tracking cattle fertility cycles with wearable devices, Stellapps has improved yields, reduced losses, and increased farmer incomes. Crucially, its mooPay platform ensures direct, cashless payments to farmers; an innovation that could strengthen trust and transparency in Sri Lanka’s dairy economy.

Case Study 3: Sri Lanka’s Own Proof of Potential

Sri Lanka does not need to look abroad for inspiration. Ambewela Farm, in Nuwara Eliya, shows what is possible when genetics, feed, and veterinary care align. With yields of 22-24 litres per cow per day, Ambewela’s operations prove that world-class productivity is achievable on Sri Lankan soil.

At the other end of the spectrum, the Udunuwara Milk Cooperative in the Central Province demonstrates the power of grassroots organization. By pooling milk from dozens of smallholder farmers, the cooperative has negotiated better prices, improved access to veterinary care, and built its own small chilling facilities. Farmers who once struggled with low incomes now earn more stable, predictable returns. Together, Ambewela and Udunuwara illustrate a future where large-scale excellence and smallholder empowerment can coexist, and drive sector transformation.

Why Now?

The convergence of government policy and donor priorities creates a rare window for action. The 2025-26 national budget earmarked Rs. 2.5 billion for dairy sector development, alongside VAT exemptions for locally produced milk (Ministry of Finance, 2025). International partners such as the Gates Foundation have highlighted strong alignment with Sri Lanka’s goals - particularly in livestock health, R&D, and inclusive growth models.

With imports consuming scarce foreign reserves, the case for self-sufficiency is no longer academic. It is urgent economics.

A Call to Stakeholders

Sri Lanka’s dairy sector cannot be transformed by farmers alone. It requires coordinated action:

• The government must provide policy clarity, land access, and institutional reform.

• Private sector processors must expand procurement networks and invest in value-added product lines.

• Donors and NGOs must bring technical expertise, financing, and innovations from global best practice.

• Consumers must shift perceptions, supporting fresh milk and local brands over imported powder.

The prize is clear: a self-sufficient dairy sector that secures food, saves billions in foreign exchange, reduces emissions per litre of milk, and lifts rural families out of poverty.

If Sri Lanka can achieve the productivity leap, from 2.6 litres to 5 litres per cow per day, the country could close the import gap by 2035. It would mean the next generation of schoolchildren would drink milk produced locally, not in New Zealand.

This is more than milk. It is sovereignty on a plate, prosperity in the village, and resilience for the nation. The question is no longer whether Sri Lanka can transform its dairy sector, but whether we have the courage and urgency to do so now.

For more information about our work, visit connecttocare.co or our LinkedIn.