Hasarel Gallage
In June 2026, Sri Lanka launched its new National Mineral Policy after 27 years, proposing a national inventory of mineral resources, aiming for domestic value addition before export, and bringing seabed minerals into the policy’s scope, something its 1999 predecessor did not do. On paper, this looks like real progress. But a policy is only as strong as the laws and institutions that carry it out, and Sri Lanka’s mineral sector still runs on an Act from 1992 (Mines and Minerals Act, No.33 of 1992), last amended in 2009 (Mines and Minerals (Amendment) Act, No.66 of 2009). This article draws on the third brief in Factum’s critical minerals series, which examines the gap between what the new policy promises and what the system can deliver in reality.
The policy has a direction, but few rules
The new mineral policy, approved by the Cabinet in February and taking effect on 1 June, rests on seven principles, from the role of the state and environmental concerns to value addition, research, governance, and land management, along with a roadmap of objectives and strategies. That makes it more actionable than the 2023 drafted policy, which did not advance to the cabinet approval stage with the change of government. Since the line ministry that oversees mining and minerals has also changed from the Ministry of Environment to the Ministry of Industry and Entrepreneurship Development, the overall direction of the mineral policy also seems to have shifted from a focus on environmental impact to trade and revenue generation through minerals. However, the new policy’s weaknesses lie less in what it says than in what it leaves undefined.
The first gap is the absence of a list of critical and strategic minerals. Sri Lanka now has a mineral policy shaped by global interest in critical minerals, yet it doesn’t say which minerals the country itself considers critical. Without a list, the policy can’t signal which minerals deserve priority in exploration, licensing and processing investment, and investors cannot tell where state support will go. This matters because Sri Lanka’s best-known minerals, vein graphite and heavy mineral sands, are significant but lack the mix of high demand and concentrated supply risk that makes cobalt, lithium or rare earths strategic.
The second gap is value addition, the policy’s central objective. Its launch was widely reported as a ban on raw mineral exports, but the policy text asks only that the export policy consider restricting minerals in minimally processed forms. It sets no minimum level of local processing and, because it is not legally binding, bans nothing on its own. It is also silent on what investors would gain from processing in Sri Lanka, such as tax concessions, access to industrial zones, or reliable electricity and transport links. Instead, it describes itself as a foundation for other institutions to draw up their own action plans, so delivery rests on a fragmented set of state bodies.
How the policy was made adds to the concern. Stakeholders interviewed for this brief, including mineral exporters, said that policymakers lean heavily on academic advice that lacks commercial and industrial grounding, producing a policy that is sound in theory but less practical in reality. They also said consultation tends to happen at the start of a drafting process, but not in the revisions that follow, so those most affected rarely see the final draft before Cabinet approval.
A regulator stretched thin
Much of the delivery of the mineral policy rests on the Geological Survey and Mines Bureau (GSMB), and a 2026 review by the National Science and Technology Commission (NASTEC) reveals some concerning capacity constraints. The GSMB, for instance, operates with 368 permanent and 160 temporary staff against an approved cadre of 514 permanent posts, leaving 146 permanent positions vacant. Like many other state institutions, it also struggles to attract and retain technical experts due to uncompetitive government salary packages.
Licensing is similarly slowed by the absence of a single window for approval. Mining company heads interviewed for this brief said that securing an exploration licence means going to more than ten different state departments and authorities for clearance. NASTEC found that GSMB issues only about 60% of licences within the prescribed timeframe, against a target of 85%, mainly because of delays in recommendations and clearances from other institutions. GSMB has also not been designated a Project Approving Agency for nearly a decade, leaving environmental impact assessments for mining to bodies such as the Central Environmental Authority, which has environmental expertise but not specialised mining expertise.
The evidence base is also stretched thin. Financial and security constraints have kept GSMB from conducting an airborne geophysical survey, so investors cannot judge whether a proposed mine is viable without funding their own exploration first. Similarly, its geological data is not digitised for easy access, and its website carries no key reports.
A law that has not caught up
Because the policy is not legally binding, it depends on legislation to give it effect. The new policy’s Principle 6 itself calls for a review of existing Acts, regulations, guidelines, administrative frameworks and fiscal norms to align them with the policy. Until that happens, the old framework stays in force.
How far GSMB’s discretion under that framework extends was tested in 2024, when the Supreme Court considered the Uva Magnetite case, which concerned an industrial mining licence for iron ore in Monaragala district. The project dates back to 2003, and objections raised during its assessment included the absence of competitive bidding, a royalty of just 4%, and contractual obligations to export raw ore without domestic value addition. The Court criticised GSMB for passing its duty as trustee of the country’s mineral resources to the Central Environmental Authority without weighing the economic, policy, and public interest concerns. It also stated that granting an exploration licence on an unsolicited proposal, and then a mining licence without letting others compete, would breach the equality guarantee in Article 12(1). The government has since suspended new exploration licences, and a Cabinet-appointed committee is reviewing around 470 exploration licences issued over the last 27 years.
Foreign ownership rules add a further constraint. Under exchange control regulations, foreign investors in the mining sector are limited to 40% of voting shares unless the Board of Investment approves a higher stake. Major mining countries like Australia, by contrast, set no fixed ceiling and screen investments case by case, treating critical minerals as a sensitive sector. Sri Lanka’s fixed cap may therefore deter investors who are reluctant to commit high capital and proprietary technology to projects they do not control.
Closing the gap
Closing this gap will take more than a policy document. Sri Lanka needs to update the existing legal framework in such a way that it fits the ambitions set forth by the new policy. Going forward, although the policy is already drafted and approved, the GSMB and the Ministry could find ways to include the stakeholders, including the communities, in setting out the plans to reach the new policy’s goals. GSMB must also prioritise addressing the staff gap, starting with the Director of HR, which, according to the GSMB website, remains vacant to this day. Updating and digitising geological data, introducing a single-window approval process to minimise licence processing times and attract investors are some other tasks that have been promised for a long time by previous governments yet never delivered. Sri Lanka has a fresh national mineral policy. Perhaps it’s time that the GSMB also adopts a fresh approach, replacing a decades-old system that has proven less efficient than desired, to govern and regulate the country’s precious mineral wealth.
Author Bio:
Hasarel Gallage is an independent researcher, specialising in critical minerals and the political economy of resource-endowed states in the Global South.
Note: This article summarizes the third of five policy briefs by Factum on Sri Lanka’s mineral industry.
Factum is an Asia Pacific-focused think tank/consultancy on Diplomacy, Tech-Plomacy, Digital and Energy Futures accessible via www.factum.lk.
The views expressed here are the author’s own and do not necessarily reflect the organization’s.
