The Tea Small Holdings Development Authority was established on 1 February 1977 under the Tea Small Holdings Development Law No. 35 of 1975. It is the sole statutory body mandated for the development of the tea smallholding sector in Sri Lanka, and it reports to the Ministry responsible for the plantation industries.
A tea smallholding is, in law, land under tea not exceeding ten acres — about 4.05 hectares — in the possession of one person. That definition covers a very large part of the national crop. Smallholders are not a marginal category in Sri Lankan tea; they are the majority of it, and the productivity of their land, the quality of the leaf they pluck and the price they are paid together determine a great deal of what the country earns from tea and what rural households in the tea-growing districts live on.
The Authority exists because that sector cannot be developed by market forces alone. A smallholder replanting a block takes land out of production for several years before the new tea yields; without assistance, the rational decision for an individual household is to keep plucking a declining bush. The subsidy schemes, the extension service and the society structure the Authority operates all address that gap between what is sensible for one household this season and what the sector needs over a generation.