In the slowly growing global tea market Lanka has not performed as well relative to its competitors in recent times as it did in the past. Sri Lanka needs to improve the efficiency of its industry to remain competitive in world tea market. Improving efficiency and international competitiveness in the Sri Lanka tea industry requires that the high costs of production, associated with low productivity, be reduced. Tea producers have the main responsibility for this. However, for improving efficiency and achieving international competitiveness, it is necessary that government policies for the tea industry are consistent with correction of market failures. This is not the case at present, with government policies for the tea industry directed partly to correcting market failures but more to achieving political goals.