Ganthuna PES Pilot — Watershed Payments for Hydropower Protection (Sri Lanka)

Between 2019 and 2022, IUCN Sri Lanka, the private hydropower producer Vidullanka PLC, and UNDP's Biodiversity Finance Initiative (BIOFIN) piloted Sri Lanka's first Payment for Ecosystem Services scheme, in the 507-hectare catchment of the Ganthuna Small Hydropower Plant on the Gurugoda Oya stream, near Aranayake in Kegalle District. Erosion and slope farming in the upper catchment were causing sedimentation that damaged turbines and reduced reservoir storage, so the pilot tested whether a downstream water user — here a hydropower operator rather than a drinking-water utility — would pay upstream land users to avoid future infrastructure costs.

Vidullanka funded 60% and IUCN 40% of a total project cost of about LKR 6.1 million (roughly US$20,000-30,000). Interventions covered only about 4.2 hectares directly: 10,400 m² of riparian buffer restoration, 22,000 m² of forest enrichment planting, and roughly 10,000 m² of community/school forest and orchard blocks, with more than 3,200 trees planted. Coordination involved Sri Lanka's Ministry of Environment, Forest Department, Department of Agriculture, Central Environmental Authority, Sustainable Energy Authority, and the Aranayake Divisional Secretariat.

The pilot remains very small relative to its 507-hectare catchment and was disrupted by COVID-19. No independent hydrological outcome data (sediment reduction, turbine performance) has been published; the figures above are drawn from project design and reporting documents rather than post-hoc verification. As of a 2025 BIOFIN update, it was still described as Sri Lanka's only implemented PES scheme, with no national PES policy adopted and a second, tea-plantation pilot only "being considered."

Read the full analysis: https://droughtclp.unccd.int/case-study/sri-lanka-using-payment-ecosystem-services-pes-watershed-restoration-and-sustainable