Tea for long was the island's top export commodity and even now is one of the main foreign exchange earners.
But poverty levels on estates have persistently been higher than the national average and more alarmingly, increased in recent years.
"The tea industry employs a large number of poor people, but in this case employment alone has failed to alleviate poverty since workers have not been substantially empowered with skills," says the study.
The very low skilled work yields insufficient wages to pull workers out of poverty, according to the study which was presented at a recent international conference on the trade-poverty nexus in South Asia.
"Hence, the estate sector remains the poorest sector in Sri Lanka, despite being a predominantly trade oriented sector."
The study says the estate sector experience highlighted the importance of complementary policies to trade, such as the development of human resources and skills, in poverty reduction strategies."Trade has had many positive benefits, including the generation of significant employment in sectors such as garments, providing access to markets not conceivable within Sri Lanka's 20 million strong population," it says.
"However, the benefits have not been as clear cut in other sectors such as the tea industry, as many in the estate sector remain below the poverty line."
The study says that overall poverty in the island declined in the past three decades and is now mainly a rural phenomenon.
"However, poverty in the estate sector which holds about 5.5 percent of the population has reached a new high from 30 percent in 2002 to 32 percent in 2006/07 where almost one in every three persons suffers from poverty."
Plantation areas which are more than 20 acres in extent and having not less than 10 residential labourers are categorised as the estate sector.
Nuwara Eliya, a key tea growing region in the central hills, and Moneragala to the south-east, are the poorest districts.
Nuwara Eliya is the only district that reported an increase of poverty from 2002 to 2006/07 and the increase is an "alarming" and almost 50 percent jump from 22.6 percent in 2002 to 33.8 percent in 2006/07, says the study.
"Tea has been Sri Lanka's major traditional export product between independence and the rise of the garment industry in the 1990s," it says.
"However, this has been less of a success story given poverty rates in the estate sector. Even though significant employment is generated, the bulk of it is very low skilled employment which yields low incomes."
Wages in the tea sector were increased following industrial action in 2006 but apparently are still not enough to pull estate workers above the poverty line.
The average daily wage earned in the sector last year was 378 rupees for men and 261 for women.
"To be above the national poverty line requires expenditure of above 2,924 per person per month as of April 2008," says the study.
"Thus, a female headed household in the estate sector with four members including just one provider, who works a full 30 days, would have a per capita income of 1,958 rupees, clearly below the poverty line."
Tea industry officials say plantations companies running the estates have been making efforts to improve worker welfare and working conditions in recent years and that estate workers are given free housing and health care.
Nevertheless, the industry faces a labour shortage as estate youth have shown a reluctance to take up the work of their parents given comparatively low wages and poor social recognition.
Other analysts point out that the plantation sector has always been a low wage industry.
The first plantations under British colonial rule had to import labour from India, while Sri Lanka's own residents were engaged in export agriculture higher up the value chain, such as spices.
Mass commercial export agriculture in many countries was usually operated with slave labour or indentured labour. These include sugar and tobacco in the Americas.
Critics says that even today in sugar plantations around the world - especially in some parts of Brazil - near slave-labour conditions exist.
Activists who are opposing a new sugar plantation in the Uva region of Sri Lanka have also pointed to the near-indentured labour type conditions governing relations with sugar contract growers.
Even in Sri Lanka workers in sugarcane small holdings are highly indebted, unlike workers in tea plantations who at least get a regular monthly wage.
Tea smallholders in the island's south, who supply leaf to factories, operate their farms in a different way, and seem to be more productive and get better rewards.
This may indicate that poverty in estates, as well as sugarcane plantations, is not related to trade, but to the structure of the industry, mono-cropping, as well as the incentives and the contracts governing relations with workers.
Tea smallholders in the south have a free market for leaf, and factories compete to buy leaf from smallholders who assume the commercial risks of growing tea.
The formula governing leaf prices is directly related to auction prices largely determined by international trade.
Some tea small holdings are also inter-cropped with coconut.
Estate workers on the other hand are selling labour, in a near-indentured fashion, to one buyer.