Sri Lanka's Sunday Times newspaper said a decision on a blanket ban has been changed following representations from large plantations.
"The plantation sector representatives told us that there is a shortage of manual labour and hence they depend heavily on the herbicide for weed control," Agriculture Minister Mahinda Yapa Abeywardena was quoted as saying.
"If there’s a ban on its use, they told us that the entire sector could collapse within two or three months."
A study by three researchers from Sri Lanka and the US has suggested that glyphosate,
a widely used weedicide was involved in causing Chronic Kidney Disease of unknown etiology (CKDu) which has been found mainly in rice growing areas of Sri Lanka.
Similar diseases have been found in South America. The chemical was originally developed by Monsanto and has overtaken rival to be the most widely used weedicide partly due to being considered as relatively non-toxic on its own.
China is now the world's largest producer of glyphosate.
But the researchers said it was helping carry toxic metals into human bodies mainly through water.
Over 90 percent of the victims came from areas involving 'hard water' where shallow ground water contained heavy metals. Arsenic also involved in the disease was was believed to be getting into the environment and foods from phosphate fertilizer.
The researchers also said that farmers were careless in using agro chemicals allowing them to be ingested easily into their bodies.
President Mahinda Rajapaksa has suggested that a committee of experts be set up to examine the issue and in the meantime glysophate use be restricted to areas where the disease was not prevalent, the Sunday Times report said.
But the research study had also warned that farmers in the North and East where the water was also 'hard' could soon develop the disease.
The study suggested that restrictions on agro-chemicals during a 30-year war had saved the farmers, but since 2009 agro chemical use had picked up.