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Sunday May 26th, 2024

Demand spikes for fuel, power generators in Sri Lanka amid power crisis and forex shortages

ECONOMYNEXT – Sri Lanka is seeing a surge in demand for fuel and power generators since the government announced scheduled power outages from the third week of February as the island nation struggles to ensure an interrupted fuel supply while finding US dollars for imports.

Sri Lanka is facing one of its worst forex and debt cresses in its history as the country’s foreign exchange reserves dwindled to 2.36 billion US dollars in end January, just enough to finance imports for five weeks. The remaining reserves also included swaps from China, India, Bangladesh, and the Asian Clearing Union (ACU).

The state-run utility provider, the Ceylon Electricity Board (CEB), has announceddaily one hour and 45-minute power cuts starting February 18. The power cut duration has now been increased up to three hours in some areas.

Since the announcement, generator suppliers and fuel stations have seen a sudden rise in demand for their products amid rumours that Sri Lanka is running out of US dollars to import fuel.

No dollars, no fuel

Government sources said the Energy Ministry is struggling to find dollars to clear two shipments of diesel which have arrived at the Colombo port.

Energy Minister Udaya Gammapnpila last week said there is an imminent risk of the country facing a fuel shortage before the first week of April.

The state-owned fuel retailer Ceylon Petroleum Corporation (CPC) has been looking for 60 million dollars to clear a petroleum shipment and another diesel shipment on Friday.

A government official said the CPC was able to clear the petrol shipment, but it has yet to clear the diesel consignment. An extra diesel shipment also has arrived at the port, the official said.

As a result, fuel stations in the country have seen a sudden increase in demand for all types of fuel.

“We do not know what the exact reason for the sudden rise in demand. But there are rumours of price increase,  smaller fuel stations not having enough fuel, and fuel needed to run generators,” a Colombo based fuel station official told EconomyNext.

Another fuel station manager said: “The lack of fuel in small fuel stations as well as lack of some fuels is the reason for more people to come.”

Many fuel station owners say the stocks of 92 Octane and auto diesel have depleted more than other types of fuel. They say most consumers opt for expensive fuels when 92 Octane or auto diesel, which are among the cheapest, are not available.

Generator demand up 

Meanwhile, power generator sellers are unable to meet the sudden rise in demand amid the power cuts.

“We already sold our stocks. There are more enquiries, but we are unable to supply the increasing demand because of the import restrictions that have been imposed by the government,” a spokesman for Circom Power Technologies (PVT) LTD told EconomyNext.

“On the other hand, banks don’t issue Letters of Credit (LCs) due to the forex shortage in the country,” he said.

The Circom spokesman said the company’s maintenance division has seen a corresponding spike in repair and maintenance requests from their clients because people were getting ready to face the worst in the event of a full-blown power crisis.

“We are in a difficult situation because it is restricted to import the spare parts we need,” the official said.

Daya Upasena, the owner of Power Lanka Pvt Ltd, told EconomyNext that their clients are coming in, enquiring about generators and prepared to pay upfront for new machines as soon as they turn up.

“We sold out the stock we had. Now we are getting some dollars from our partners that we plan to invest in about 10 machines,” Upasena said.

“But we have pre orders for about 50 machines at the moment,” he said adding that the firm is looking for new avenues such as renting generators for clients, who are unable to purchase a machine permanently.

The current average price of a three kilovolt-ampere power generators is around 70,000 rupees.

Suppliers have urged the government to relax the ongoing import restrictions so that the industry can survive while being a support service for other industries in addressing the power shortage. However, though the central bank has said there are no such restrictions, suppliers are unable to get dollars from local banks as there is a severe dollar shortage.  (Colombo/Feb 22/2022)

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Sri Lanka power outages from falling trees worsened by unfilled vacancies: CEB union

HEAVY WINDS: Heavy rains and gusting winds have brought down trees on many location in Sri Lanka.

ECONOMYNEXT – Sri Lanka’s power grid has been hit by 300,000 outages as heavy winds brought down trees, restoring supply has been delayed by unfilled vacancies of breakdown staff, a union statement said.

Despite electricity being declared an essential service, vacancies have not been filled, the CEB Engineers Union said.

“In this already challenging situation, the Acting General Manager of CEB issued a circular on May 21, 2024, abolishing several essential service positions, including the Maintenance Electrical Engineer in the Area Engineer Offices, Construction Units, and Distribution Maintenance Units,” the Union said.

“This decision, made without any scientific basis, significantly reduces our capacity to provide adequate services to the public during this emergency.

“On behalf of all the staff of CEB, we express our deep regret for the inconvenience caused to our valued customers.”

High winds had rains have brought down trees across power lines and transformers, the statement said.

In the past few day over 300,000 power outages have been reported nationwide, with some areas experiencing over 30,000 outages within an hour.

“Our limited technical staff at the Ceylon Electricity Board (CEB) are making extraordinary efforts to restore power as quickly as possible,” the union said.

“We deeply regret that due to the high volume of calls, there are times when we are unable to respond to all customer inquiries.

“We kindly ask consumers to support our restoration teams and to report any fallen live electrical wires or devices to the Electricity Board immediately without attempting to handle them.

The union said there were not enough workers to restore power quickly when such a large volume of breakdowns happens.

“We want to clarify that the additional groups mentioned by the minister have not yet been received by the CEB,” the union said.

“Despite the government’s designation of electricity as an essential service, neither the government, the minister in charge, nor the CEB board of directors have taken adequate steps to fill the relevant vacancies or retain current employees.

“We believe they should be held directly responsible for the delays in addressing the power outages due to the shortage of staff.”

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Melco’s Nuwa hotel to open in Sri Lanka in mid-2025

ECONOMYNEXT – A Nuwa branded hotel run by Melco Resorts and Entertainment linked to their gaming operation in Colombo will open in mid 2025, its Sri Lanka partner John Keells Holdings said.

The group’s integrated resort is being re-branded as a ‘City of Dreams’, a brand of Melco.

The resort will have a 687-room Cinnamon Life hotel and the Nuwa hotel described as “ultra-high end”.

“The 113-key exclusive hotel, situated on the top five floors of the integrated resort, will be managed by Melco under its ultra high-end luxury-standard hotel brand ‘Nuwa’, which has presence in Macau and the Philippines,” JKH told shareholders in the annual report.

“Melco’s ultra high-end luxury-standard hotel and casino, together with its global brand and footprint, will strongly complement the MICE, entertainment, shopping, dining and leisure offerings in the ‘City of Dreams Sri Lanka’ integrated resort, establishing it as a one-of-a-kind destination in South Asia and the region.”

Melco is investing 125 million dollars in fitting out its casino.

“The collaboration with Melco, including access to the technical, marketing, branding and loyalty programmes, expertise and governance structures, will be a boost for not only the integrated resort of the Group but a strong show of confidence in the tourism potential of the country,” JKH said.

The Cinnamon Life hotel has already started marketing.

Related Sri Lanka’s Cinnamon Life begins marketing, accepts bookings


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Sri Lanka to find investors by ‘competitive system’ after revoking plantations privatizations

ECONOMYNEXT – Sri Lanka will revoke the privatization of plantation companies that do not pay government dictated wages, by cancelling land leases and find new investors under a ‘competitive system’, State Minister for Finance Ranjith Siyambalapitiya has said.

Sri Lanka privatized the ownership of 22 plantations companies in the 1990s through long term leases after initially giving only management to private firms.

Management companies that made profits (mostly those with more rubber) were given the firms under a valuation and those that made losses (mostly ones with more tea) were sold on the stock market.

The privatized firms then made annual lease payments and paid taxes when profits were made.

In 2024 the government decreed a wage hike announced a mandated wage after President Ranil Wickremesinghe made the announcement in the presence of several politicians representing plantations workers.

The land leases of privatized plantations, which do not pay the mandated wages would be cancelled, Minister Siyambalapitiya was quoted as saying at a ceremony in Deraniyagala.

The re-expropriated plantations would be given to new investors through “special transparency”

The new ‘privatization’ will be done in a ‘competitive process’ taking into account export orientation, worker welfare, infrastructure, new technology, Minister Siyambalapitiya said.

It is not clear whether paying government-dictated wages was a clause in the privatization agreement.

Then President J R Jayewardene put constitutional guarantee against expropriation as the original nationalization of foreign and domestic owned companies were blamed for Sri Lanka becoming a backward nation after getting independence with indicators ‘only behind Japan’ according to many commentators.

However, in 2011 a series of companies were expropriation without recourse to judicial review, again delivering a blow to the country’s investment framework.

Ironically plantations that were privatized in the 1990s were in the original wave of nationalizations.

Minister Bandula Gunawardana said the cabinet approval had been given to set up a committee to examine wage and cancel the leases of plantations that were unable to pay the dictated wages.


Sri Lanka state interference in plantation wages escalates into land grab threat

From the time the firms were privatized unions and the companies had bargained through collective agreements, striking in some cases as macro-economists printed money and triggered high inflation.

Under President Gotabaya, mandating wages through gazettes began in January 2020, and the wage bargaining process was put aside.

Sri Lanka’s macro-economists advising President Rajapaksa the printed money and triggered a collapse of the rupee from 184 to 370 to the US dollar from 2020 to 2020 in the course of targeting ‘potential output’ which was taught by the International Monetary Fund.

In 2024, the current central bank governor had allowed the exchange rate to appreciate to 300 to the US dollar, amid deflationary policy, recouping some of the lost wages of plantations workers.

The plantations have not given an official increase to account for what macro-economists did to the unit of account of their wages. With salaries under ‘wages boards’ from the 2020 through gazettes, neither employees not workers have engaged in the traditional wage negotiations.

The threat to re-exproriate plantations is coming as the government is trying to privatize several state enterprises, including SriLankan Airlines.

It is not clear now the impending reversal of plantations privatization will affect the prices of bids by investors for upcoming privatizations.

The firms were privatized to stop monthly transfers from the Treasury to pay salaries under state ownership. (Colombo/May25/2024)

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