An Echelon Media Company
Sunday June 23rd, 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)

Leave a Comment

Your email address will not be published. Required fields are marked *

Leave a Comment

Leave a Comment

Cancel reply

Your email address will not be published. Required fields are marked *

India supports Sri Lanka Coast Guard to boost maritime security

ECONOMYNEXT – India has given 1.2 million US dollars’ worth spare parts to Sri Lanka’s Coast Guard to be used in a vessel also gifted to the Indian Ocean Island on an earlier occasion, the Indian High Commission in Colombo said.

“Handing over of the large consignment of spares symbolizes India’s commitment to support capability building towards addressing the shared challenges of Maritime Security in the region,” the Indian High Commission said

The spare parts were brought to Sri Lanka on the Indian Coast Guard Ship Sachet, an offshore patrol vessel that was on a two-day visit to the island.

The spares were formally handed over to the Sri Lanka Coast Guard Ship Suraksha which was gifted to Sri Lanka in October 2017 by India.

India has gifted spare parts for the ship in June 2021 and April 2022 and also provided assistance in refilling of Halon cylinders in January 2024. (Colombo/June23/2024)

Continue Reading

Sri Lanka Water Board makes profits, tax-payers inject Rs28bn

ECONOMYNEXT – Sri Lanka’s state-run National Water Supply and Drainage Board has made a profit of 5.2 billion rupees in the year to December 2023, after a tariff increase despite not getting money for 25 percent of its water it pumps out.

Total revenues went up to 61.8 billion rupees in 2023 from 35.4 billion rupees, a Finance Ministry report said.

Water revenue surged to 58.5 billion rupees from 33.1 billion rupees, cost of sales also went up to 32.8 billion rupees from 23.14 billion rupees, helping boost gross profits from 12.3 billion rupees to 29.0 billion rupees.

Finance costs surged to 14.9 billion rupees from 3.9 billion rupees,

NSWD reported net profits of 5.2 billion rupees for the year, against a loss of 2.7 billion rupees a year earlier.

The Treasury had given 28 billion rupees from tax payer money to settle loans.

During the Rajapaksa administration, macroeconomists who ran the Finance Ministry made state enterprises borrow money from banks through Treasury guarantees listing them as ‘contingent liabilities’, claiming they were ‘off balance sheet’.

The Road Development Authority, which had no revenues to speak of borrowed large amounts of money from banks which were listed as ‘contingent liabilities’ though they were a responsibility of the state from day one, allowing macroeconomists to understate both the budget deficit and national debt, critics say.

The water tariffs were raised by 81 percent after macroeconomists printed money to supress interest rates for flexible inflation targeting/potential output targeting. The currency collapsed after macroeconomists tried to float the rupee with a surrender rule in place.

Non-revenue water for which no money is collected was 25.2 percent. The agency was supposed to reduce non-revenue water. In some districts religious establishments are responsible for non-revenue water, according to an official who said it on condition of anonymity.

The water board is also unable to collect money from some services like common toilets for underserved communities. (Colombo/June23/2024 – Update II)

Continue Reading

Sri Lanka will expedite Indian projects: President

ECONOMYNEXT – Sri Lanka will expedite Indian-backed projects in the island, President Ranil Wickremesinghe told Indian business people after a visit by Indian External Affairs Minister S Jaishankar this week.

“I discussed with Prime Minister Modi the need to accelerate the joint program that we have decided, agreed on. So the major ones are identified, and Foreign Minister Jaishankar came down today [20] to have a discussion. Now this will show the new path we are taking,” president Ranil Wickremesinghe said.

“It won’t be individual projects. We’ve discussed a fair number of them. First is the grid interconnection between Sri Lanka and India, so that sustainable energy can be transmitted to India.

“We have the Sampur solar power project, which is a Government to Government (G2G) project, and a three island project, which is where we hope the ground breaking can take place in July,” he told Indian business people at the 31st All India Partner’s Meet 2024 (AIPM 2024), held at ICT Ratnadipa in Colombo.

The AIPM 2024 which was organised by KPGM Sri Lanka and India provided a platform for both countries to reaffirm their commitment to collaborative projects that promise to redefine bilateral relations and propel socio-economic growth.

“It’s a great pleasure and a privilege to have you in Sri Lanka, in Colombo, holding this meeting. It shows on one hand the close friendship that our two countries have, and on the other hand, the confidence that you have in Sri Lanka.

“Having now survived two difficult years, I must acknowledge that this was possible because India gave us a loan of $3.5 billion. All that will be repaid.”

Cooperation between the two nations needed to be enhanced, particularly in the energy sector, aiming to foster new development for the Northern region, Wickremesinghe said.

“We are looking at developing Palk Straight for wind energy and solar energy, both countries to get together and have a large farm for solar energy, for renewable energy. It also means that we will have a new economy for the northern province, which was worst affected by the war.”

Several Indian-backed projects in Sri Lanka have stalled due to protests from some parties, with some going to courts.

India is helping expand the Kankesanturai port, and is discussing development of the Palali and Colombo airports.

The National Livestock Development Board of Sri Lanka, in collaboration with India’s Amul Dairy Company, is involved in a project to enhance liquid milk production in the country.

The two nations are also considering establishing land connectivity.

Discussions have also taken place regarding expediting the Trincomalee Development Project, which encompasses industrial investment zones and tourist areas.

“Plans are underway to construct a multi-product oil pipeline from Nagapatnam to Trincomalee, pending the final observation report. Trincomalee is poised to become a hub for oil refining, with the development of ports and investment zones, transforming Trincomalee Port into a significant hub on the Bay of Bengal.

“Today, the entire East Coast is being opened up for tourism, with additional land earmarked for hotels in Galle and southern areas. Moreover, there are plans to establish more investment zones across the country, alongside expanding our professional training programs. In these endeavours, we are collaborating closely with India.” (Colombo/Jun22/2024)

Continue Reading