ECONOMYNEXT – Sri Lanka’s electricity tariff hike controversy has a taken a new turn with the Chairman of Public Utilities Commission Janaka Ratnayake saying there is a fresh dispute among members an attempts to disregard recommendation of its secretariat.
Three members of the commission had opposed a revised tariff proposal submitted by the tariff division of the commission and had instead supported the full tariff hike requested by the Ceylon Electricity Board, he said in a video statement.
“Three members of the commission had met without approval and given documents agreeing to an increase of over 225 billion rupees,” he said in a video statement.
A revised proposal compiled by the tariff division of the PUCSL following a public consultation had been ‘consigned to the waste basket” he said.
The action to approve the tariff hike in its entirely and plans to implement it from February 15 was against the Electricity Act and the PUCSL Act, due to political pressure he alleged.
There was no immediate reaction from the commission.
READ MORE: How Sri Lanka’s electricity tariffs are expected to be revised: interview
The Ceylon Electricity Board in a tariff filing had said the utility will have to spend 722 billion rupees in 2023 based on its demand forecast but will only get a 434 billion rupees, projecting a loss of 287 billion rupees requiring a 66.2 percent revenue increase to avoid losses.
Up to October the CEB had lost 112.9 billion rupees, the agency said.
The CEB is facing sharply higher costs after the rupee collapsed from 200 to 370 to the US dollar in 2022 and lost all its foreign reserves in the wake of two years of money printing to maintain an artificially low policy rate.
According to information released by Ratnayake, the tariff division had recommended around 35 percent increase in revenues based on a lower demand forecast.
There had been demand drop of about 6 GWh from around 47 to 41 GWh since the collapse of the rupee in March and the August tariff revision.
Sri Lanka has extensive cross subsidies in electricity tariffs, with some customers including religious categories getting sharply below cost prices from some customers.
It may amount to arrogating the taxation powers of the and over-charging others which may subvert the tax system of the country, according to some critics.
Sri Lanka’s power minister has said that affected persons could be cash grants, regularizing the welfare system and the mis-use of CEB for budgetary purposes, so that correct costs are reflected in the budget.
“We discussing with several agencies to give the cash grants,” Power Minister Kanchana Wijesekera told parliament. “The government will give some support for their costs.” (Sri Lanka plans up to 65-pct tariff hike in January: Minister)
The International Monetary Fund has called for cost reflective tariffs in Sri Lanka as part of an agreement to give a 2.9 billion dollar bailout.
In Pakistan also where the currency has collapsed following mis-targeted interest rates and re-financing through central bank credit, the IMF had called for higher electricity tariffs.
PUC Tariff Division recommendation
(Colombo/Feb15/2023)