ECONOMYNEXT – Sri Lanka’s Water Supply and Drainage Board is selling water at a loss requiring a tariff hike to break-even, State Minister of Water Supply Sanath Nishantha said as the country comes to grips with worst currency crises triggered by its intermediate regime central bank.
“Currently the water board is providing water at two cents per liter, which is extremely low,” Minister Nishantha told EconomyNext at the opening of a new Centre of Excellence for Water and Sanitation in Ratmalana.
“The price of a one-liter bottle of water in the market is above 100 rupees, and yet the government is only charging two cents for that amount to be provided through the pipe line system to every household”.
However, bottled water which can be taken around and consumed – sometimes from hill springs – and bulk water cleaned from major rivers cannot be compared directly.
The Water Board is selling at 2.0 cents a litre when its cost of production is 3.5 cents, Minister Nishantha said.
Sri Lanka’s water, electricity, fuel and food prices go up year after year because the country’s macro-economists print money to suppress interest rates triggering forex shortages and currency crisis.
When macro-economists print money to mis-target rates and deprecated the currency, energy prices go up pushing up the cost of pumping water.
In 2022 after two years of money printing, macro-economists busted the currency from 200 to 370 to the US dollar.
The NWSDB has 2.8 million connections and 92 percent belong to domestic customers.
“We are still discussing, on how much the increase should be, and the researching for that is ongoing,” Minister Nishantha said.
“If we do that, then the water board can operate without any financial support from the government”.
Sri Lanka raised water tariffs once in August after the currency collapse.
Attempts to take the policy rate away from macro-economists so that they can no longer mis-target rates and inject liquidity (conduct ‘monetary’ policy) in a bid to bring back monetary stability lost in 1950 have so far failed.
Due to currency depreciation Sri Lanka’s utility prices do not fall even when global energy prices fall.
According to the Central Bank annual report, the Water Board recorded an operating loss of 3.1 billion rupees in 2021 compared to the loss of 370.5 million rupees recorded in the previous year, owing to increases in operation and maintenance costs. (Colombo/Dec15/2022)