An Echelon Media Company
Tuesday November 29th, 2022

Sri Lanka power & energy minister defends “necessary” electricity tariff hike

ECONOMYNEXT – Sri Lanka’s Power & Energy Minister Kanchana Wijesekara in parliament defended electricity tariff hikes, insisting that the burden on consumers would not have been so great if timely tariff revisions had been implemented. 

Speaking during an adjournment debate on Monday August 29 on the impact of the tariff hike, Wijesekara argued that wrong policies were not exclusive to one government and that steep hikes were inevitable given the large costs of power generation.

“Even though a hike is a very difficult thing for the people, it must be done at this time,” Wijesekara said.

“So far the [the state-run utility provider] Ceylon Electricity Board (CEB) needs to pay 76.8 billion rupees to private power plants and 29 billion rupees for renewables including rooftop solar. [The state-run] Ceypetco has to pay 31 billion rupees.”

The minister said that even though the CEB had filed for a projected revenue of 869 billion rupees from the tariff hikes, the Public Utilities Commission (PUCSL) had only given approval for 500 billion rupees.

“[A tariff increase] is a must, and that has been done with the maximum possible subsidy for the low-consumption groups,” he said. 

The majority of Sri Lanka’s electricity consumers use less than 30 units a month, and the current tariff rates offer that group a 75 percent subsidy on the rate per unit.

“Consumers who used 30 units a month spent 105 rupees on their electricity bill. That 105 has become 360 with the hikes,” Wijesekara said.

“Taken as a percentage it’s a lot…Is there anyone who cannot pay 360 for electricity? There is no one like that. Even for a loaf of bread we pay 200 rupees today.

“Electricity that costs around 1,500 rupees to generate is given at only 360 rupees.”

The CEB and PUCSL have attempted to soften the impact of tariff hikes on low-consumption groups by a process called cross subsidisation, where income from high end users will be used to pay for consumption by low end users. 

Related: 

Explainer: Sri Lanka’s electricity tariff hike and how it works

Wijesekara said that the hikes for the places of worship were also raised despite criticism from religious leaders. 

“Out of 46,682 religious places in Sri Lanka, 15,195 consume fewer than 30 units. Till now they have only spent 87 rupees for electricity per month. Now they will have to pay 330 rupees.” he said.

According to CEB data, tariffs for electricity used at places of worship were hiked by 555 percent, driving up the charge per unit from 7.42 rupees to 48.65 rupees.

It costs 32 rupees to generate one unit of electricity.

Cost of fuel and coal have more than doubled since the last tariff hike in 2013, and the effect of the depreciating rupee is driving power generation costs through the roof.

In a speech that preceded Wijesekara’s Monday morning, opposition MP Kabir Hashim was scathing in his criticism of the current government’s past actions that allegedly led to Sri Lanka’s power crisis, including overstaffing of and failure to restructure the CEB. The Samagi Jana Balawegaya (SJB) MP also proposed a direct cash transfer to low-income households and SMEs affected by the rate hike.

Related:

Sri Lanka main opposition proposes cash transfers for those affected by electricity tariff hike

 

However, Wijesekara defended his position by saying that it was not just one party that was to blame for the crisis, and that irregularities had also taken place when the current main opposition was in power. 

“The number of CEB employees increased from 15,000 to 22,000 while you were in power. For all ten years that [former President] Mahinda Rajapaksha was in power, only 1,000 were added,” he said.

“When your government was making wrong decisions, you didn’t have the backbone to stand up against them.”

Wijesekara agreed that restructuring of the CEB was necessary. He had previously tweeted that “half of the 26,000 workforce at the CEB” would be adequate to run the organisation efficiently, and that the majority of workers were “inefficient and incompetent.”

He said that despite the large volume of employees, the CEB was still outsourcing services that could be provided in-house.

Wijesekara said that the opposition’s own inability to amend tariffs was now making life difficult for everyone. 

“From 2016 to 2022, if you had decided to change tariffs at least once every four years, this much strain would not have been placed on the people,” he said.

“Tariffs were hiked in 2013 and then after Norochcholai was given to the people by Mahinda Rajapaksha, the benefit was given to the people by slashing tariffs by 25 percent.”

Despite making profits in 2015 and 2016, Wijesekara said that the CEB faced a cumulative loss of 278 billion rupees between 2017 and 2019 as a result of the government’s failure to plan out energy generation in the country or hike rates.

“I agree with MP Kabir Hashim that with the hikes, we also have to manage costs. We have spoken time and time again about renewable energy, but it is only when a crisis happens, that we understand the importance of it,” said Wijesekara. (Colombo/Aug29/2022)

Comments (1)

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

  1. Don says:

    Its time to end the corruption of every form. From the minister to the ground handler and cut down on wastage and unutilized labor hours. Dubai being a country of many folds ahead of Sri Lanka has reduced its cost of operation by recruiting new staff with low pay scales eg.. an engineer at DP world use to get paid about AED 25,000 plus a month. in the year 2016 they have recruited new engineers for around AED 15,000. The old staff was given the option of leaving or taking the salary cut.

    We as a country cannot survive when the cost of operation of the government sector is enormously high and keep making losses over and over. its high time to make the necessary corrections or there will be no chance again i the future.

    The current head of state has noting to loose and he is the ideal candidate to implement the reforms. no other politician in this country will ever touch this area because they are only in politics to live for ever. They are hear to loot an become richer.

View all comments (1)

Comments (1)

Cancel reply

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

  1. Don says:

    Its time to end the corruption of every form. From the minister to the ground handler and cut down on wastage and unutilized labor hours. Dubai being a country of many folds ahead of Sri Lanka has reduced its cost of operation by recruiting new staff with low pay scales eg.. an engineer at DP world use to get paid about AED 25,000 plus a month. in the year 2016 they have recruited new engineers for around AED 15,000. The old staff was given the option of leaving or taking the salary cut.

    We as a country cannot survive when the cost of operation of the government sector is enormously high and keep making losses over and over. its high time to make the necessary corrections or there will be no chance again i the future.

    The current head of state has noting to loose and he is the ideal candidate to implement the reforms. no other politician in this country will ever touch this area because they are only in politics to live for ever. They are hear to loot an become richer.

Sri Lanka rubber farmers to get boost from France, Michellin

ECONOMYNEXT – Sri Lanka will start a project supported by France and Michellin group to support 6,000 rubber farmers, cabinet spokesman Minister Bandula Gunawardena said.

Rubber farmers in Badalgama and Medagama in the Moneragala district will be supported improve their capacity and supply chains at a cost of 726,700 Euros.

Financial support will be provided by France’s Michellin group which has a subsidiary in Sri Lanka and the government of France.

The project will be implemented by France’s Ksapa group under the guidance of Ministry of Industries.

The cabinet of ministers had cleared a proposal by the Plantations Industries Minister to enter into an agreement to implement the project. (Colombo/Nov29/2022)

Continue Reading

A new Sri Lanka monetary law may have prevented 2019 tax cuts?

ECONOMYNEXT – A new monetary law planned in 2019, if it had been enacted may have prevented the steep tax cuts made in that year which was followed by unprecedented money printing, ex-Central Bank Governor Indrajit Coomaraswamy said.

The bill for the central bank law was ready in 2019 but the then administration ran out of parliamentary time to enact it, he said.

Economists backing the new administration slashed taxes in December 2019 and placed price controls on Treasuries auctions bought new and maturing securities, claiming that there was a ‘persistent output gap’.

Coomaraswamy said he keeps wondering whether “someone sitting in the Treasury would have implemented those tax cuts” if the law had been enacted.

“We would never know,” he told an investor forum organized by CT CLSA Securities, a Colombo-based brokerage.

The new law however will sill allow open market operations under a highly discretionary ‘flexible’ inflation targeting regime.

A reserve collecting central bank which injects money to push down interest rates as domestic credit recovers triggers forex shortages.

The currency is then depreciated to cover the policy error through what is known as a ‘flexible exchange rate’ which is neither a clean float nor a hard peg.

From 2015 to 2019 two currency crises were triggered mainly through open market operations amid public opposition to direct purchases of Treasury bills, analysts have shown.

Sri Lanka’s central bank generally triggers currency crises in the second or third year of the credit cycle by purchasing maturing bills from existing holders (monetizing the gross financing requirement) as private loan demand pick up and not necessarily to monetize current year deficits, critics have pointed out.

Past deficits can be monetized as long as open market operations are permitted through outright purchases of bill in the hands of banks and other holders.

In Latin America central banks trigger currency crises mainly by their failure to roll-over sterilization securities. (Colombo/Nov29/2022)

Continue Reading

Sri Lanka cabinet clears CEB re-structure proposal: Minister

ECONOMYNEXT – Sri Lanka’s cabinet has cleared proposals by a committee to re-structure state-run Ceylon Electricity Board, Power and Energy Minister Kanchana Wijeskera said.

“Cabinet approval was granted today to the recommendations proposed by the committee on Restructuring CEB,” he said in a twitter.com message.

“The Electricity Reforms Bill will be drafted within a month to begin the unbundling process of CEB & work on a rapid timeline to get the approval of the Parliament needed.”

Sri Lanka’s Ceylon Electricity Board finances had been hit by failure to operate cost reflective tariffs and there are capacity shortfalls due to failure to implement planned generators in time. (Colombo/Nov28/2022)

Continue Reading