COLOMBO (EconomyNext) – Petroleum products will be priced by a formula and electricity will also be priced by a formula based on volume usage, Sri Lanka’s minister Champika Ranawaka has said.
Ranawaka took office as the country’s new power and energy minister this week, after a new administration came to power.
An automatic pricing formula will end arbitrary pricing by politician and end the ability of the elected ruling class to impoverish the entire population by currency depreciation, economic analysts say.
It is now easire to price products by formula as the US dollar is strenthening with the Federal Reserve ending money printing, but it is more important for the economic well-beng of the poor to raise power prices as soon cost go up, economic analsyts say.
The current administration came into power partly due to economic hardships imposed by a fall of the rupee from 110 to 130 during a balance of payments crisis in 2013 which was triggered by energy subsidies funded by central bank accommodated (printed money) bank credit.
The roots of the crisis lay in a late 2011 budget decision not to raise power prices during a drought, which led to more than 200 billion rupees in combined losses at state power and energy utilities.
There is no market pricing in power because the sector is a ruler-controlled state monopoly, where citizens have been barred from selling power even to their neighbours the state and rulers.
At the moment Sri Lanka charges probably the highest prices in the world for domestic users of power, while giving cheaper prices for export industries, where the ultimate consumers are in rich industrialized nations.
Petroleum distribution is a duopoly divided between by ruler-controlled state firms in Sri Lanka and India.
Sri Lanka also prices petrol – which is a cheaper fuel to import and is also cleaner – while under-pricing diesel which has a higher calorific content and is more expensive to import and is use also causes cancer.