COLOMBO (EconomyNext) – Sri Lanka’s power tariffs will be revised in June following a public consultation and petroleum and gas prices would be changed according to a formula, Energy Minister Champika Ranawaka said.
"In the future we will introduce a price formula where the people will be able to get fuel without anybody’s interference," Ranawaka told reporters in Colombo.
"It will be a transparent formula. In June new power tariffs will be introduced. Then also people will know what the costs are."
He said there will be provision to take into account lower income people in the new tariffs.
In Sri Lanka power is a state monopoly and petroleum is duopoly controlled divided between ruler-run enterprises from Sri Lanka and India and prices are dictated by Sri Lanka’s rulers as a result there is little or no competition.
The most dangerous outcome of this is that when global energy prices go up, domestic prices are held down with bank credit, which are then accommodated by central bank credit (printed money) which results in currency depreciation and balance of payments crisis.
In 2011, despite the existence of a Public Utilities Commission which should revise power tariffs every six months – or sooner if there is a sudden rise in production costs – the rulers held prices down with printed money.
The rupee fell from 110 to 130 and not only energy but all costs including those of food rose as a result of high inflation in that year.
Analysts say the economic hardships imposed by the currency depreciation that came from energy subsidies helped make the new administration into power.
Global commodity prices are now falling in dollar terms as a result of better Federal Reserve policy with analysts talking of a 1980s style Great Moderation 2.0 coming back.
But with the European Central Bank starting a new round of money printing gold prices have started to move up, indicating that oil prices may also become volatile.
Ranawaka said the consumer affairs ministry would take steps to reduce cooking gas prices also according to a formula.
Though a formula was devised several years ago for gas, which was biased in favour of a domestic firm when the larger firm was foreign hands, the formula seems not have been consistently imposed.