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Tuesday November 29th, 2022

Sri Lanka President orders CEB to build 300MW coal plant fast

ECONOMYNEXT – Sri Lanka’s President Gotabaya Rajapaksa had ordered the state-run Ceylon Electricity Board to quickly build a 300 Mega Watt coal power plant to help overcome a power crisis, Information Minister Bandula Gunewardene said.

“The cabinet paper says the President had ordered the Chairman of Ceylon Electricity Board to quickly enter into agreements to build the power plant in Puttalam to avoid an upcoming power crisis,” Minister Gunawardene said.

The Ceylon Electricity Board runs three 300MW coal plants in Puttalam.

The last approved long term generation plan estimated the cost of a third plant to be about 500 million US dollars with some changes to coal unloading facilities.

The fourth plant was planned to be commissioned by around 2023.

Sri Lanka’s existing plants are built by China. A memorandum of understanding has been signed China some time ago for an additional plant, according to industry sources.

It is not clear how the Chairman can initiate a contract, since the CEB is under strict procurement rules. However there is space for government-to-government deals to be made, though officials of the utility favour full or limited competitive bidding.

In a draft generation plan which has not been approved by the regulator high efficient coal plants are proposed which will cost more.

“In all new planned coal power projects, necessary environmental impact mitigation measures such as strict emission control, indoor coal storages and enclosed coal handling facilities are
incorporated along with higher conversion efficiency,” the draft plan said.

“Such mitigation measures are incorporated over and above what is required to meet current environmental laws of the country but at an additional capital cost of about 700USD per kW, compared to a conventional coal power plant.”

CEB is also considering, more efficient ‘super critical’ coal plants, which however may be larger.

The CEB is also pushing to set up a liquefied natural gas terminal to power new and proposed existing LNG plants.

Sri Lanka is heading for a power crisis as the last administration was unable to award a deal for a 300MW dual fuel plant,

Attempts were made to build ‘take-or-pay’ LNG plans instead of a separate terminal, leading to allegations of corruption. (Colombo/June06/2020)

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  1. mahinda wimalasena says:

    Instead of another coal plant is it not advisable to open up a mega solar power plant ?

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  1. mahinda wimalasena says:

    Instead of another coal plant is it not advisable to open up a mega solar power plant ?

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)

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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)

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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 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)

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