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Monday February 6th, 2023

Sri Lanka regulator disputes CEB costs, demand projections for 2023

ECONOMYNEXT – Sri Lanka’s Public Utilities Commission has disputed forward looking tariff hike for state-run Ceylon Electricity Board in 2023 saying fuel sold by a petroleum monopoly as well as demand projections are too high.

The CEB is seeking a 400 billion revenue increase in 2023, under a new plan by the government to revise tariffs every January and July.

PUCSL Chairman Janaka Ratnayake says the Ceylon Petroleum Corporation is over-charging the CEB by selling fuel at large profits.

“The amount we pay for fuel and furnace oil is extremely high,” Ratnayake told reporters. “We mostly need furnace oil and Naptha. Furnace oil, CEB takes from the CPC at 320 rupees per litre. Naphtha for 160 rupees.

“We know this amount is extremely high. Even the CPC has accepted from diesel and petrol that they are making around 150 rupees in profit per litre.

“According to that, from one litre of furnace oil, CPC is making a profit of 120-140. And they are asking for a 404 bn rupees from a tariff hike.”

Because the CEB is not an end user, it should not get a retail tariff with large profits, Ratnayake said. Lanka Coal, the state company which buys and re-sells coal to the CEB does not keep large margins, he said.

It is not clear whether the CPC is trying to recover past losses by keeping retail prices above cost.

The Treasury has said that in 2022 so far the CPC had been paid 80 billion rupees to cover low cost fuel sold to the CEB earlier and the Treasury could no longer give subsidies.

Ratnayake alleges that at attempt is being made to recover past losses.

“We do not accept that,” he said. The reason is, the price revise cannot be done to recover a previous loss.

“The revision should be done based on the cost recovery manner. In revising that, there is a theoretical process for that.”

For 2023 the CEB is projecting generation of 17,400 GigaWatt hours with 721 billion rupees of costs. About 404 billion is set to come from 4,600 GWh from the most expensive liquid fuel costing 404 billion rupees.

In 2021 the CEB generated 16,716 GWh of energy. Up to September power generation was down 3.6 percent. In September generation was down 7.6 percent. In 2023 the economy is also expected to contract.

The PUCSL is projecting demand of only 15,500 GWh and 1,800GWh of liquid fuel costing 147 billion rupees.

At current world prices the liquid fuel costs should only be 86 billion rupees, the regulator says.

The PUCSL however is projecting coal generation at at optimistic 85 percent plant factor of 6,000GWh. The plants are designed for around 80 percent. The CEB is expecting only 5,100GWh from coal.

In the first quarter around February and March there is a drought in Sri Lanka requiring high volumes of liquid fuel.

Ratnayake said the regulator also wanted to revise tariffs every six months and in 2016 had proposed revisions in April and October.

The CEB however had not filed tariff requests, he said.

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Sri Lanka to address SME tax problems at first opportunity: State Minister

ECONOMYNEXT – Problems faced by Sri Lanka’s small and medium enterprises from recent tax changes will be addressed at the first opportunity, State Minister for Finance Ranjith Siyambalapitiya said.

Business chambers had raised questions about hikes in Value Added Tax, Corporate Income Tax and the Social Security Contribution Levy (SSCL) that’s been imposed.

It should be explored on how to amend the Inland Revenue Act, Siyamabalapitiya said, adding that the future months should be considered as a period where the country is being stabilized.

Both the VAT and SSCL are effectively paid by customers, but the SSCL is a cascading tax that makes running businesses difficult.

In Sri Lanka SMEs make up a large part of the economy, accounting for 80 per cent of all businesses according to according to the island’s National Human Resources and Employment Policy.

(Colombo/ Feb 05/2023)

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Sri Lanka revenues Rs158.7bn in Jan 2023 up 51-pct

ECONOMYNEXT – Sri Lanka’s government revenues were 158.7 billion rupees in January 2023 but expenditure and debt service remained high, Cabinet spokesman Minister Bandula Gunawardana said.

In January 2022 total revenues were Rs104.5 billion according to central bank data.

Sri Lanka’s tax revenues have risen sharply amid an inflationary blow off which had boosted nominal GDP while President Ranil Wickremesinghe has also raised taxes.

Departing from a previous strategy advocated by the IMF expanding the state and not cutting expenses, called revenue based fiscal consolidation, he is attempting to do classical fiscal consolidation with spending restraint.

President Ranil Wickremesinghe has presented a note to cabinet requesting state expenditure to be controlled, Gunawardana told reporters.

State Salaries cost 87.4 billion rupees.

Pensions and income supplements (Samurdhi program) were29.5 billion rupees.

Other expenses were 10.8 billion rupees.

Capital spending was   21 billion rupees.

Debt service was 377.6 billion rupees for January which has to be done with borrowings from Treasury bills, bonds and a central bank provisional advance of 100 billion rupees, Gunawardana said.

Interest costs were not separately given. (Colombo/Feb05/2023)

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Sri Lanka’s Ceylon Tea prices down for second week

ECONOMYNEXT – Sri Lanka’s Ceylon Tea prices fell for the second week at an auction on January 31, with teas from all elevations seeing a decline, data showed.

“In retrospect, the decline in prices would be a price correction owing to the overall product quality and less interest from some key importers due to the arrival of cargo at destinations ahead of schedule,” Forbes and Walker tea brokers said.

The weekly sale average fell from 1475.79 rupees to 1465.40 rupees from a week ago, according to data from Ceylon Tea Brokers.

The tea prices are down for two weeks in a row.

High Growns

The High Grown sale average was down by 20.90 rupees to 1380.23 rupees, Ceylon Tea Brokers said.

High grown BOP and BOPF was down about 100 rupees.

“Ex-Estate offerings which totalled 0.75 M/Kg saw a slight decline in quality over the previous week” Forbes and Walker said.

OP/OPA’s in general were steady to marginally down.

Low Growns

In Low Grown Teas, FBOP 1 was down by 100 rupees and FBOP was down by 50 rupees while PEK was up by 150 rupees.

The Low Growns sale average was down by 8.55 rupees to 1547.93 rupees.

A few select Best BOP1s along with Below Best varieties maintained.

OP1                     Select Best OP1’s were steady, whilst improved/clean Below Best varieties maintained.   Others and poorer sorts were easier.

PEKOE                 Well- made PEK/PEK1s in general were steady, whilst others and poorer sorts were down.

Leafy and Semi Leafy catalogues met with fair demand,” Forbes and Walker brokers said.

“However, the Small Leaf and Premium catalogues continued to decline.

“Shippers to Iran were very selective, whilst shippers to Türkiye and Russia were fairly active.”

This week  2.2 million Kilograms of Low Growns were sold.

Medium Growns

Medium Grown BOP and BOPF fell by around 100 rupees

The Medium Growns sale average was down by 33.40 rupees to 1199.4 rupees.

“Medium CTC teas in the higher price bracket witnessed a similar trend, whilst teas at the lower end were somewhat maintained subject to quality,” Forbes and Walker brokers said.

“Improved activity from the local trade and perhaps South Africa helped to stabilize prices to some extent.”

OP/OPA grades were steady while PEKOE/PEKOE1 were firm, while some gained 50-100 rupees at times.

Well-made FBOP/FBOPF1’s were down by 50-100 rupees per kg and more at times.

(Colombo/Feb 5/2023)

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