ECONOMYNEXT- Sri Lanka will order exporters, embassies, non-resident visa holders, hotels and will be ordered to settle their electricity bills in US dollars, the regulator has said as the island is in the grip of the worst currency crisis in the history of its soft-pegged central bank.
The customers will be invoiced in Sri Lanka rupees but they will have to settle the bills in US dollars, PUCSL Chairman Janaka Ratnayake said.
The money will be used to import coal, spare parts and foreign currency payments to private power producers.
There are plans to buy power from renewable power companies, which have political clout, for US dollars though the CEB does not invoice customers in US dollars, exposing the agency to foreign currency risk the same way as it is exposed to coal and liquid fuel.
Due to a broken soft-peg with the US dollar, Sri Lanka has difficulties transferring real wealth from the rupee credit system to the US Fed linked dollar banking system and fuel imports in particular have been badly hit.
The PUCSL is expected to hike electricity tariffs following a steep fall in the rupee in a botched attempt to float the currency after two years of money printing to mis-target interest rates.
The PUCSL said companies with more than 60 percent dollar revenues will have to settle their bills in US dollars after the tariff hike is approved.
Relevant extracts from the PUCSL statment is reproduced below:
In order for CEB to import fuel (coal) and spare parts for the power plants and to pay foreign currency components of IPP invoices, it is proposed to collect sales revenue in United States Dollars from the consumers who have foreign currency income sources. Such USD collection by LECO shall be transferred to CEB as part of their Bulk Procurement payments.
Thus, all customers who earn more than 60% of their revenue in USD would be required to settle their monthly electricity bills issued by CEB/ LECO in USD, calculated at the USD exchange rate (buying rate declared by the Central Bank of Sri Lanka) at the time of settling the bill.
This will be effective along with the end user tariff review. Examples of such establishments are;
• Manufacturing establishments (including their factories, warehouses and offices) who export their products (include all factories in EPZs)
• Marine and Airline service providers (providing services to international aircrafts and ships)
• Export oriented IT or other service companies
• Non-resident visa holders and diplomatic missions/ residences
• SLTDA Registered Tourist Hotels, Boutique hotels, restaurants, etc. serving primarily foreign tourists (having rates published in USD)