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Sri Lanka’s CEB financial crises deepens; power cut halted with fuel credit

ECONOMYNEXT – Power cuts of up to two hours a day from February 03, were averted after Sri Lanka’s Energy Minister intervened to arrange extra fuel on credit from state-run Ceylon Petroleum Corporation, for a thermal power plant the ministry said.

“The Ceylon Petroleum Corporation stopped fuel supplies to the Kerawalapitiya power plant because the credit limit has been exceeded,” the Power Ministry said in a statement.

“The Ceylon Electricity Board decided on a two hour power cut to manage the situation. The minister instructed the CPC to provide fuel subject to covering approval from the Cabinet.

The CEB is in a deep financial crisis, because the a coal plant was cancelled by the last administration and the independent regulatory commission failed to provide tariff hikes since 2013, though it is expected to review prices every six months.

The Central Bank has also busted the rupee from around 131 to 182 to the US dollar by trying to keep interest rates down by injecting liquidity (printing money) as well as overall Mercantilist monetary policy aimed at destroying real wages of workers to give profits to export companies (competitive exchange rate).

The Ceylon Petroleum Corporation is also in trouble due to depreciation.

In 2019, the CEB managed to run up a forex loss of 82 billion rupees, because Mercantilist officials did not allow it to buy foreign exchange with proceeds from a price formula and forced it to borrow dollars as the rupee came under pressure from liquidity injections.

Many Independent Power Producers have also run up their credit limits with both the CPC and banks as the CEB is delaying payments, sector officials said.

As a result the CEB is forced to operate the plant which has fuel instead of the cheapest plant (merit order) further worsening losses at the utility.

The CEB has good maintained satisfactory hydro storage in the current dry season by running thermal plants earlier but agricultural authorities are conserving water for the Yala cultivation season, reducing water releases. (Colombo/Feb04/2020)





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