electricity tariff increase affects industry
Industrial Sector has been expressing their concern about the
uncompetitive Industrial Tariff Electricity for a considerable
period of time. The existing Tariff itself is much higher than
those in other Countries with whom Sri Lankan Industries have to
compete. Besides the Tariff, the quality of the power supply too
is much to be desired and continues to be a burden for the
Instead of remedying these unfavourable factors which impede
Industry it is now proposed to increase the tariff by which the
Industrial Sector will be called upon to pay as much as 25-30%
increase. It is considered to be an unbearable increase which
will adversely affect the Industrial Sector.
Several Sectors of the Industry are already tottering due to
high cost of electricity, while some others are finding it
difficult to be cost effective. High cost of interest,
restriction of the movement due to security situation,
increasing cost of transport and services, numerous holidays,
impact of spiraling inflation, numerous taxes and levies are
additional burden on the Industry. Instead of taking steps to
lessen these impediments and help enhance the competitiveness in
a free market economy, adding up further hardships on the
Industry by way of increased power tariff would certainly
destabilize the Industrial Sector with disastrous consequences
on the National Economy.
The Proposed 25-30% increase would seriously affect the
export Industries and many of them would jeopardize their
markets if they attempt to pass these costs over or gradually
fade away due to erosion of their margins. These equally applies
to Industries which cater to the local market as they too have
to compete with imported goods and therefore cannot pass on the
increased cost risking their sales.
Cumulative effect of all these will be the loss of export
revenue, increase volumes of imports to the Country, lower tax
revenue to the state, reduced wages or loss of employment and
gradual disintegration of the Industrial base of the Country.
More and more local Industries would explore the possibility of
relocating in other Countries. Thus instead of attracting
Foreign Direct Investment, Industries will move away from Sri
Reasons for proposed increase in Tariff is attributed to the
increase in cost of fuel and withdrawal of the subsidy granted
hitherto to Ceylon Electricity Board by the Treasury, may be
justified from the perspective of Ceylon Electricity Board.
However, as the voice of Industries in this Country, CNCI which
has played a prominent role in canvassing for the commencement
of the Coal Power Plant and Upper Kotmale Hydro Project for over
05 years , reluctantly compelled to say that the Ceylon
Electricity Board and the Country as a whole is called upon to
bear this burden due to shortsighted policies of successive
Governments. The political leaders of recent times who did not
take the decision that had to be taken at the appropriate time
for fear of losing the ballot should bear the responsibility for
the current debacle.
We are also told that by year 2011 when the Coal Power Plant
and Upper Kotmale Hydro Power Projects are up and running, the
competitive Tariff could be made available. Assuming that the
two new power generation projects are commissioned as scheduled
one would wonder how the Industrial Sector could sustain itself
in the intervening period.
The Industrial Sector of this Country accounts for 17% of the
GDP, provide employment for over 1.5 million people and Earn
valuable foreign exchange through Export Income in region of 80%
of the external trade. Therefore our contention is that this
Sector cannot be sacrificed to salvage the Ceylon Electricity
Board which is a bane in the Country’s development efforts due
to shortsighted policies of successive Governments and
mismanagement of affairs by the Ceylon Electricity Board . It is
not possible to destroy the Industrial Base now and then
rejuvenate it in 2011.
Industries are not seeking subsidies but quality power at
competitive rates, if not completive rates at least to maintain
the current Tariff rates. We therefore, urge the Government to
intervene and pick up the increased cost, which the Industrial
Sector is being called upon to pay and to relieve them of this
We also suggest the following;
u To let the Industry know at what price level of oil
the proposed Tariff has been computed at.
u To allow those who generate alternative forms of power
such as mini hydro etc., and feed to Ceylon Electricity Board
grid in one location be afforded the facility to buy it back
in another location from the Ceylon Electricity Board grid at
a lower cost, what is termed as wheeling, which is
successfully operated in India.
u Impose a CESS on incandescent electric bulbs and use
the CESS income to promote and subsidize the CFL bulbs, which
would substantially reduce the usage of power.
u Remove all forms of import duties and taxes including
VAT on the import of equipment and accessories, which are used
in Energy Saving Projects.
u Ceylon Electricity Board take steps , on priority
basis to reduce the transmission losses at least by 1% within
one year. We are of the view that the saving so would will
help in recouping a substantial amount from what is to be
collected by the increased Tariff from the Industrial Sector.
u Involve the Chamber in the progress monitoring of the
implementation of the Coal Power Plant and Upper Kotmale Hydro
u Earlier attempts to restructure Ceylon Electricity
Board failed and consumer is called upon to pay for the
inefficiency of the Ceylon Electricity Board too. Therefore we
propose that new power generation projects such as the Coal
Power Plant and UKHP be commissioned and managed by a new
Government owned Company distinct from the Ceylon Electricity
Board which finds even the current size of its operations