Landmark agreement in the power sector

Monday, 14 October 2013 00:00 -     - {{hitsCtrl.values.hits}}

It has been reported that an agreement was signed between the Government of Sri Lanka and the Indian National Thermal Power Corporation Ltd to construct a coal-based power station in Sampur during the recent visit of the Indian Foreign Minister. The Pathfinder Foundation (PF) has been consistent in advocating the opening up of the power generation sector to equity investment. There is no justification for continuing the CEB’s monopoly in power generation on economic grounds. This is particularly so at a time of fiscal consolidation and rising costs of foreign borrowing. Furthermore, PF has also contended that there should be greater recourse to PPPs to maintain the momentum of the Government’s infrastructure development program. For these reasons, in Pathfinder Foundation’s view, the signing of the Sampur agreement with foreign equity participation is a landmark event in the development of the country’s power sector. When completed, it will add 500 mw to the nation’s power generation capacity. The project is expected to be completed in 2018. Sri Lanka’s electricity costs are extremely high when benchmarked internationally. This not only imposes an additional burden on households but also seriously undermines the competitiveness of the economy. Many investors, local and foreign, cite the high cost of power as a major deterrent. This is attributable, to a large extent, to poorly planned development of power generating capacity in the past. The increasing demand for power arising from a growing economy and the commitment of successive Governments to extending electricity coverage across the country was not planned for in a systematic manner. The completion of the three phases of the Norochcholai power plant as well as the Sampur project is expected to improve the mix of power generation which will enable lower energy costs in the future. This will be an important factor in improving the competitiveness of the economy thereby boosting the prospects of all businesses ranging from micro enterprises to large corporates.