Empowering the private sector

Monday, 21 March 2011 00:01 -     - {{hitsCtrl.values.hits}}

Sri Lanka is a bewildering land of contrasts that usually make little sense. The first coal power plant is ready to provide people with low cost energy. Named Lakvijaya, the more commonly known Norochcholai power plant is ready to begin business tomorrow but its real benefits remain under question.

Costing US$ 455 million the Chinese loan for phase I of the Norochcholai power plant will have to be repaid by the government. Despite its long repayment tenure the cost is nonetheless a burden to the public. Another US$ 891 million bill will be added once phase II is completed in 2014. If the rhetoric of the government is to be believed then the whole point of these coal power plants, even at massive cost to the environment, is to generate enough power to light Sri Lanka’s path to development. The logic of this would be to encourage the private sector to increase exports so that more foreign exchange, expertise and stability – in short prosperity will flow into the country.  

Yet during an interview Power and Energy Minister Champika Ranawaka insisted that no power concession will be forthcoming to the private sector in the near future. Admittedly Norochcholai alone will not be able to solve Sri Lanka’s power woes on its own. However with phase II and III as well as Sampur the challenge should be much reduced. Moreover a reasonable amount of the loan burden will be shifted onto the private sector who will be obligated to repay it through taxes imposed by the government. Therefore would it not be justified in giving them some relief, at least in the short term, until home grown companies have become more profitable and larger?

High electricity tariffs are a reality, even the minister admits that; but what he does not believe is that it is a deterrent to private enterprises. Industries such as ceramics were advised to switch to alternative technologies and the impractical ploy of working during off-peak hours was repeated. Even Foreign Direct Investment (FDI), which the country desperately needs, was dismissed as needing low electricity prices to come to Sri Lanka. This was all the more startling as it was acknowledged that when comparing to other countries worldwide Sri Lanka does indeed charge heavily for power.

The next question is one of sustainability. Initially the government claims to use low sulphur coal but admits that costs are high and deposits of the said high grade coal might be low. It was reported that the first shipment of 65,500 MT of coal cost US$7 million. Even if costs are not this excessive in the future it is still a cost that the government and in turn tax payers must bear not to mention the fact that if high grade coal is not accessible then the government will have to use blended coal. A situation that would result in grave environmental impact in the future that will also need to be borne.

Large scale projects need to prove their worth by directly benefiting the entire community that supports it. Giving concessionary power to domestic units is not the sole duty of the Ceylon Electricity Board (CEB) for a country to develop its private sector needs to play a key role and it must be supported to do so.