Mahinda takes COL bull by the horns

Wednesday, 29 December 2010 00:33 - - {{hitsCtrl.values.hits}}

Akin to taking the bull by the horns, President Mahinda Rajapaksa yesterday personally stepped in to arrest a further upward pressure in the accelerating cost of living.

He effected two key decisions, which though populist, are likely to have some economic ramifications.As a direct response to growing fire against the proposed new electricity tariff, the President last morning instructed the Ceylon Electricity Board (CEB) to extend the relief pricing for electricity to domestic users up to the first 120 units.

Accordingly, the present tariff rate will continue for small businesses and SMEs. There will be a 25% tariff reduction for religious places, Government hospitals, schools, vocational training institutions and universities.

“President Rajapaksa gave these directions to the CEB officials during a review of CEB activities at Temple Trees yesterday,” Government sources said.

Later in the afternoon the President also ordered the removal of import tax on LP gas to keep the price of this popular mode of energy for household cooking from rising. The move follows LPG suppliers’ requesting a price hike on account of an increase in global markets.

Analysts said that keeping the base electricity tariff unchanged was likely to see CEB fall short of realigning its supplies as per cost. The Presidential move, however, has been welcomed by households, whilst the new tariff proposed by the Public Utilities Commission (PUC) has come under fire by even the industrial sector.

The decision to remove import tax on LPG will result in a corresponding erosion in revenue to the Treasury.

The twin moves by the President are hot on the heels of mounting criticism over the Government’s failure to arrest a sharp spike in the cost of living. The Government has been forced to resort to imports of key essentials such as chicken, eggs and coconuts as well as onions to maintain price stability.

The latter is due to short supplies from local sources triggering a spike in prices in tandem with higher demand during festive season.

At a media briefing Trade Minister Johnston Fernando said LPG suppliers have requested yet another price increase of Rs. 200 from the Consumer Affairs Authority (CAA). However, he said that he would not approve the move. Furthermore, milk powder suppliers have also been requesting a price increase for the last five months, but the CAA has not given them permission to raise prices, the Minister said.