No electricity shock, claims Government

Tuesday, 23 April 2013 00:00 -     - {{hitsCtrl.values.hits}}

By Nisthar Cassim

Amidst criticism from the Opposition, the Government yesterday justified the electricity tariff hike as being necessary for the CEB with the least effect on poorer households whilst revealing that the people and private sector will still enjoy a hefty Rs. 50 billion subsidy despite the upward revision.

“The CEB has Rs. 364 billion in dues, for which it has to make payments. We have to find ways to keep the CEB running. Despite the challenges, the recent revision hasn’t placed a heavy burden on the poorer households. Nevertheless, in spite of the hike, households and private sector will be still enjoying a Rs. 50 billion subsidy on their electricity use,” Power and Energy Minister Pavithra Wanniarachchi told editors during a breakfast meeting chaired by President Mahinda Rajapaksa and senior ministers and officials at Temple Trees.

“Seventy five percent of households in the country or 3.7 million households use less than 90 units per month and the increase for them ranges between Rs. 75 and Rs. 432 per month inclusive of the fuel adjustment surcharge,” the Minister said at the meeting, which was the first following the Sinhala Tamil New Year and largely focused on the power crisis given the mounting criticism against the tariff revision announced last week.

She said around 1.1 million households on average use 30 units per month and for them the increase will be Rs. 75 per month. A further 1.3 million households’ average use is 60 units and the monthly hike for them is Rs. 174 whilst for 1.3 million households who have an average 90 units usage, the increase is Rs. 432 per month.

Given the fact that the cost per unit of electricity is Rs. 23.30, these households still enjoy a subsidy of Rs. 25 billion, Minister Wanniarachchi disclosed at the meeting. “We are providing an electricity unit at Rs. 5 each,” chipped in President Rajapaksa.

The Minister also revealed that the industrial or private sector too would continue to enjoy a subsidy of Rs. 25 billion, whilst the tourism sector’s benefit is Rs. 1 billion, bringing the total subsidy despite the hike to a staggering Rs. 50 billion plus.

She said the hike was critical to improve the financial health of the CEB, which has the responsibility to provide electricity to all uninterrupted as per the vision of President Rajapaksa. She noted that among the Rs. 364 billion outstanding payments were Rs. 43 billion to banking system on account of credit obtained for purchase of fuel from CPC, Rs. 16 billion to Treasury and Rs. 19 billion to private sector.

CEB’s revenue last year was Rs. 14 billion per month or Rs. 178 billion in total but suffered a loss of Rs. 61.2 billion. The impact of the depreciation of the rupee in 2012 to CEB was only Rs. 600 million.

Secretary to Ministry of Power and Energy M.M.C. Ferdinando said with upcoming expansion in coal power generation by 600 MW by later this year (300 MW each in September and December), the dependence on fuel-guzzling electricity generation will be reduced, resulting in a saving of Rs. 45 billion next year. In that context he hinted at the possibility of the removal of the fuel adjustment surcharge by early next year.

Ferdinando also clarified net payments for private power producers were only Rs. 19 billion but the Ministry has instructed the CEB to renegotiate existing power purchase arrangements with private sector when they come up for renewal in addition to terminating others. “So far we have terminated four such arrangements with private power producers,” he added.

Economic Development Minister Basil Rajapaksa who was also present at the President’s meeting with editors said that the policy of engaging the private sector in power generation was implemented in 1993 when a different regime was in power and upon realisation some deals were unfavourable to the State, the entire policy was being revisited.

He also said that at a time when international donors refused to lend financial support to Government investment in power generation, the Treasury, National Savings Bank and EPF came into finance the Kerawalapitiya plant and today it was making a positive impact.

Minister Wanniarachchi also said the 50:50 Indo-Sri Lanka joint venture power project in Sampur with an investment of $ 500 million and capacity to produce 500 MW of electricity would be commissioned in June for completion by 2016.

She noted that in tandem with annual demand for electricity, it was important to keep upgrading capacity – a development which previous regimes hadn’t done. “However, President Mahinda Rajapaksa since assuming office has made a promise to provide electricity to all uninterruptedly and the Government has made a strong commitment by launching several projects including the Norochcholai and Upper Kotmale in addition to those progressing,” she said at the meeting, at which CEB officials added that in several South Asian nations, 24-hour electricity across the respective countries was absent.