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As their energy costs suddenly spiked, Sri Lanka’s industrialists who flocked to Industry and Commerce Ministry on Friday, urged the CEB to become more efficient and consider alternative sources. Interestingly, they commended the Industry Ministry for the ongoing support in getting them connected to the high power grid.
“We shall be starting a series of industrialist-CEB consultations immediately on power efficiency and costs so that our industry sector can overcome the 
latest surge,” Minister of Industry and Commerce Rishad Bathiudeen said at the Auditorium of the Ministry of Industry and Commerce, Colombo.
Bathiudeen was addressing the first ever national level forum and dialogue session between Sri Lanka’s industrialists and the Government, consisting of top officials from the Ministry of Power and Energy as well as the Ministry of Industry and Commerce, held recently.
Among those in attendance with Bathiudeen were more than 70 industrialists non-BOI at all levels, SME and large scale industrialists, Power Ministry Secretary M.M.C. Ferdinando, CEB Chairman W.B. Ganegala, officials of the Labour Ministry, Ministry of Industry and Commerce Secretary Anura Siriwardena and other top officials of Industry Ministry. The crucial session was organised by Bathiudeen to address the severe distress faced by industrialists in the aftermath of recent power tariff hike.
In June 2012, recognising the possibility of future industrial power tariff hikes, Bathiudeen implemented a much needed industry grade energy efficiencies at factory level, using the public private partnership (PPP) model, targeting to reduce industrial consumption by 10% initially.
As for Sri Lanka, industrial electricity sales in 2011 (category wise) industries ranked second at 34%, while the domestic sector led with 40%. Electricity usage by Lankan industries increased by 9.7% in 2011 to 9,840 GW hrs. A total of 50,668 industrial electricity accounts were active in 2011. The industrial electricity tariff is charged through three tiers: Industrial-1 (I-1), Industrial-2 (I-2) and Industrial-3 (I-3).
The latest tariff hike on the Lanka’s industrial sector is a flat 15% for all categories which is lesser than the rate hike in the domestic sector which is minimum 25% and 40% at maximum. Industrialists, who were in talks with Bathiudeen, belonged to all the three categories. Bulk electricity consumers are represented in Categories I-2 and I-3 and both use Time of Use Tariffs.
Of the 50,668 industrial electricity in 2011’s accounts, 91% belonged to I-1, though when it came to consumption, I-1 reported only 8% of total consumption while I-2 lead with 53% of the total 3,398 GW hours used by all industrial categories in 2011. Sri Lanka’s industrial power experience in the past has been that for I-2, 7% of the total consumption is from ‘peak’ and for I-3, 11% at ‘peak’.
One of three consumers spend a huge amount on electricity and therefore their load shifting requirement is higher than the other two. They also tend to suffer more from unproductive labour and worker charges when during changeovers, their heavy machines are restarted and till then labour idles, at times, for more than one hour per day.
Sri Lanka plans to have an additional 1,755 MW power generation through the projects of Puttalam Phase 2 (2014), Trincomalee Stage 1, Broadland Hydro and Uma Oya Hydro (2016), Trincomalee Stage 2 (2017) and rest of Trincomalee Stage 2 (2018), respectively.
“The CEB has been facing huge losses, especially since the 1990s oil price hike. But despite the rising costs, we did not increase our selling rates. The recent crisis started February 2012 onwards when oil prices suddenly shot up,” M.M.C. Ferdinando said.
Ferdinando also detailed at length the series of events that led to the present scenario. “Our hydro thermal mix is 30 to 70 meaning 70% of power comes from fuel and oils. When oil rose earlier from Rs. 45 to Rs. 65 per litre, the CEB only increased its rates by 15%, absorbing 10% of the rest of cost escalation, taking on a Rs. 28 billion loss.
“Thereafter, Rs. 65 per litre of oil again rose to Rs. 90 in 2013 causing another Rs. 28 billion loss for us. The rate increase comes due to the hike in oil prices which we used to create 6,100 GW hours from the total 12,566 GW hours we are required to generate. Coal is 1,883 GW hours, hydro power is 3883 GW hours, sales at 10,998 GW hours and renewable at 700 GW hours. But our pricing formula is not based on a tariff based on cost effectiveness. Therefore, a policy decision needs to be made by the Government on a cost effectiveness formula so that everyone gets to pay according to a justifiable basis.”
Asked by industrialists how the Government would respond if coal prices climb, Ferdinando replied: “Coal goes up only in a limited way and is not volatile as global oil prices. Coal is also the present global trend.”
Industrialists, who appeared to be well equipped with country’s power generation and tariff data, informed the officials led by Bathiudeen that Sri Lanka’s power generation costs are highest in the region at US$ 1.05 per unit, while the rest of the region produces power for much less sometimes less than US$ 0.50 (per unit).
Ferdinando, replying, said: “Though the generation costs are high, total cost is not passed to the consumer since the Government subsidises the costs. Industries are subsidised by Rs. 3 per unit. We have also been upgrading the systems from 2010 and these costs too need to be taken into account.” He added: “Give us the chance to mobilise the Schemes II and III of Norochcholai and then see.”
Sachitha Plastics representative S. Samarasinghe, representating a leading plastic recycler in Sri Lanka at the session, said: “While we welcome the per unit basis subsidy we receive from the CEB, the benefit however is lost when peak to off peak changeover shutdown takes place. We nevertheless praise the Industry and Commerce Ministry for continuously stepping forward to help industrialists to connect to the industrial grade power grid.”
