Hundred billion rupee marketing flop

At the request of CEB and with the acceptance of Public Utilities Commission (PUC), the Government proposed an increase in electricity tariffs for the public and the industry. The proposals were vehemently attacked by the Opposition, trade unions, and the public who claimed that people were too poor to pay increased electricity bills.

At the May Day public rally, the President informed the people that the proposed tariff increase using up to 60 units a month had been withdrawn with some relief up to 180 units. However, the loss would continue and would have to be passed over to the public in a more discreet manner.

At the Parliament debate, the Minister for Electricity and Power submitted details of customers using categories 0-30, 31-60 and 61-90, the increase in cost, the subsidy for each group and the number of households in each category.

According to the CEB, the total domestic consumers number 4,717,448 and households without electricity are 248,286. The CEB claims their losses for 2010 was Rs. 258 million, increased to Rs. 19 billion in 2011 and Rs. 61 billion in 2012. The CEB’s average cost of electricity delivered to the customers was readjusted by PUC to Rs. 20.83 per unit.

The above shows:

n Consumers under 30 units: Total 1,111,125 or 23.55%

n Consumers under 60 units: Total 2,429,880 or 51.51%

n Consumers under 90 units: Total 3,729,181 or 79.05%

The above notes that more than 50% of consumers use less than 60 units a month. Only households consuming over 120 units a month pay above the basic cost of Rs. 20.83 per unit. The CEB claims that 92% households in Sri Lanka have been provided with grid electricity. Of the balance solar power is used by 2.1%, leaving only 5.9% without electricity. The non-availability of electricity to households may be due to:

A. The non-availability of grid power in the vicinity

B. The financial inability to make the initial payments

C. The house construction being not acceptable to issue power.

The households in the country total around five million and very likely the poorest 5% population are unable to get electricity due to extreme poverty. Those who opposed the power hike claimed that the consumers are unable to pay the enhanced electricity bills. They quoted the percentage increases and increase from one step to the next, but deliberately avoided quantifying the increase which amounted to Rs. 67.50 for user of 30 units and Rs. 174.15 for a user consuming 60 units a month.

Household Income

& Expenditure

Survey 2009/2010

The Household Income & Expenditure Survey 2009/2010 produced by the Ministry of Finance and Planning gives some interesting data which are slightly outdated, with current earnings and expenditure now being higher.

Assuming that power consumption increases with income levels, which is correct especially for lower level consumers, the income of consumers would be show in the table.

The 5% of households without electricity who are assumed unable to be connected due to poverty are included in first two groups of earnings less than Rs. 12,662 a month constituting 4.7% of population. The survey also states that only 7.6% of families are below poverty level.

Users under 30 units constitute 23.55% of consumers who earn between Rs. 12,662 to Rs. 28,837 a month (Group 1) and consumers of 31 to 60 units who come under 51.51% and earn between Rs. 28,837 and Rs. 45,301 per month (Group 2). According to opponents of tariff increase, Group 1 could not afford to pay an additional Rs. 67.50 per month and the Group 2 cannot afford Rs.174.15 per month.

Expenditure habits

The same survey indicates that the average household income amounts to Rs. 32,446.08 and some relevant items of expenditure are shown in the table.

It is interesting to note that households consuming 30 to 60 units a month with an income of minimum Rs. 32,446.08 cannot afford to pay an additional Rs. 174.15 per month for electricity, whereas expenses for alcohol, smoking and betel chewing come to a considerable amount. It is also to be noted that in the survey, the averages indicated costs are liquor, smoking and betel chewing for each household.

At the end of 2012, the population was 20.6 million and the total number of mobile phones amounted to 20.2 million, which gives a mobile phone to everyone including babies. The phone cost of Rs. 735.85 was for 2009 and has clearly gone up many-fold. In 2012 it was reported that over 50% of the households had some sort of transport. Transport ownership does not agree with the inability to pay Rs. 174.15 per month, which is equivalent to the cost of a litre of petrol.

Rs. 100 billion marketing flop

Electricity is an absolutely essential item in the house and people are prepared to pay a reasonable price for the convenience, and balance the household budget by reducing other expenses. The inability to pay was a hoax cooked up by the Opposition parties and the trade unionists who were losing grip on the masses.

The Ministers, some who run an electricity bill of up to Rs. 76,000 a month paid by the Government, failed in their duty to convince the masses by highlighting the increase was only Rs. 67.50 and Rs. 174.25 and is affordable.

The Minister’s failure forced the President to withdraw the increase, which according to Chairman CEB comes at a cost of Rs. 8 billion a month or Rs. 100 billion a year. The CEB and the Government Ministers, with the mighty State infrastructure at their disposal, failed to convince the masses of the reasonableness of the tariff increase and is now losing Rs. 100 billion a year – this is the biggest marketing flop in Sri Lanka’s history.

(The writer is a Chartered Civil Engineer graduated from Peradeniya University and has been employed in Sri Lanka and abroad. He was General Manager of State Engineering Corporation of Sri Lanka and currently employed with a Chinese construction organisation. He can be contacted on [email protected].)