Power perspectives

PROPOSED electricity tariffs have electrified the business community with many demanding that more reasonable rates be imposed to assist business. A range of businesses, including hotels, ceramic products, apparel, manufacturing and packaging, made their representations against the proposed increase during the public hearing held by the Public Utilities Commission (PUC).

While it is commended that the PUC has taken the time to seek out the opinion of stakeholders, what people really want to see are results. Power and Energy Minister Champika Ranawaka insists that the proposed tariff increases will have a minimum impact on households and argues that there is no need to make people who do not use electricity pay for it.

However, it must be pointed out that the Rs. 115 billion loss annually incurred by the CEB is paid by the Treasury, which gets its money from the taxes paid by the people. Most of them are collected through indirect taxes that members of the low income community pay out through every purchase they make. So the argument that this tariff system saves household consumers from unfair electricity charges doesn’t hold water. Yet, the fact that their direct payments are limited is a positive fact. But at what cost does this relief come?

Industries point out that these increased tariffs will undermine businesses that are just getting their act together and sampling opportunities after a three-decade conflict. The Government has repeatedly stressed that it is intent on encouraging the private sector to increase manufacture and exports so that the overall economy can grow. However, if production costs increase – Sri Lanka already has one of the highest electricity rates in South Asia – the competitiveness of the country will be at stake. A valid point, given that large volumes of Foreign Direct Investment are being sought out by the Government. With higher expenses, foreign companies will be more interested in looking for cheaper if not greener pastures.

As a result of competitiveness dipping, businesses will struggle to make profits, limiting the amount of employment opportunities and increasing the brain drain. For many businesses, the Power and Energy Ministry’s loincloth solution that businesses operate at night and pay off-peak rates is impractical since overtime costs, female members in the workforce and sheer volumes produce a deterrent effect. The impracticality of such a measure is offset against the Government’s plans to sell electricity to India in 2013, which can only provide amusement in the face of yet another bill increase.

Massive power plants such as Norochcholai are expected to empower the national grid from early next year. Yet the main dependency on hydro power and increasing expense on fuel-generated power has put the CEB between a rock and a hard place.

The CEB also spends a considerable amount of money on purchasing power from private hydro power operators. Mini hydro-power projects are commended the world over for providing cheap, national grid-independent and environmentally-friendly power generation sources to rural areas. The idea is that mini-hydro plants should empower the community in which they are established rather than sell to the national grid, which essentially defeats the purpose of cheap and environmentally-friendly power as well as robbing the local populace of employment opportunities.

The challenge is to keep the future in mind – for, unless the entire economy is sustained, power price hikes will be the least of the nation’s worries.