Sri Lanka: New electricity tariffs to affect Hotels, Ceramics, manufacturing industries and household income
Despite a booming time in economy and one of the luxurious industries such as tourism, a number Sri Lanka’s top industries including the cushioning sector of tourism such as hotels and ceramics had expressed their gloomy concerns of the new electricity tariff s that are yet to come for implementation on early 2011.
Recently, The Sri Lanka Ceramics Council (SLACC) has voiced their stressing concerns by a statement highlighting that the proposed new tariff will increase the cost of electricity to their member companies by amount ranging from 20% to 42%.
“The ceramic industry is highly energy intensive and energy costs generally constitute around 50 % of the total cost of production in most ceramic factories. The high cost of production at present in our country, has always been a disadvantage for Sri Lanka in comparison with our regional competitors.” said the Ceramics Council in the statement.
Similarly, Sri Lanka's top hotels which were paying the subsidized 'industrial' rate had been put under a higher rate in the new proposed tariffs. The new hotels rate is supposed to be at Rs.19.50 a unit which would lead top city hotels to pay extra Rs.120 million for power as per estimated figures.
After suffering for years with challenges from a war and now although end of war has brought up much prospective hope for hotel sector growth and the leisure sector’s growth will now be hampered as per analysts due to increased power costs for electricity. “We hope there would be some sort of rate reduction for us otherwise our local governments have been same all the time, from one end they show us a pathway to grow while blocking us from another way” said one top hotelier on the grounds of anonymity.
As per the proposed revision in the time of day tariff, ceramics companies are unable to shift production to the off- peak period due to a number of reasons, including the employment of a large number of female employees, which make it difficult to engage them in work during power supply’s off-peak hours, the lack of transport facilities in the night, the nature of production activities, kilns running continuously for 24 hours a day, 7 days a week and in some companies which have a 24 hour uniform production level there are no prospects for shifting production to the off-peak period.
Ultimately, this also comes at a time when the industrial Liquid Petroleum Gas (LPG) price, which is based on the Saudi Aramco Contract Price, is at an all time high in energy markets. LPG price have hit a peak and are now higher than the peak in July 2008 during the height of energy crisis.
Hotels, Textiles and Ceramic companies are among the bulk users of LPG and higher consumers of electricity as a whole.
According to sources from LP Gas industry including privately owned Laugfs and now government owned (former Shell Gas Lanka) Litro Gas, the companies has seen many textiles, and garment businesses taking a long time to settle the payments running into hundreds of thousands of rupees due to gas purchases that were done before mid of 2010. “This clearly defines how unable they are to run and recover their payments and how the industries such as textiles had been affected. We have seen some foreign owned textiles, courier their due payment cheques to be signed by their principals abroad when it comes to settlements while directors are present in local operations” said another source from the LPG industry adding even some locally owned undergarment manufacturing top textiles had been delaying payments for months.
The Ceramics Council is the apex body in the island nation representing industry members in the field of ceramic tableware, floor & wall tiles, sanitary ware, ornamental ware, utility ware, roofing tiles and glass sector.
According to Ceramics Council, in the recent past, the member companies have undertaken many initiatives to reduce all forms of energy consumption by the following methods, and further improvements such as modifying products to consume less energy and process to reduce energy consumption, introducing more energy efficient plant and machinery along with new types of kiln furniture to reduce energy consumption and unable to further improvements to reduce energy costs without significant capital investments.
The council pointed out that when alternative forms of energy were being promoted, many of Ceramic Council members considered it very seriously and one company went ahead and invested Rs.45 million on a Dendro project that was found to be a total failure.
“The lesson was that the high temperatures required for firing ceramic and porcelain cannot be produced with alternative renewable forms of energy, even with the mixing of producer gas and LPG. Therefore the manufactures discontinued the Proposals for alternative energy” Council said in its statement.
These companies have been struggling with considerable financial difficulty and the tableware export companies have been adversely affected by the withdrawal of the GSP+ facility according to Ceramics Council. The council highlighted that Lanka Walltile PLC which was grappling with high energy costs at their Balangoda plant is a an example for a company that decided to shut down the plant, retrench the 800 odd employees, and focus on expanding facilities at their Meepe factory with more modern and energy efficient plant and machinery.
The hotels, ceramics and textile industries employ several thousand directly, and several thousand indirectly in the country, while the officials of these industries are calling for support from the government to carefully consider the repercussions on the on any power cost revision that is affected.
According to officials many industries in the country were getting power at Rs.9.10 with a mechanism to charge for peak hours. Under the new rates industry will have three charge bands of Rs.16.50 for 'peak,' Rs.8.70 for off-peak, and Rs.11.50 for day.
The new power tariff structure is due to be introduced by Public Utilities Commission of Sri Lanka with a view of making debt running Ceylon Electricity Board to break-even by 2014 and to make it a profitable state entity by 2015 through selling 'cost reflective' electricity to consumers.
“If state wants to make CEB profitable, they should first look into state owned bodies who are wasting electricity and power most of the time. Even, common laymen would sadly see during the day time when state employees leave their seats without switching off their fans, lights or air conditions. . You would see queues of people waiting for hours in order to get signature to a document to export or import while department officials are not attending to their work timely. This in turn affects the country’s working population’s human hours and that in turn hamper the real growth of our production and manufacturing.” said Thushara Ambetiya an exporter to the Asian Tribune.
Under approved expenses for the power utilities for 2011 the regulator has estimated costs to be Rs.19.14 a unit but government subsidies would bring it down to Rs.14.95 during the first six months of next year. Although government has proposed a subsidy to domestic customers who use below 90 units, general public are of the view that only rural people in extremely remote areas will be under 90 units category, while many households in urban areas use approximately 120 to 150 units per month.
“If you have one refrigerator, radio, television, DVD player, iron, computer and 3 ceiling fans added with a semi automatic washing machine plus minimum four hours of mobile phone charging once every other day; you will be anyway using somewhere up to 120 units given that you only keep your ‘lights on’ from evening 6.30 p.m. to next day 6 a.m.” said Mahesh Manatunga a concerned citizen from Chilaw, a town in North West Region.
Meanwhile, Samantha Weerasooriya an Electrician from Western Province said that apart from ‘live’ cables, many neutral electricity cables and wires that run into households in the country are empowered with electricity, that in turn increase the number of units in electricity meters fixed in households unknowingly. “I have complained about this to Electricity Board many times and at times I have been carrying out repairs at many households located in number of places. But the Electricity Board has done nothing so far” he said.
- Asian Tribune -