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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2702

Rishad, CEB start work on Lanka’s Industrial Power costs

Colombo, 27 April, (Asiantribune.com):

As their energy costs suddenly spiked, Sri Lanka’s Industrialists who flocked to Industry and Commerce Ministry on the morning of 26 April began urged the supplier CEB to become more efficient and consider alternative sources.

Interestingly, they commended the Industry Ministry for the on-going 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” said a spirited Rishad Bathiudeen (Minister of Industry and Commerce) on 26 April at the Auditorium of the Ministry of Industry and Commerce, Colombo 3.

• Rishad & Power Ministry launch immediate consultations

• ‘Wait for Noro I & II and then see lower tariff!’ – Power Ministry’s Ferdinando

• Industrialists praise Rishad & Ministry for mediation and facilitation

• ‘Rising global oil price the real reason’ - CEB

Minister Bathiudeen was addressing the first ever national level forum and dialogue session between Lanka’s industrialists and the government (consisting of top officials of Ministry of Power and Energy as well as Ministry of Industry and Commerce) held in earnest on 26 April. Among those in attendance with Minister Bathiudeen were more than 70 industrialists (non-BoI- of all levels, SME and Large scale), M M C Ferdinando (Secretary, Power Ministry), W.B.Ganegala (Chairman CEB), officials from Labour Ministry, Anura Siriwardena (Secretary, Ministry of Industry and Commerce) and other top officials of Industry Ministry. The crucial session was organised by Minister 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, Minister 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 domestic sector leading with 40%. Electricity usage by Lankan industries increased by 9.7% in 2011 to 9840 GWhrs. A total of 50668 Industrial electricity accounts were active in 2011. 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 max).

Industrialists who were in session with Minister Bathiudeen on 26 April 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. 91% of the 50668 industrial electricity in Y 2011 accounts belonged to I-1 though when it came to consumption, I1 reported only 8% of total consumption while I-2 lead with 53% of the total 3398 GWhrs used by all Ind.

categories in Y2011. 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’. I-3 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 additional 1755 MW power generation in the projects of Puttalam Phase 2 (2014), Trincomalee Stage 1, Broadland Hydro & Uma Oya Hydro (2016), Trincomalee Stage 2 (2017) and rest of Trincomalee Stage 2 (2018), respectively.

“CEB have been facing huge losses, especially since 1990s oil price hike. But despite the rising costs, we did not increase our selling rates. The recent crisis started 2012 February onwards when oil prices suddenly shot up” said M M C Ferdinando (Secretary, Power Ministry), who 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 65 per litre, CEB only increased its rates by 15% absorbing 10% of the rest of cost escalation, taking Rs 28 Bn loss. Thereafter Rs 65 per litre of oil again rose to Rs 90 in 2013 causing another Rs 28 Bn loss for us.

The rate increase comes due to hike in oil prices we use to create 6100 GWhrs from the total 12566 GWHrs we are required to generate. Coal is 1883 GWHr, hydro power is 3883 GWhrs, sales at 10998 GWHrs, and renewable at 700 GWHrs. But our pricing formula is not based on tariff based on cost effectiveness. Therefore a policy decision needs to be made by the government on cost effectiveness formula so that everyone gets to pay on a justifiable basis.”

Asked by industrialists how will government respond if coal prices climb, Ferdinando replied: “Coal goes up only in a limited way and 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 Minister Bathiudeen that Sri Lanka’s power generation costs are highest in the region at $ 1.05 per unit while the rest of the region produces power for much less –sometimes less than $ 0.50 (per unit). Ferdinando, replying, said: “Though the generation costs are high, total cost is not passed to the consumer since government subsidizes the costs. Industries are subsidized by Rs 3 per unit. Also we have been upgrading the systems from 2010 and these costs too need to take into account” and added. “Give us the chance to mobilize the Schemes II and III of Norochcholai and then see!”

“While we welcome the per unit basis subsidy we receive from Ceylon Electricity Board, the benefit however is lost when peak to off peak changeover shutdown takes place” said Ms S Samarasinghe, a leading Plastic Recycler in Sri Lanka who represented her firm Sachitha Plastics at the session. “We nevertheless praise the Industry and Commerce Ministry for continuously stepping forward to help industrialists to connect to the industrial grade power grid.”

- Asian Tribune -

Rishad Bathiudeen (Minister of Industry and Commerce-second from right) and M M C Ferdinando (Secretary, Power Ministry-second from left) step into reject rate hike misinformation and calm unnecessary panic worries of Lankan industrialists on 26 April in Colombo.
M M C Ferdinando (Secretary, Power Ministry-standing) explains the new industrial tariff structure to industrialists as Rishad Bathiudeen (Minister of Industry and Commerce – seated head table far left) and Anura Siriwardena (Secretary – Ministry of Industry and Commerce – head table,  seated middle) listen attentively on 26 April.
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