ECONOMYNEXT – Sri Lankan Power and Energy Minister Kanchana Wijesekara has defended electricity tariff hikes in parliament, insisting that the burden on consumers would not have been as burdensome if timely tariff revisions had been implemented.
Speaking in an adjournment debate on Monday August 29 on the impact of the tariff hike, Wijesekara argued that bad policies were not exclusive to one government and that big hikes were inevitable given high costs of electricity generation.
“Even though a hike is a very difficult thing for people, it should be done right now,” Wijesekara said.
“So far, the [the state-run utility provider] The Ceylon Electricity Board (CEB) is to pay 76.8 billion rupees to private power stations and 29 billion rupees for renewable energy, including rooftop solar. [The state-run] Ceypetco must pay 31 billion rupees.
The Minister said that although the CEB had requested an expected revenue of Rs 869 billion from tariff hikes, the Public Utilities Commission (PUCSL) had only given approval for Rs 500 billion.
“[A tariff increase] is a must, and it has been done with the maximum possible subsidy for low consumption groups,” he said.
The majority of electricity consumers in Sri Lanka use less than 30 units per month, and current tariffs provide this group with a 75% subsidy on the unit tariff.
“Consumers who used 30 units per month were spending 105 rupees on their electricity bill. That 105 became 360 with the hikes,” Wijesekara said.
“As a percentage, that’s a lot… Is there anyone who can’t pay 360 for electricity? There is no one like that. Even for a loaf of bread today we pay 200 rupees.
“Electricity which costs around 1,500 rupees to produce is given at only 360 rupees.”
CEB and PUCSL have attempted to mitigate the impact of tariff increases on low-consumption groups through a process called cross-subsidies, where high end-users’ incomes will be used to pay for low end-users’ consumption.
Explanation: Electricity tariff hike in Sri Lanka and how it works
Wijesekara said treks to places of worship have also been increased despite criticism from religious leaders.
“Out of 46,682 places of worship in Sri Lanka, 15,195 consume less than 30 units. So far they have only spent 87 rupees on electricity per month. Now they will have to pay 330 rupees. he said.
According to CEB data, electricity tariffs used in places of worship have increased by 555%, driving up the unit price from 7.42 rupees to 48.65 rupees.
It costs 32 rupees to generate one unit of electricity.
The cost of fuel and coal has more than doubled since the last tariff hike in 2013, and the effect of the depreciation of the rupee is driving up electricity generation costs.
In a speech ahead of Wijesekara’s Monday morning, opposition MP Kabir Hashim was scathing in his criticism of past actions by the current government that allegedly led to the power crisis in Sri Lanka, including overstaffing and the failure of the restructuring of the CEB. MP Samagi Jana Balawegaya (SJB) has also proposed a direct cash transfer to low-income households and SMEs affected by the rate hike.
Sri Lanka’s main opposition offers cash transfers for people affected by electricity tariff hike
However, Wijesekara defended his position saying that it was not only one party that was responsible for the crisis, and that irregularities also took place when the current main opposition was in power.
“The number of CEB employees increased from 15,000 to 22,000 while you were in power. For every ten years [former President] Mahinda Rajapaksha was in power, only 1,000 were added,” he said.
“When your government made bad decisions, you didn’t have the courage to stand up to them.”
Wijesekara agreed that the restructuring of the CEB was necessary. He had previously tweeted that “half of the CEB’s 26,000 employees” would be sufficient to run the organization effectively, and that the majority of the workers were “inefficient and incompetent”.
He said that despite the large number of employees, the CEB was still outsourcing services that could be provided in-house.
Wijesekara said the opposition’s inability to change tariffs was now making life difficult for everyone.
“From 2016 to 2022, if you had decided to change the tariffs at least once every four years, such pressure would not have been imposed on the population,” he said.
“The tariffs were increased in 2013, then after Norochcholai was given to the people by Mahinda Rajapaksha, the benefit was given to the people by reducing the tariffs by 25 percent.”
Despite making profits in 2015 and 2016, Wijesekara said the CEB suffered a cumulative loss of 278 billion rupees between 2017 and 2019 due to the government’s failure to plan power generation in the country or increase prices.
“I agree with MP Kabir Hashim that with the hikes, we also need to manage the costs. We have talked time and time again about renewable energy, but it is only when a crisis arises that we understand its importance,” said Wijesekara. (Colombo/August 29, 2022)