Thursday, December 7, 2023

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Government allay public fears of unbearable electricity tariff hike

Following the Indo-Lanka plan of setting up a power transmission link between the two neighbours and, the government is to go all out to implement a cost -reflective Electricity Tariff Formula based on which the tariff will be increased or decreased.

The opposition outcry and the Public Utilities Commission of Sri Lanka (PUCSL) pre warnings of blocking any new traffic increase had become empty words as a result of the Cabinet approval to an electricity tariff formula one of the needs at present.

Minister of Power and Energy Kanchana Wijesekera confirmed that Cabinet approval was granted to amend the general policy guidelines for the electricity industry and to implement a cost reflective electricity tariff to be implemented from January 2023.

In the wake of this move, India and Sri Lanka plan bilateral talks at the “highest level” for setting up a power transmission link between the two neighbours, official sources said.

Public sector transmission major Power Grid Corporation of India has already prepared a preliminary report for the proposed project, they said.

Meanwhile the sixth shipment of 60,000 metric tons of coal out of 19 shipments ordered from South Africa arrived in the country last Friday making the third power plant of the Norochcholai power station operational

This has negated the pre-warning of the engineers’ union of the Ceylon Electricity Board warned of further power cuts of up to 10 hours a day in January.

According to the subject minister Kanchana Wijesekera, the Ceylon Electricity Board (CEB) estimates a cost of Rs. 56.90 per unit of electricity if consumers are to experience an uninterrupted power supply. However, the current average tariff is at Rs.29.14 and the deficit is estimated at Rs. 423.5 billion.

The power demand estimated by CEB is 14920 GwH and is marginally lower than 2021 (15,200 GwH). But after the electricity tariff hike there has been a drop in demand during the last three months.

According to Global assumptions a 100 percent increase in tariff will lead to a 8-10 percent reduction in consumption.

Industrial energy use has dropped by 15 percent and this is unhealthy for the economy as it is leading to an economic contraction. The next tariff hike will further depress the demand, several energy experts opined.

An overly large tariff increase can further depress the economy by contracting purchasing power of people and businesses, making exports uncompetitive and driving businesses to closure.

It has also been noted that the recent tariff increase of approximately 75 percent has resulted in approximately 7% drop in the demand.

The 2023 tariff increase will also reduce consumption, but since elasticity is not 100 percent, the demand will be at a lower rate.

The CEB has shown that electricity demand reduces during contractions of the Sri Lankan economy. But according to the IMF and the World Bank, the economy is expected to contract to over 4 percent in 2023.

The tax increase in 2023 will also reduce the disposable income of a large number of Sri Lankans, forcing a reduction in the demand.

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