The shortage of foreign currency in the banking system has revealed deep vulnerabilities in the planning and fiscal management of the energy sector, says The Ceylon Chamber of Commerce through its Energy Sector Committee.
The Chamber is of the view that this has underlined Sri Lanka’s overdependence on imported fossil fuels, and highlighted the slow shift towards renewable energy. It is the Chamber’s belief that the national energy generation plan should be based on factors that will ensure economic stability and not be over-dependent on imports.
This requires pricing predictability over a planning cycle short enough to respond to changes in input pricing, and increasing renewable integration to smooth out volatility of external markets.
Therefore, in consideration of the current energy crisis, the Chamber recently wrote to the Minister of Power and other relevant policymakers highlighting nine key recommendations covering both short-term and medium to long-term measures needed to ensure stability in the sector.
1. End the moratorium on COVID-19 related payment deferments above a certain value, so that people who can afford to pay their electricity bills are opted out of payment deferments.
This can allow some level of cushioning for the financial crisis the utility is currently experiencing, 2. bring up to date all payments due from the utility to the Independent Power Producers (IPPs). This in particular affects the single unit plant owners, which impacts their capacity to generate electricity and meet their bank loan payments.
These delays in debt repayments caused by economic disadvantages should be exempted from the CRIB, since they are beyond the control of the investor, 3
immediately implement demand-side management measures, the objectives of which are clearly explained in the Ceylon Electricity Board website but no details are provided on any specific recommendations for Sri Lanka, 4 immediately revise the electricity tariff and band structure. The increase in cost of coal and oil are challenging the sustainability of maintaining the current tariff regime.
The utility must also implement the necessary processes outlined in the tariff methodology so that the regulator has sufficient information to make equitable pricing decisions, 5. clear the net-metering and net-accounting application backlog. This is said to be due to the lack of grid capacity. However, this theory is not applicable to all sub-stations in the country and must be studied in more detail.
Expenditure on merchandise imports increased by 23.1% to US dollars 1,959 Million in January 2022, compared to US dollars 1,592 million recorded in January 2021, although it decreased.
Expenditure on the importation of consumer goods increased by 4.2% in January 2022 over the month of January 2021, due to increases in both food and non – food consumer goods.
Import expenditure on food and beverages increased by 1.8% (y – o-y), mainly owing to the importation of cereals and milling industry products (primarily rice). Expenditure on rice imports exceeded US dollars 119 million during the period from November 2021 to January 2022.
Expenditure on the importation of investment goods increased by 17.2% in January 2022 compared to the same month in 2021, due to substantial increases in building materials and machinery and equipment. Compared to the month of January 2021, import expenditure on all subsectors under building materials, except aluminium articles, increased in January 2022, led by iron and steel.
A marginal net inflow of foreign investment was recorded in the government securities market in January 2022.The net inflows from the government securities market in January 2022 amounted to US dollars 4 million.