Financial Times

Urgent need for power sector reforms
The Ceylon Chamber of Commerce (CCC), last week urged the government, to once again demonstrate its political will and mature leadership in pursing key power sector reforms in the interest of the country.

“We also appeal to all responsible political parties (principally the main opposition party) to support the government as they did in the resolution of the contentious issue of the Post Tsunami Operational Management Structure (P-TOMS). This critical step gives hope that the country is indeed entering an era of political maturity, which is a vital first step for the nation to realise its true and full potential as an emerging economy,” it said in a statement on the need for power sector reforms.

The statement said:
The longstanding crisis in the power sector has had far reaching implications on the country as a whole and the business community, in particular. Some of the serious challenges faced by the country as a result of the power crisis include;

• The excessive cost of power, which is one of the highest in the region. This hampers the competitiveness of the Sri Lankan industry and has adverse implications on the cost of living and the generation of new employment.

• Inability to meet the annual demand for power, which is projected to grow at the rate of 8% per annum. This has adverse implications on the expansion and growth of the economy.

• Inability to extend the rural electrification programme. Approximately 35% of the people of the country do not have any access to electricity.

• Inability of state sector to, annually, allocate Rs.40-45 billion to ensure sustainable development of the power sector.

• Inability to service and settle an enormous accumulated debt of Rs.80 billion., which is placing an intolerable strain on some of the state owned banks and the economy, aggravating the threat of inflationary pressure.

• Inability to improve the quality of services provided to consumers, both industrial and domestic.

• Ineffective utilisation of the large asset base of around Rs.250 bn. in the private sector.

Successive governments have identified the need and agreed that the introduction of power sector reforms, with the divesting/restructuring of the CEB, is the best way to resolve the crisis in the power sector. The reforms are expected to provide flexibility and autonomy for crucial decision-making, devoid of political interference.

In arriving at what should constitute the elements of the reform programme, extensive consultation have been conducted with all stakeholders, including employees and Trade Unions of the CEB, over a period of nearly 10 years. Firm assurances have been given that there will be no redundancies and the terms and conditions of service of all employees will not be disturbed following the implementation of reforms.

Despite the gravity of the impending national crisis, the Government is being restrained from proceeding with implementation of reforms, due to unreasonable pressure from Trade Unions.

The donor agencies that have pledged financial assistance to power sector projects have cautioned that such financial assistance will be withdrawn, if the reform process is not completed in due time.
In the process of reaching consensus, the CCC urges the government not to compromise or modify the key pillars of reform. These are:

• The appointment of an independent regulator

• Breaking the CEB monopoly into separate entities for generation, transmission and distribution, in the form of independent Companies
These reforms are a vital necessity and are a part of a global trend of adjustment to the modern economic order. Neighbouring countries, such as India and Indonesia, are far ahead of Sri Lanka in instituting reforms in the power sector.

Green campaigners slammed over opposition to power projects
Shavindranath Fernando, Project Director, Ceylon Electricity Board, recently complemented a lady from the audience during a public discussion on energy issues - for denouncing “green” campaigners who succeed in convincing people of the so-called dangers caused to the environment by power projects.
Focusing on the proposed Upper Kotmale Hydro Power Project at a seminar on “Energy Crisis in Sri Lanka,” organized by the Ceylon National Chamber of Industries held, he said there was absolutely no such environmental impediments as envisaged by these protest groups. He said residents around the area where the power facility is to be installed were welcoming it indicating that they would get better housing facilities and other benefits like new and better roads and infrastructure developments. But he said that it was the people (protestors) from Colombo who were against the proposed plant at Talawakele.

Fernando said the project has now been reduced to a small one whereby the reservoir would only occupy 65 acres at a cost of US$ 250 million. “Though it is said that seven water falls would be affected there were only five water falls and among them also only one waterfall would be affected,” he said.
Chamber Chairman Nimal Perera said that the economy was battered by many setbacks, attributing the energy crisis as one of the major problems. This situation is created due to a lack of national planning and mixing up of the country’s priorities to suit the whims and fancies and personal agendas of the politicians.

Prof. Priyantha D. C. Wijayatunga, Director General, Public Utilities Commission of Sri Lanka (PUC) speaking on ‘Energy Crisis and Proposed Reforms’ said that one of the biggest issues in the power sector was the problem of governance coupled with transparency, business accountability, consumer service etc.
Ananda Piyatilake, President, Ceylon Electricity Board, Engineers Union said that politicians and others blame the lethargy and inefficiency of state workers to the present day energy crisis which was no true. There was no cash crisis at CEB prior to 1999 and just over five years ago CEB had a bank balance of Rs 4,000 million. The funds that were given to invest and the returns to be utilized in the CEB development were used by the government and now the CEB is indebted to the Treasury in billions

Relief soon from power shortages in Colombo
By Dhammika Dharmawardhane
Has all the development in and around Colombo led to over capacity and disability to meet the demand for electricity? Is this leading to constant power failures in Colombo? While being quite satisfactory drivers for the economy, were all the high-rises and development projects in Colombo sucking up all the electricity to power them leaving us hapless urbanites in the dark?

I decided that a good place to start would be my now favourite place to visit in Colombo, our commercial bastion, the ‘Maha Bankuwa’. I gained entrance to the Foreign Aid and Budget Monitoring Unit of the Ministry of Finance and Planning; this time quite swiftly as I had now perfected this art. For those of you who missed the article, I previously visited the same in my brief investigations on the human wastage/sewage in the new and splendid high rises springing in and around the city of Colombo and where it finally rests.
I then went on to highlight my latest concern on the state of the supply of electricity in the city of Colombo and its suburbs.

Rest assured, headed by Project Director, Dr. Susantha Perera, a gracious but a more than little overly technical gentleman, there is a Greater Colombo Substation Project well on its way to ensure sufficient and proper supply of electricity to Colombo and its suburbs, especially South Colombo, the areas of Maradana, Dehiwala, Havelock Town and Sri Jayewardenepura. Visiting Dr. Perera’s project office the total scenario was properly explained to me in detail.

Fellow urbanites, an old underground line system serves to supply electricity to Colombo City and even older overhead lines provide electricity supply to Colombo’s fast-growing southern suburbs like Dehiwala and Sri Jayewardenepura. As consumption has grown rapidly with development of infrastructure and economic activity, the current system cannot meet the growing demand. Limited capacity means that major consumer needs cannot be met.

Large, would-be income generating projects use their own generators to supply power to their buildings leading in a substantial loss of revenue to the CEB. Capacity limitations, reliability of supply and improper distribution have resulted in us mere mortals suffering frequent interruptions to electricity resulting in of course common dilemmas like PC’s crashing, important functions such as dinners for close friends being conducted in intimate candlelight, being stuck in elevators however briefly etc., etc., due to an old, unreliable and risky system that supplies us with electricity.

However, there is light at the end of the tunnel. The Greater Colombo Substation Project has started in early 2004 and is expected to be fully operational by January 2006. Another fitting excuse for all of us to celebrate the coming New Year with joyful abandon. The Kolonnawa main distribution station will supply electricity through new underground lines laid to lead to brand new substations in Maradana, Dehiwala, Havelock Town and Sri Jayewardenepura.

CEB will have new income generating business opportunities, the private sector can benefit from obtaining power through the CEB instead of running costly operations on generators, the environment will benefit minus the diesel smoke and fumes and Colombo’s elite can retire to their beds every night in air conditioned comfort. Most importantly Sri Lanka’s economy will continue to be fuelled through its main capital city of Colombo and our economy will flourish. All this through a grant from the German government through its lending arm KfW to the tune of 42 million Euros and a CEB contribution of rupees 1,300 million, all totalling a staggering Rs. 5.5 billion.

The writer has over 13 years experience in communication and strategic planning with J Walter Thompson, Ogilvy & Mather, Lowe Worldwide, McCann Erickson and a government agency. He has lived and worked in Sri Lanka and USA.

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