Financial Times

Praise from President; rejected by CEB
Mixed signals for small power producers
By Chaturi Dissanayake
The government, faced with a power crisis, has been encouraging the setting up of small power plants particularly with dendro (fuel-wood) to feed the national grid and minimise the need to import fuel.

But, The Sunday Times FT discovered last week that there are mixed signals and mixed priorities in the promotion of this small but key sector leading to frustration amongst companies which require at least three years to get approvals to complete any small power project.

One company, M.P.L. Dendro Thermal Power Pvt Ltd, was even selected under President Mahinda Rajapaksa’s 300-factories programme, praised for going into a difficult area and asked to proceed but came across the CEB as a stumbling block. The CEB says its capacity is full and cannot take extra power and has refused to issue a Letter of Intent (LOI) which assures the CEB will buy the power. That is only the first step in the finalisation process. The company owned by Maskeliya Plantation from the Richard Peiris group will provide about 500 direct and indirect employment opportunities in the area.

“The country is facing a shortage of power at present but the CEB is not willing to purchase the 1.5 mega watts to be generated by our plant. Further there is the additional benefit as the project will have a positive environmental impact on the plantation and its surroundings by growing almost 492 hectares of Calliandra and Gliricidia where only the branches will be harvested for the power plant,” said D. Delvita, worried Manager of the project.

The CEB says it doesn’t have the grid capacity to purchase the power generated by MTL while the company can’t start the project without the LOI. CEB officials say there is oversubscription to the regional grid as there are many mini hydro generation plants in the area. “We need to enhance the grid capacity or the investor must bear the cost and enhance the grid. That’s the only solution,” Ajith Fernando- DGM in charge of energy purchases at the CEB. Dendro thermal power is going to be too expensive once coal plants come out even with the government subsidy, he said adding that there is only one plant at present which is also closed due to high costs involved as the wood price has gone up.

Dr. Nishantha Nanayakkara, President of the Small Power Developers Association, however disputed this argument saying a state subsidy would make dendro power viable.

“The CEB has been giving the same excuse for the whole of last year as well without actually providing a solution. It’s not a major investment for the CEB to upgrade their grids but no action is being taken.”

He said there are about 100 MW worth power from several dozen small power plants are held up due to the delay of the CEB to enhance capacity at the national grid.

Dr. Nanayakkara said mini power plants would benefit the community in many areas; the local infrastructure would be developed, the community would get job opportunities and the people would get the technical know how as well.
Dr Romesh Bandaranayake, former president of the association, said that “if the CEB had the will to do it they definitely can absorb it. If they decide to strengthen their system even slightly they can absorb well above the capacity they have now and even without that with their annual upgrading of the systems they would be able to enhance their absorption rate greatly.”
At the BOI, Mrs G. Rajapakse, Senior Manager (Investments), said the matter (over CEB refusal) would be referred to “the highest level”. She was very positive that the CEB would sign a LOI in the near future.

The launch of the Nipayum Sri Lanka (300 enterprises initiative) took place on January 24 where President Mahinda Rajapakse gave certificates of recognition to those selected and recognised under this project.

The selected companies get tax holidays based on the location and exemption of custom duties and VAT ON THE import of new plant and machinery

Yet even though MPL is one of the first to be recognised and although the achievement comes in the most-difficult category under the programme, the company may have to wait for a long time until officials wake up.

Back to Business