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Energy crisis and new initiatives Close on the heals of the trade union action of the Port where perhaps with lesser awareness among the public the country lost substantial revenue, as well as damage to its reputation, came the strike by petroleum workers virtually bringing the entire country to a halt reminding us of the queues and dark days of the 1988-89 terror period. In short, Sri Lankans were called upon to pay a heavy price for weaknesses in the system of governance and it was yet another shock treatment for a nation threatened by internal conflicts with obvious adverse social and economic effects. Last week we dealt sufficiently on the need to develop an effective dispute resolution mechanism in the public sector and we need not repeat what we asserted. The petroleum issue was further confounded by the absence of the second player LIOC who has not been servicing the public for nearly three months for which no satisfactory explanation given by the government nor the LIOC, now a public quoted company. Colombo city was the worst affected as the prime stations have been given to LIOC thus creating immense pressure on the few CPC outlets. Apart from industrial disputes, the subject of petroleum itself is a major concern for the government due to escalating costs its consequent pressure on the balance of trade, foreign reserves, inflation, cost of living and many more issues. Given the dominance of the oil-based power plants currently at 61% as against the hydro-electric being 36%, Sri Lanka is at the moment facing a major energy crisis perhaps due the lack of foresight in implementing correct policies at the appropriate times. Since the end of the American oil company dominance and the formation of OPEC in the early seventies oil prices have been rising, another theory also suggests that in comparison to the $2 per barrel price in the early seventies, the inflation-adjusted price currently should be around $95 whereas its still below this level, this gives us an indication of the potential for prices to go higher. Today all indications for stabilizing the oil price seems negative with civil war in Iraq, Israeli attacks on Lebanon, Iran’s nuclear policy, Venezuela’s hostility towards Americans, political instability in Nigeria etc. Increasing consumption arising from the economic expansion of India and China is another issue. Recently the Ministry of Power & Energy released a document titled “ National Energy Policy and Strategies of Sri Lanka’ detailing the policy, implementing strategies, targets and milestones etc. Given the gravity of the problem this measure is most welcome and timely as the energy issue too has reached crisis proportions due to the common malady that’s affecting our country i.e.: too frequent elections and the associated political instability, inconsistent government policies, resistance to reforms, management weaknesses, etc. The policy document also spells out that Oil and Gas exploration procedures have been initiated and that seismic acquisitions in the Gulf of Mannar basin was carried out in 2005 and more detailed investigations are planned for 2006/7. As the policy document states that two main energy commercial sub sectors in Sri Lanka are state owned utilities and they undoubtedly need to be reformed to meet the changing conditions, Ceylon Electricity Board (CEB) and Lanka Electricity Company Limited (LECO) are expected to be unbundled to form separate companies for generation, transmission, and power trading and distribution companies. If these reforms were carried out at the times they were originally planned the public would not have been called up to pay the price that is being imposed now. Trade union leaders are not the sole stakeholders of these enterprises; there are millions of consumers whose rights as well as the rights of taxpayers who keep these institutions afloat should be safeguarded. The subsidy to the CPC amounts to nearly 1.1% of the GDP and it’s a pity that the government disbanded the market based price mechanism initiated in 2002. Had this been in force the debt burden to the CPC could have been much lower and the adjustment factors too may have worked to curtail wasteful consumption. Sri Lanka’s industrial exports have been performing well and it’s of paramount importance to grow this trend. One of the major impediments for growth is the high electricity and the World Bank report on “Investment climate” in Sri Lanka clearly shows that industrialists invest disproportionate part of their fixed capital in power generators. The power supply is outside the reach of a quarter of the population, perhaps a factor to be noted in the drive towards eradication of poverty. It is hoped that the implementation of the new policy will be given highest priority by the government.
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