The Sunday Times FT - Fuel costs, road management and energy

A recent government decision not to subsidize petrol and diesel has brought a fresh momentum to the local retail market. In the absence of any government subsidies the two players Ceypetco and LIOC will fix their prices depending on the market. It seems that LIOC with better management of resources and linkages to the parent company in India will in the long run be able to edge out Ceypetco that has also lost the more prominent filling stations to LIOC at the time of the liberalization carried out few years back. However no government can afford to lose control over its energy sources and it’s hoped that appropriate changes would be done to strengthen Ceypteco. It is the duty of the government to strengthen this institution with required technical and managerial resources to counter the competition from LIOC. Strong institutions make the difference between rich and poor countries and the living standards of citizens

Petroleum costs remain a worry for developing countries like Sri Lanka and possibly as a direct result of this scenario. The trade deficit for the first seven months has aggravated by 56 %. The tsunami aid flows and the increasing private remittances have however cushioned the adverse effects to maintain a balance of payment surplus.

Consumers too will feel the effects of the higher fuel costs on a more regular basis without government intervention. And with growing tensions in the Middle East and the deteriorating situation in Iraq one cannot expect any lowering of the global petroleum prices. With rising public debt and without a significant increase in government revenue any further relief to the public cannot be expected.

However there are many measures that a government could make to minimize the wastage of fuel on the roads through better road management, the recently installed traffic lights at the model farm /Devi Balika round about with digital time recorders is one good example. Road users should be given a fair deal and at least the main roads in the cities should be relieved from the disturbing external factors such as cycle races, processions, demonstrations, unauthorized parking, etc to provide for free movement of traffic. Political pandals and stages for rallies are sometimes erected in the middle of the roads and one best example is the busy Ward Place, Borella junction intersection. The recently introduced parking restrictions have introduced a semblance of discipline though few inconveniences are inevitable.

Another major need is to strengthen the public transport system. Collapse of the Railway system has placed immense burden on the road system for both goods and passenger transport. With limited road development and unlimited entry of vehicles, road congestion has become the order of the day. In the main cities it would be sensible to introduce a circular bus service covering key institutions. In the conflict free peaceful days of the sixties the then well-managed CTB ran a good school bus system as well as a “Thoran Seveya” (pandal service) to service the public needs. A circular bus service will definitely reduce the pressure for parking as well as the number of vehicles in the city and provide lot of convenience to harassed public. While the government may not be able to make much investments in the near future it is heartening to note that the Cabinet has approved the building of five flyovers in the city of Colombo, which will make a significant contribution to traffic congestion as well as to the fuel wastage. Though upgrading Railways is a complicated subject, strengthening the KV line service as a short-term measure too would rake a fair burden of fuel and vehicles off the roads. This line could be a boon to the thickly populated Homagama/Maharagama/Nugegoda office workers who commute to the city.

On the subject of energy a significant happening that took place recently was the signing of the loan package for the implementation of the much controversial Norochcholai coal power plant between the government of Sri Lanka and the government of China through the Export & Import Bank of China. The total package amounted to USD 455 million based on a loan of 15 to 20 year repayment period including a five-year grace. The power plant will be built in three phases of 300 MW capacities each up to final plant capacity of 900 MW.

The unfortunate delay of this project has caused the country massive losses over the past decade and half. It is also learnt that cabinet has given the approval for the development of hydropower projects in Broadland, Gin Ganga, Moragalla and Uma oya in accordance with the CEB power generation plans.

Having dealt in this column previously about the port development it is heartening to note the signing of another important agreement between the government and the Asian Development Bank for the funding of the initial phase of the Colombo south harbour evelopment project. This agreement provides for phase one of the project of building the breakwater in the southern end of the Colombo harbour to accommodate modern container vessels. Given the importance of the transshipment business and its positive effects to the national economy enhancing the competitive advantages augurs well for the future.

It is also learnt that the required container terminals will be built with private sector partnership in keeping with the success of the SAGT project. For an island economy highly dependent on exports and transshipment up do date port facilities are a necessity.