Apparel group commends reduction in electricity tariffs

The Joint Apparel Association Forum (JAAF) has welcomed the recent decision by the Public Utilities Commission of Sri Lanka (PUCSL) to implement a 25.3 per cent reduction in industrial electricity tariffs, parallel to a 27 per cent reduction for domestic customers and a 22.5 per cent overall reduction effective from July 16, 2024.

In addition to easing the burden on retail customers, JAAF commended the PUCSL decision for providing much-needed relief to Sri Lanka's apparel and export industries, enhancing competitiveness and supporting economic recovery, the Forum said in a media release.

The PUCSL decision was taken in the light of the submission made by the Ceylon Electricity Board (CEB) which had the industrial tariff unchanged, and post the public consultation held last week where JAAF made a submission that, Sri Lanka’s apparel exporters were forced to contend with one of the highest electricity tariffs among its competitors. However, following reduction approved by the PUCSL, Sri Lankan manufacturers will now benefit from a tariff rate that is much more competitive.

Sri Lanka's apparel industry, which contributes nearly half of the nation's export earnings, has faced severe challenges due to high electricity costs. In 2022, tariffs soared from Rs. 6.58/kWh to Rs. 34/kWh, contributing to a decline in apparel export revenue from $5,591.5 million to $4,535.5 million. The recent tariff reductions will alleviate some of these financial pressures, allowing the industry to stabilize and regain its competitive edge.

"We commend the PUCSL for recognising the significant challenges faced by the apparel sector and taking decisive steps to reduce industrial electricity tariffs as well as tariffs for SMEs and minor industries, all of which were struggling with the higher rates. This decision is a welcome step in the right direction that will prove crucial for maintaining the competitiveness of Sri Lankan exports, and supporting a broad-based, export-led economic recovery,” JAAF Secretary General, Yohan Lawrence said.

In its submissions, JAAF noted that consistent and wide overestimation in the tariff forecasting for cost recovery submitted by the CEB has also driven retail and industrial tariffs unnecessarily higher. In addition to placing a direct and undue burden on average citizens of Sri Lanka, JAAF noted that these major inaccuracies in the tariff forecasting model had eroded the competitiveness of Sri Lanka’s apparel exports.

“Accuracy in the tariff forecasting model is an absolute must. While we are deeply grateful for the decision to reduce tariffs, we must also reiterate that the tariff increase in October 2023 was based on inaccurate forecasting and resulted in the CEB making substantial profits of Rs.61 billion in Q3 2023 and Rs.58 billion in Q1 2024. While such significant profits eventually created clear space for a tariff reduction, it is fairer for all customers when tariffs are based on accurate forecasting at the outset,” Mr. Lawrence stated.