CEB is not a burden on national economy, says Power Minister

Denying accusations that the Ceylon Electricity Board is a burden on the national economy, Minister of Power and Energy Champika Ranawaka points out its contribution towards the country’s development and claims the staggering loss of $ 42 billion predicted for 2012 was mainly due to the fuel price hike and rupee depreciation. Following are excerpts of an interview:

 

In 2010 the CEB’s fuel expense was Rs. 82 billion; but in 2012 it is a staggering Rs. 163 billion. When an institution faces a 100% increase in its expenses, it is no secret that it has to face challenges of this nature. In 2010 we were able to save Rs. 15 billion and in 2011 we saved Rs. 11 billion. In 2011 we faced the lowest rainfall recorded in 50 years, but we managed to overcome difficult situations. We are hoping to save at least Rs. 20 billion this year I am happy to say that today there is financial discipline in CEB. There was a time when the CEB was a burden to the Treasury, but today we do not depend on the Treasury to settle our dues or cover our losses. We work according to a plan. We never expected a global economy crisis or a change in weather patterns. It is due to such reasons that we weren’t able to achieve our targets I challenge the Finance Ministry to prove that the CEB is a burden to the national economy. Not having a competitive price formula is the main reason behind the crisis situation in the CPC and CEB The country should be proud of the fact that, amidst the country’s highest fuel price hike and also during a dry season, we haven’t revised electricity prices and are providing 24 hour electricity supply. They claim we are a burden to the national economy. No one talks about benefits we have provided to the industrialists in this country. Industrialists should pay three times what they are paying now. The tourist hotels should be charged twice as what they are paying now. Although the CEB is making losses, our contribution towards these industries helps them to make profits in their own sectors

Q: The CEB recorded a loss of Rs. 14 billion in 2011 and the estimated loss for 2012 is Rs. 42 billion. What has happened to your pledge to make CEB a profitable institution?

A: The CEB is not operated under Government funds. We operate using our own money. The CEB is not a burden on the Treasury. We have showed profits just like we promised. But sometimes we have to face unexpected situations. The CEB is currently facing such a situation.
In 2010 the CEB’s fuel expense was Rs. 82 billion; but in 2012 it is a staggering Rs. 163 billion. When an institution faces a 100% increase in its expenses, it is no secret that it has to face challenges of this nature. In 2010 we were able to save Rs. 15 billion and in 2011 we saved Rs. 11 billion. In 2011 we faced the lowest rainfall recorded in 50 years, but we managed to overcome difficult situations. We are hoping to save at least Rs. 20 billion this year.
I am happy to say that today there is financial discipline in CEB. There was a time when the CEB was a burden to the Treasury, but today we do not depend on the Treasury to settle our dues or cover our losses. We work according to a plan. We never expected a global economy crisis or a change in weather patterns. It is due to such reasons that we weren’t able to achieve our targets.
Due to the present rupee depreciation, there is an intolerable increase in coal and fuel prices. We never expected such a situation. I will reiterate that by 2015 we will bring the CEB to a breakeven position. The CEB is not burdening the people by revising electricity prices. We could have easily done that and made this a profit-making institution overnight. But we don’t want to do it. I have stopped the corruption, bribery and wastage that were prevalent in the CEB. We don’t hesitate to take strict action against any wrongdoers and lawbreakers.

Q: But the Finance Ministry claims that the CEB burdens the national economy and is also the main cause of CPC losses. Do you agree?
A: This is a fabricated accusation. I challenge the Finance Ministry to prove that the CEB is a burden to the national economy. Not having a competitive price formula is the main reason behind the crisis situation in the CPC and CEB.
When fuel prices were increased in 2008, CEB recorded a loss of Rs. 33 billion. We were not allowed to revise the prices. When CEB made profits, we paid that to the Finance Ministry. I decline all allegations that the CEB is the main cause of CPC losses. When they don’t allow institutions like CPC and CEB to operate on commercial purposes, when they don’t respond to our requests to initiate a price formula, how can they blame us? The fault is not ours.
The CPC does not supply fuel to CEB on a subsidised rate. There are some inefficient officers who are offended by the fact that they couldn’t make the CEB a profitable institution during their tenure. There was a mafia. The CEB was not given fuel and some machines had to be shut down. Five tenders were cancelled. The CEB was forced to buy diesel at a high cost. At the end the CPC had to bear the loss for that. The CEB has come to this position while fighting this mafia.
In fact, the country should be proud of the fact that, amidst the country’s highest fuel price hike and also during a dry season, we haven’t revised electricity prices and are providing 24 hour electricity supply.
They claim we are a burden to the national economy. No one talks about benefits we have provided to the industrialists in this country. Industrialists should pay three times what they are paying now. The tourist hotels should be charged twice as what they are paying now. Although the CEB is making losses, our contribution towards these industries helps them to make profits in their own sectors.
We spend an enormous amount of money to supply electricity to this country and in return we get only one tenth of what we spend. Cost of street lighting is Rs. 4 billion a year. Although the Treasury has promised to bear the cost, we haven’t received any money from it. Why isn’t anybody talking about the CEB’s contribution towards the country’s economy through such measures?
Let me reiterate, fuel prices and electricity prices should be based on a competitive price formula. In May 2011, I made a request to the Cabinet of Ministers explaining the importance of implementing such a price formula, but up to date there hasn’t been any response.

Q: Although you say electricity is provided at a subsidised rate for the industrial sector, industrialists say Sri Lanka has the highest electricity rates in the region. Your views?
A: Who is making all these allegations? Other than Sri Lanka no country in this region provides 24 hour electricity supply. In Chennai there is a two-hour power cut every day. In other parts of Tamil Nadu there is an eight hour power cut. Those industrialists have to run their own diesel engines during this time to generate power. Every week there is a two-day industrial holiday.As a utility, electricity rates must be lower, but when those industrialists add their self generation cost to that, the amount they spend on electricity is much higher than in Sri Lanka.
Unlike in Sri Lanka, in India, electricity is provided on commercial purposes. Electricity is traded every 15 minutes. They use nuclear power. They use cheap coal. If we use such cheap and low quality coal, environmentalists will get onto the streets claiming we are causing pollution.
In Sri Lanka we use high premium coal, which is priced at US$ 140 per kilo whereas in India they buy coal for US$ 40 per kilo. We can’t use nuclear power due to pollution matters. If those industrialists who claim Sri Lanka has the highest electricity rates can take the initiative and allow us to have cheap coal and use nuclear power, then we are ready to bring down rates to match Indian prices.

 

Today Norochcholai has become a joke; they are laughing saying the plant is shut down during most part of the year. I agree the machine has failures and shortcomings. There are technical faults; there is an issue of our workers getting familiarised with Chinese technology. We shouldn’t forget that this is the first coal power plant. This is a new experience and we need time to get adjusted to it. But we are gradually getting familiar with the set up and overcoming one issue after another

Q: You have said that one reason for today’s electricity crisis is the delay in commencing coal power plants. But the Norochcholai coal power plant has become a failure, incurring heavy losses and burdening the CEB. Why is this?
A: There are several reasons. Mainly this was planned during J.R Jayewardene tenure as the Power and Energy Minister. Norochcholai was commissioned during a time when coal was priced at 10 cents a unit. But it never materialised. People were up in arms against the project; the environmentalists, politicians, Catholic Bishops and villagers. When Chandrika Bandaranaike tried to recommence the project in 1994, there were protests once again. Today the unit cost of coal is Rs. 7.80 and it keeps increasing by the day. Capacity charge is Rs. 5; transmission distribution cost is around Rs. 4. When we add all this, a unit costs Rs. 16 and we sell it at the same price too. In 2020 a unit of coal will be priced at Rs. 20.
Secondly, the plant was originally planned to be built in Trincomalee. But due to the war it was shifted to Norochcholai, which was not the best location. Thirdly, we lost the opportunity to use the best technology. Japan offered the best technology with international standards. But due to protests from the Catholic Church, the project was stopped.
Later when we finally received the green light to go ahead with the project, the Chinese Government agreed to help us. As a result we bought a machine based on Chinese standards. Today Norochcholai has become a joke; they are laughing saying the plant is shut down during most part of the year.
I agree the machine has failures and shortcomings. There are technical faults; there is an issue of our workers getting familiarised with Chinese technology. We shouldn’t forget that this is the first coal power plant. This is a new experience and we need time to get adjusted to it. But we are gradually getting familiar with the set up and overcoming one issue after another. Initially we took 23 days to unload a coal shipment, but today we take only seven days. I am expecting a report from an expert panel on the shortcomings of the Norochcholai plant and recommendations to rectify them. During the second stage we will rectify those errors.

Q: Most projects initiated by the CEB have ended up as failures. In such a situation, why do you want to get involved in mini-hydro projects as well?
A: There is a mafia in mini-hydro power projects in the country. To overcome this situation we initiated a program; we started to evaluate the licenses of investors of mini-hydro projects. There are projects that can never be initiated due to environmental and other similar issues. We have decided to cancel those licenses.
We had a scoring program and everyone who scored more than 50 points was able to continue with the projects. Then we studied the delayed projects. Licenses of investors who do not have a genuine and a valid reason will be cancelled. Those will be taken under the Government to be developed.
The mini-hydro power projects have expanded up to the maximum level. We obtain 180 mw through mini-hydro projects. There are some 300 plus projects that are being developed at present. There are some 100 to 150 not-so-profitable projects without any investors; CEB is hoping to get involved and commence those projects.

Q: Why do you want to invest in projects that are not profitable? Can’t you see that such move will end up being another burden to the CEB?
A: No investor will want to spend money on a project located in the middle of a forest. Even if there are investors, they will want the CEB to invest in the transmission lines and power grids. At the end, 75% of the evacuation cost of the investor will be borne by the CEB, but the profits will go the private investor. Why should we let that happen?

 

Let me reiterate, fuel prices and electricity prices should be based on a competitive price formula. In May 2011, I made a request to the Cabinet of Ministers explaining the importance of implementing such a price formula, but up to date there hasn’t been any response

Q: CEB’s loss for 2012 is projected as Rs. 42 billion from last year’s Rs. 14 billion. Why is that?
A: The main reasons are the fuel price increase and rupee depreciation. CEB’s generation cost has doubled due to these reasons. Just within 12 months CEB’s Rs. 82 billion generation cost has increased to Rs. 162 billion. I doubt any institution will be able to face a situation like this.

Q: Will there be an electricity price revision in near future?
A: I cannot make predictions about the future. The projected loss of Rs. 42 billion is not something the CEB is capable of handling. The people in this country too should learn to minimise the wastage. This is a more complex situation. This is not a situation that could be solved by increasing prices or granting subsidies. An organisation like CEB needs restructuring. There should be a drastic change in the CEB and CPC management. Furthermore, like I said before, a price formula needs to be implemented.
We should be aware that in another 30 years there will be no fuel in the world. In another 10 years we will have to face a fuel shortage. We humans have so far failed to find an alternative for fuel. Therefore, we need to change our lifestyle. This could be done through market forces and regulation and as well as by cultural means. We should change the way we live and start acting individually.