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Lanka to impose fuel surcharge on power rates

(Bloomberg)
Filed on March 15, 2008

COLOMBO - Sri Lanka, which gets two-thirds of its electricity from oil-fired plants, will impose a fuel surcharge on power rates as record oil prices increase costs.


A 30 per cent “fuel adjustment charge” will be levied on users of more than 90 units from March 15, Minister of Power and Energy John Seneviratne told reporters in Colombo today.

Sri Lanka’s consumer prices rose the most in at least four years in February as the central bank kept the benchmark interest rate unchanged for 12 straight meetings to revive the $27 billion economy.

The rate increase will benefit Ceylon Electricity Board, the state utility that loses 44 billion rupees ($408 million) annually selling power at subsidised prices.

“The government can’t continue subsidising as it needs funds for infrastructure development,” Seneviratne said. “The price rise will bring the least burden to consumers and avert power cuts.”

The island’s electricity demand is growing at about 8 per cent a year, necessitating an addition of 200 megawatts of new generating capacity annually.

The government is building its first coal-fired plant at Norocholai, north of capital Colombo, which will produce 300 megawatts by 2010 and as much as 900 megawatts as demand rises. The generation cost will be half that of an oil-fired unit.

Ceylon Electricity Board and NTPC Ltd., India’s biggest power generator, have formed a venture to build a second coal- fired power plant by 2012.

Crude oil for April delivery on March 12 rose as high as $110.20, the highest intraday price since futures began trading in 1983.

Sri Lanka imports all its oil requirements.

Consumer prices in Colombo rose 21.6 per cent last month from a year earlier after increasing 20.8 per cent in January.





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