Local manufacturers now benefit from a much more competitive electricity tariff rate: JAAF

Sri Lankan manufacturers will now benefit from a tariff rate that is much more competitive, Sri Lanka’s apparel sector said, commending the Public Utilities Commission of Sri Lanka (PUCSL) for slashing charges that were unbearable to the business community.

The Joint Apparel Association Forum (JAAF) noted that the move not only eases the burden on retail customers, it also provides much-needed relief to Sri Lanka’s apparel and export industries, thereby enhancing competitiveness and supporting economic recovery.

The PUCSL this week gave approval to implement a 25.3 percent reduction in industrial electricity tariffs, parallel to a 27 percent reduction for domestic consumers and a 22.5 percent overall reduction effective from July 16, 2024.

“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 said.

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 US$ 5,591.5 million to US$ 4,535.5 million. The recent tariff reductions will alleviate some of these financial pressures, allowing the industry to stabilise and regain its competitive edge.

The PUCSL decision was taken in the light of the submission made by the 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. 

Another key point in JAAF’s submissions to the PUCSL was its call for the urgent implementation of a rigorous least-cost generation plan utilising transparent competitive bidding processes for power purchase agreements. 

In particular, JAAF called on policymakers to ensure that the country’s natural resources, such as wind and solar, were effectively leveraged at the lowest cost to support a sustainable transition to renewable energy.  

In its submissions, JAAF further noted that consistent and wide overestimation in the tariff forecasting for cost recovery submitted by the Ceylon Electricity Board (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.