JAAF dismayed by zero revisions made to industrial electricity tariff

• Points out CEB has made no effort despite having allowance
• Reiterates electricity tariff hikes were made based on demand overestimation by CEB
• Asserts costs of rupee depreciation can no longer be passed on to apparel industry
• Urges PUCSL to recognise sizable contribution apparel industry makes to Sri Lankan economy

Sri Lanka’s apparel sector, the largest foreign exchange earner and a key contributor to the debt-ridden economy, yesterday said it is “dismayed” by the zero revisions made to industrial electricity tariff rates by the Ceylon Electricity Board (CEB), despite having the allowance.

The Joint Apparel Association Forum (JAAF) pointed out that the electricity tariff revisions proposed by the CEB for the period July to December 2023 indicate there is room for a reduction in the tariff for ‘entities of economically important businesses’, no efforts have been made thus far in providing such relief.

The JAAF reiterated that the proposed electricity tariff hikes were based on increased electricity demand, pointing to a clear overestimation of electricity demand by the CEB.

In a statement to the media, the JAAF stressed that its stand is now confirmed as accurate by the CEB’s own documentation with the actual consumption being recorded as 10 percent less than what was actually forecasted by the CEB early this year.

Further, the depreciation of the US dollar has also resulted in a reduction of import costs to the CEB.

“Therefore, the electricity distributor can no longer pass on the costs of the rupee depreciation to the apparel industry via exponential industry electricity tariff rates,” the JAAF said.

The JAAF urged the PUCSL to recognise the sizable contribution the apparel industry makes to the Sri Lankan economy and extend industrial tariff reductions to the industry, allowing the industry to compete on a level playing field in an intensely competitive global market.

Following the 66 percent electricity tariff hike that was imposed earlier this year, Sri Lanka’s electricity rates in US dollars stand at the top end of the scale when compared to regional giants such as India, Bangladesh, Vietnam, Indonesia and Thailand, which offered US $ 9-10 cents per kWh.

With the strengthening of the Sri Lankan rupee, the energy costs in US dollars are now significantly higher than the competitors. When the fixed and maximum demand charges are included, Sri Lanka’s energy costs are notched at over US $ 16 cents per kWh, while Bangladesh, the biggest competitor, is under US $ 10 cents.  Vietnam and Indonesia offer rates under US $ 8 cents.

“It is also alarming to note that the government hopes to export surplus power to India in this context, as our industrial electricity tariff rates are now 21 percent higher than that of India,” the JAAF pointed out.

The JAAF asserted that the electricity tariff hikes that came into effect at the end of 2022 and the beginning of this year completely disregarded the integral role played in the country’s economy by the apparel industry.

The hike was imposed despite the industry stakeholders having highlighted that the industry was faced with a 15-20 percent drop in orders, which signalled a reduction in demand, due to the ongoing global recession.

“The result is an exponential increase in costs to business operations, threatening the sustenance and operation of a US $ 5 billion industry that braces the country’s economy. As a result, due to this reduction in exports, the sector has become less competitive,” the JAAF said.

In 1Q23, apparel exports decreased by 17 percent year-on-year.