Electricity costs, wages and elephant in the room - EDITORIAL

Sri Lanka’s state-run Ceylon Electricity Board (CEB) has run up losses of billions of rupees in the first quarter of 2022. Our sister publication the ‘Daily FT’ reports Power and Energy Minister Kanchana Wijesekera saying recently, the CEB is likely to make a loss of Rs.152 billion in the next four months.

Since April, power cuts have been imposed on a daily basis. Minister Wijesekera on December 4 this year revealed that according to CEB estimates, a single unit of electricity costs Rs.56.90. He added under the present system, lower income layers of society are heavily subsidized, and the top layer pays over the average cost of a unit to compensate for a part of the subsidy.

Presently the lowest strata - those consuming 30 or lesser number of units - pay Rs.8/- per unit. There are 1,460,228 consumers in this bracket. Again those consuming between 30 - 60 units and whose number comprise 1,683,172, pay Rs.10/- per unit, while those consuming between 90 - 180 units and comprise 1,559,131 consumers, are charged Rs.50/- per unit. 303,928 consumers who consume 180+ units pay Rs.75/- per unit. The balance subsidy, the minister said is borne by the Treasury.

Today the government, with the country stricken with a foreign debt of over US$ 30 billion, and lending agencies refusing to provide loans to our cash-stricken country, government is in no position to subsidize the CEB and the 6,405,646 consumers who have been receiving power at below cost rates.
Drastic problems require drastic solutions... The minister has suggested a standardized Rs. 56/90 per unit across the board rate for all consumers, as government is unable to continue with the system of subsidies any longer.

At the same time the levels of poverty in the country have risen dramatically. Speaking to reporters, Professor of Economics Wasantha Athukorala of the University of Peradeniya claimed that there has been a dramatic increase in poverty over the past three years. He said in 2019, nearly 3 million people lived below the poverty line, but that number had increased to 9.6 million by October 2022.

With inflation at over 69% and food prices sky rocketing to over 90%, the professor’s claims cannot be doubted. In September this year, a UNICEF report showed over 5.7 million people, including 2.3 million children, required humanitarian assistance in Sri Lanka, making our island nation among the top ten countries with the highest number of malnourished children. The UN agency expects the numbers to rise further. 

A household income survey conducted by the Department of Census and Statistics reveals the real median household income per month has been reported as Rs.39,987 in 2019. With the cut in wages imposed after Coronavirus hit the country and the accompanying loss of employment which followed, the figures regarding the numbers living below the poverty line and the numbers of malnourished children in the country can hardly be doubted.
How are these millions of families at the lower rungs of society expected to pay a massive hike in electricity rates? Does this mean that nearly half our population will have to live in darkness?

The CEB - a state monopoly - is unable to tackle the problem of providing electricity to our people continuously and at acceptable rates. It has continually depended on state subsidies to continue to function. The CEB has also consistently rejected switching to alternative sources of energy. 
Despite running at a loss, its directors and employees have continued to pay themselves bonuses and other perks, while other workers suffer pay cuts and job losses. Such a system is untenable and must change. As we said earlier drastic problems require drastic solutions. Since the state monopoly is unable to meet challenges of the day, the non-state sector -private sector- needs to be involved in finding permanent solutions to this all-important area.

Trade unions, cronies of political groups which benefit via the continuation of the present system will undoubtedly protest for change. But changes need to be made. The country cannot afford subsidizing important sectors of the economy which have a history of failure.
In Britain, in order to meet expanding costs of power and energy, the government of that country is providing its less well-to-do citizens with an annual cash grant. In like manner, our government too, has to find similar solutions.

A wage structure which keeps nearly half the population at levels below the poverty line is unjust and unacceptable. While in the present circumstances government cutting subsidies is understandable, wage increases need to keep apace. 
This is the challenge posed to government and it needs to face up to it.