ECONOMYNEXT – Sri Lanka’s state-run Ceylon Electricity Board had lost only 545 million rupees in the September 2021 quarter, down from 12.4 billion rupees a year earlier amid heavy rainfall which has boosted hydro generation, interim accounts show.
CEB revenues in the September 2021 quarter fell 3.4 percent to 63.5 billion rupees and cost of sales fell 12.9 percent to 60.8 billion rupees.
The power utility reported a gross profits of 2.7 billion rupees compared to a 9.4 billion rupee loss last year.
At group level, which includes LTL Holdings, a partially privately owned power generation and transformer producing group, and coal purchasing unit, CEB reported profits of 408 million rupees.
For the nine months to September 2021, the group reported profits of 3.05 billion rupees, down from 27.6 billion rupees last year.
Revenues were up 9.8 percent to 218 billion rupees, up from 199.3 billion rupees.
In both the September and December quarters, Sri Lanka has had record rains helping reduce thermal power. Meanwhile demand has also fallen amid lockdowns.
Sri Lanka is supposed to have cost-based regulated prices, but the regulator has failed to achieve the objective.
When there is drought costs rise as fuel in imported. Due to lack of cost-based pricing the by the regulator, the CEB then borrows from the banks, pushing up interest rates.
The central bank then prints money to keep interest rates down.
The newly printed money expands credit and imports putting pressure on the rupee.
Similar pressures happen when the Ceylon Petroleum Corporation does not market price fuel and borrows from banks or the Treasury cuts taxes and the central bank prints money to keep its overnight rates fixed with open market operations.
Exchange rate pegs break and foreign reserves are lost due to open market operations, outright monetizing of the deficit or failed bond auctions. (Colombo/Nov17/2021)