Sri Lanka needs quick, cost-based energy tariffs: Treasury

June 3, 2013 (LBO) – Sri Lanka needs quick cost-based energy pricing to avoid balance of payments pressure and stop bank credit being used for consumption, a finance ministry report has said. The overall national savings rate is further undermined by the deficit in the current account of the budget, where the state spends in current expenses alone, more than its total revenues.

Last year SOE’s had got grants and loans of 32.2 billion rupees up 16 percent from a year earlier, but current transfers to state enterprises had reduced 12.4 percent to 4.3 billion rupees with improvement is several smaller enterprises.

However CPC, CEB and Sri Lankan Airlines (which had lost 22,777 million rupees overall) had funded losses through bank borrowings and suppliers credits outside the budget.

Treasury guarantees for the state enterprises to borrow totaled 321.2 billion rupees or 4.9 percent of gross domestic product.

By end of the 2012 Ceylon Electricity Board (CEB) and Ceylon Petroleum Corporation (CPC) had borrowed 200 billion rupees or about 3 percent of gross domestic product due to inadequate price hikes.

In 2011 when a drought started the finance ministry in its budg