Business

‘PUCSL electricity tariff revision is discriminatory’

Published

2 years ago

2023/11/2

Electricity tariff design must meet two main objectives: firstly, raising the money needed to pay for the costs of provision, and secondly, sending the right economic signals to each customer to favour the optimal socio-economic use of electricity.

To achieve the above objectives the principles that must be followed when designing tariffs are;

Economic sustainability or revenue sufficiency,

Equity or non-discrimination among users,

Economic efficiency in resource allocation, and

Transparency, simplicity, and stability of the methodology.

A well-defined and appropriate tariff structure must balance the financial sustainability of the sector on the one hand and the well-being of various segments of society on the other. The CEB’s tariff revisions seem to be mainly focused on the aspect of revenue sufficiency, ignoring the other aspects. As electricity is a commodity, there should be no difference in the prices charged to different users, except when reflecting any differences in the cost of providing services to different classes of users.

A differential tariff implies that some categories are subsidised leading to the question of who pays these subsidies. The current structure is such that households consuming an excess of 60 Kwh, and general purpose bulk supply users subsidise the industrial, hotel and charitable sectors.

Households that consume over 90 Kwh and general purpose bulk customers are charged a tariff that is double that of industries and hotels. With regards to hotels, in effect, domestic consumers subsidise foreign tourists. However, the differential tariff between general bulk supply and industrial/hotel users is meaningless. For example, a hall that hosts weddings and celebrations would be treated as a general bulk customer and be charged double the tariff that a hotel would be charged, even though both host similar events. A restaurant in a shopping mall would be charged as a general customer, but the same restaurant located within a hotel would enjoy a tariff half of that which a hotel incurs. While this differential existed under the previous tariff, it is made worse under the new structure; hotels faced a 10% increase in tariff while general users faced a 20% increase.

If the idea behind a lower tariff for hotels is to make the sector more competitive, then the solution is to address the causes of uncompetitiveness directly. One area is construction costs which raises the level of investment and the cost of maintenance. Protectionism for the domestic construction materials industry raises the costs of steel bars and rods, sanitary ware, aluminium extrusions, granite, electrical fittings, and carpets resulting in high overall construction cost. The effective protection granted on these items can exceed 200%; the savings in finance cost from a lower capital outlay would probably exceed the savings from a lower electricity tariff.

Economic value creation can take place in many different ways in an economy and the service sector is no less important than other sectors. The cross subsidisation between customers violates the equity or non-discrimination principle of a good tariff and discourages use by the overcharged and promotes overconsumption by the subsidised.

For example, the higher domestic tariff may serve as a disincentive for remote work. Remote or flexible work arrangements can reduce transport costs, congestion, energy use and for some, enable a better work/life balance. The government should be facilitating flexible work but the higher rates applicable to some domestic consumers may be a disincentive.

Economic activity is increasingly complex and a value chain can involve many different sectors. For example, the tea industry involves agriculture, processing in factories, transport, warehousing, blending, financing, marketing and exports. Moreover, products are now more knowledge intensive, so a greater part of the value addition arises in non-production-oriented components of the value chain. With differential tariffs, parts of the same value chain may pay different prices for use of the same commodity.

Further, a lower tariff to “industry” penalises new economy enterprises while promoting highly energy intensive users. This distorts resource allocation by encouraging excessive energy consumption, artificially promoting capital-intensive industries where the country may not have a clear comparative advantage. A subsidised tariff also blunts the incentive to economise.

The cost of supplying electricity fluctuates throughout the day, depending on the power generation mix, cost of fuels used, transmission costs and energy losses but as electricity storage is not economically viable, it has to be consumed whenever it is produced. Households with rooftop solar thus enjoy a subsidy. Domestic solar generation takes place in day time where the cost of generation is low but the import of electricity to the house takes place at night when the cost of generation is high. Offsetting units generated against units imported results in a subsidy because of the difference in costs between the two. Time of use metres should be mandated for all domestic users on net metering with the import/export being accounted for on the respective time of use tariff. Indeed all users who consume above 60 Kwh should move to the time of use tariff.

Should the government decide to subsidise the capital or operating costs to serve certain customer classes, it should do so directly from the budget and while a lifeline tariff for the poor is justified the high domestic users pay a tariff 7.4x that of the lowest. Not all households are the same size and an extended family living in a single house may face a much higher tariff although their income level may not differ greatly from the average.

The PUCSL should review tariffs to prevent the distortions highlighted above. Instead of cross-subsidies, the regulator should be working to reduce overall cost of the provision of electricity through better procurement and greater efficiency.

Treating all costs as a pass-through in computing the tariff is a mistake. The PUCSL needs to set efficiency targets in order to set fair and reasonable tariffs. The CEB should be incentivised to control its costs by specifying and enforcing performance requirements. Benchmarking CEB performance against regional and international peers to assess relative efficiency is necessary, as is consulting stakeholders on achievable efficiency targets.

Advocata is an independent policy think tank based in Colombo, Sri Lanka. We conduct research, provide commentary and hold events to promote sound policy ideas compatible with a free society in Sri Lanka. Visit advocata.org for more information.

Advocata spokespersons are available for live and pre-recorded broadcast interviews via 0774858401

CONTACT:

Subashini Kaneshwaren,

Senior Communications Executive, Advocata Institute

Email: subashini@advocata.org

All News Advertisement

Business

ADB announces financial support package to help Asia and Pacific

Published

17 hours ago

2026/03/27

Thilina Walpola

The Asian Development Bank (ADB) has announced a financial support package to help its developing member countries (DMCs) mitigate the economic and financial impacts resulting from the conflict in the Middle East.

“ADB will deliver rapid, flexible, and scalable assistance to help countries manage immediate pressures and strengthen long-term resilience, notably fast-disbursing budget support and trade and supply chain finance to secure the import of essential goods, now including oil,” said ADB President Masato Kanda. “This builds on our strong track record of supporting Asia and the Pacific through periods of global uncertainty.”

ADB has ample resources to safeguard existing and planned operations, while expanding emergency support in line with DMC needs, including utilizing its countercyclical lending buffer.

The bank is closely monitoring global market developments and their potential implications for economies across Asia and the Pacific, particularly regarding energy price volatility, inflationary pressures, and external account balances.

The latest ADB analysis indicates that disruptions to shipping routes have already increased costs and delivery times, while supply risks extend beyond energy to key industrial inputs such as petrochemicals and fertilizers, with serious implications for agriculture and food production. Tourism- and remittance-dependent economies face compounding vulnerabilities beyond these initial shocks. Furthermore, the conflict is increasing uncertainty and tightening financial conditions across the region, putting pressure on currencies and capital flows.

In response, ADB is ready to deploy timely financial and technical support to help DMCs manage risks, maintain macroeconomic stability, and protect vulnerable populations. There are two main components to ADB’s intervention. The first is fast-disbursing budget support to help DMCs facing heightened fiscal pressures, notably the use of the bank’s Countercyclical Support Facility to help governments stabilize their economies and mitigate the impact of shocks on the lives and livelihoods of those most at risk.

The second is ADB’s Trade and Supply Chain Finance Program (TSCFP), which supports the private sector to ensure critical imports, including energy and food, continue to flow. The bank has decided to reactivate support for oil imports under the program on an exceptional basis for this limited period. This decision acknowledges that economies and people across the region are being severely affected by the rapid surge in oil prices and supply chain disruptions.

ADB has begun discussions with all severely affected DMCs on possible immediate support and will continue to work closely with governments, development partners, and the private sector to ensure coordinated and effective responses to maintain economic stability and protect the poor and most vulnerable.

ADB is a leading multilateral development bank supporting sustainable, inclusive, and resilient growth across Asia and the Pacific. Working with its members and partners to solve complex challenges together, ADB harnesses innovative financial tools and strategic partnerships to transform lives, build quality infrastructure, and safeguard our planet. Founded in 1966, ADB is owned by 69 members—50 from the region.

Business

Global GIS celebrates 12th anniversary with grand opening of new office building

Published

17 hours ago

2026/03/27

Thilina Walpola

Jeewan Suranga, Director (L), and Nishshanka De Silva, Managing Director of Global GIS (Pvt) Ltd (R), opening the new head office

Global GIS (Pvt) Ltd, the pioneer of geospatial positioning solutions in Sri Lanka, celebrated its 12th year of successful operations with the grand opening of its new spacious 3-story head office building at 6th Lane, Pagoda Road, Nugegoda. The grand opening was followed by a series of religious events held at the new premises.

“As the pioneer in geospatial solutions in Sri Lanka, we are delighted to be celebrating this significant milestone in our journey by relocating to a more spacious premises warranted by the growth that we have been experiencing over the years. Furthermore, we have designed the new head office premises to add more value to our customers in terms of training, capacity building, and product demonstrations with a state-of-the-art auditorium,” stated Nishshanka De Silva, Registered Licensed Surveyor, Managing Director – Global GIS (Pvt) Ltd.

“This milestone serves as a testament to our dedication to innovation, leadership, and excellence. With our experience, our team of dedicated staff, and with the support of our long-standing partners, we are committed to providing our expertise in line with international best practices in the geospatial services industry,” he added.

“Global GIS operates a high-precision CORS (Continuously Operating Reference Stations) network that covers Sri Lanka, with strategically positioned GPS/GNSS receivers providing users with high-accuracy positioning data in real time”.

Business

NPCI International strengthens UPI Merchant Acceptance in Sri Lanka

Published

17 hours ago

2026/03/27

Thilina Walpola

Ritesh Shukla

For merchants:UPI provides access to a large, digitally savvy customer base, improves cash management, reduces dependence on physical currency and enhances operational efficiency

For travellers:UPI offers the convenience of real-time payments, transparent exchange rates, and a familiar, secure payment experience

NPCI International Payments Limited (NIPL), the international arm of the National Payments Corporation of India (NPCI), has reaffirmed its commitment to expanding Unified Payments Interface (UPI) merchant acceptance in Sri Lanka. The initiative aims to enhance cross-border payment experiences for Indian tourists, support Sri Lanka’s growing digital economy, and further strengthen the deep economic and cultural ties between India and Sri Lanka.

UPI, India’s real-time, account-to-account payment system, enables instant and secure transactions through mobile applications. Processing over 20 billion financial transactions monthly, it has emerged as one of the world’s most advanced digital payment infrastructures. With over 700 million UPI QR- touch points across India, its open, interoperable architecture and strong security framework allows it to integrate seamlessly with international payment ecosystems, including Sri Lanka’s LankaQR infrastructure.

India has consistently remained Sri Lanka’s leading source for tourism. Over 4,16,000 Indian tourists visited the island in 2024, and this number grew to 5,31,000 in 2025, accounting for the highest share of total international arrivals. With this year-on-year growth, the need for seamless and reliable payment solutions has become even more crucial. Indian visitors travel to Sri Lanka for leisure, weddings, shopping, and spiritual tourism, highlighting the importance of smooth, secure, and convenient payment options throughout their journey.

Through the collaboration between NPCI International and LankaPay, Indian tourists can make digital payments across Sri Lanka by simply scanning LankaQR using their preferred UPI-enabled mobile applications, minimising the need to carry or exchange physical cash. UPI payments are now enabled at leading establishments including Cinnamon Hotels, Taj Hotels, Barista, Keells Supermarket and Odel, amongst others.To support this growing corridor, NIPL has been actively engaging with key stakeholders in Sri Lanka, including the Central Bank of Sri Lanka, acquiring banks, and key merchants, to scale UPI acceptance in line with Sri Lanka’s domestic payment framework.

This integration has significant advantages for both merchants and customers. For travellers, UPI offers the convenience of real-time payments directly from their Indian bank accounts, transparent exchange rates, and a familiar, secure payment experience. For Sri Lankan merchants, it provides access to a large, digitally savvy customer base, improved cash management, and reduced reliance on physical currency, driving greater operational efficiency.

Ritesh Shukla, MD & CEO, NPCI International, said, “NPCI International is committed to building trusted, interoperable payment corridors that bring countries closer through technology. Our engagement in Sri Lanka reflects a shared vision to enhance digital payment acceptance, simplify travel and commerce for millions of people, and create value for local businesses and the wider economy. Through our partnership with LankaPay, we are advancing seamless, secure, and real-time transactions that strengthens the economic partnership between India and Sri Lanka.”

As UPI adoption progresses, NIPL will continue working closely with Sri Lankan regulators, ecosystem players, and merchants to extend acceptance across high-frequency sectors such as hospitality, retail, tourism, and essential services. Recognized by the IMF as the world’s largest real-time payment system, powering 49% of global instant payments, UPI presents a significant opportunity for Sri Lankan merchant to elevate the travel experience for Indian visitors, boosting economic activity and enhancing cross-border commerce between the two nations.