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The Tightrope Walk on Decentralised Finance and Cryptocurrencies

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By Charith Gamage

Cryptocurrencies together with Decentralised Finance (DeFi), the finance ecosystem that extends cryptocurrencies into banking territory, can positively impact developing countries. But it is not quite so straightforward and is still a double-edged sword for developing markets like Sri Lanka. So, how should the country position itself to face the key challenges ahead?

Since its inception following the Global Financial Crisis in 2007-2008, as an alternate digital asset, cryptocurrency has always been a two-edged sword, abundantly subjected to scepticism.

Some of this scepticism has a rationale behind it. Cryptocurrencies do not have an underlying cash flow, such as that for stocks of firms, nor do they have an inherent material value, such as for assets like gold. Being located inches away from the regulatory radar, they can also be equally prone to criminal activities. If that is not enough, bitcoin mining, the process by which new transactions are validated on the network, consumes a lot of energy. So, despite being a crypto enthusiast, even billionaire Elon Musk once stated, it has an environmental impact, too [1].

In the face of these challenges, the recent cryptocurrency price surge with the Covid-19 Pandemic has taken many by surprise. What caused the market to embrace them, spearheaded by its most popular type, Bitcoin’s spiralling 600%+ rally? According to crypto proponents, the value stems primarily from its design that can self-sustain as an alternative decentralised system to the traditional systems. In other words, the market is ready to pay the price for its ability to function as an asset over which no centralised person or authority has control. So, the claim, as the pandemic engulfed global economies, is that investors may have lost faith in central bank policies and their pursuit for an alternate asset that has resulted in this price movement.

DeFi, on the other hand, extends this concept and allows cryptocurrencies to function in a decentralised banking environment that may even have immense benefits to developing countries. As the debate continues, it is worth finding out more on the recent emergence of DeFi; how could it unlock the potential of Emerging/Frontier markets, and at what cost? What are the key hurdles to pull the meat from the bone moving forward?

What is DeFi, and how does it work?

The idea of DeFi is more broad-based than one of its workhorses, cryptocurrencies, which most are familiar with as a medium of exchange or store of value, and it builds on a fundamental structure known as the blockchain. The system allows it to operate without the need for intermediaries, such as traditional financial institutions like conventional commercial banks, brokerages, and of course, authorities such as central banks. However, it has its own ecosystem that recreates the traditional financial system. So, it is logical to say that DeFi refers to the decentralised banking and financial system that the technology is based on and includes components such as lending and borrowing services for cryptocurrencies (and many more). To put it simply, it is an alternative banking system in the digital space with digital currencies that has no middlemen (such as commercial or central banks who have controlling power) and with rules that are already written into it. Today, it mostly runs on the Ethereum blockchain, the second most popular currency after Bitcoin. DeFi has rapidly evolved in recent years, and, for example, Aave, Marker, and Curve Finance are the biggest lending systems in this space, with the sum of all assets deposited in DeFi closer to 45 billion USD [2].

Without banks or lawyers, as in the traditional financial system, DeFi is built with smart contracts, a self-executing contract built on the blockchain when predetermined conditions are met, and allows economic agents such as the general public and firms to engage in banking activities.

Because this architecture differs fundamentally from bringing the same traditional banking into the digital space, as happens in online banking, many can see that it will benefit developing countries when traditional financial systems fall apart. Nevertheless, it comes at a cost, where the country needs to overcome challenges to harness its potential.

Why exploring DeFi is pronounced in emerging and developing markets

It is not a secret that the lack of financial intermediation in the developing world under the conventional system hinders their economic potential. Although Sri Lanka’s unbanked population (26%) is somewhat lower than the global average (31%), it is unclear how certain groups’ failure to conform to formal regulations and paperwork around these institutions distances them from the entire expected services they desire (Data Source Findex 2017). On the other hand, economic agents have fewer investment opportunities to invest their wealth for a better return in economies with underdeveloped markets. DeFi seems to have better answers to those questions.

For example, a UNICEF project shows that DeFi can uplift those lives [3]. The project, Satchel, a Blockchain-based DeFi service created by a research group from Berkeley, helps fulfil the financial needs of those underprivileged communities by allowing them to pool their funds together and earn interest. The concept could be extended to pool their money and lend it out to small businesses; in this way, the community can use the interest earned for their purposes while the local small businesses fulfil their funding needs. So, DeFi can thus give an alternative, if not more than that, to regular banking, for small businesses and communities in rural regions, even if they are unable to satisfy the criteria of traditional banking.

Apart from improving financial inclusion among rural communities, DeFi clearly has other benefits with proper education, such as an efficient cross-border fund transfer for businesses and remittances. Sending remittance through cryptocurrency can gain more attention in the future as a low-cost solution for ordinary remittance transfers and currency conversions that can eat up as much as 7% of those flows. Also, DeFi can be easily integrated with the Universal Basic Income (UBI) programmes discussed in a previous article that empower low-income communities to lead the economy[4].

Most importantly, decentralisation allows the market to gain alternative power over the ability of traditional institutions to control the market by devaluing or increasing the money supply or by imposing unhealthy regulations on certain sectors. This balance could be healthy for the economy as it brings competition to the market over the conventional institutions.

What are the key challenges to be solved?

Although DeFi has the potential to boost economic activities, proper integration with society needs much more effort, including the development of digital infrastructure and literacy. A recent Daily FT editorial highlighted this challenge, citing that digitisation efforts will not be fruitful unless the underlying foundation is strengthened [5].

In addition, the emergence of an alternate banking system via DeFi can cause unprecedented challenges to economies. Of course, it can create “systemic risks” and propagate instabilities in conventional financial systems, depending on how interlaced they are. Having dominated the conventional monetary system, they can also lessen the effectiveness of the monetary tools and power of the institutions such as central banks. Although these discussions are still rudimentary, given that economics related to DeFi have not been tested at scale, they will be more hot topics as the technology grows.

On the other hand, DeFi regulation is one of the most daunting tasks, as exemplified by the experiences of many countries that are currently trying to combat it. At the moment, bringing capital gain income from crypto assets under the tax net, regulating crypto exchanges to avoid the misuse of technology, and curbing phoney cryptocurrency schemes, are the most popular topics in this space. Meanwhile, a Forbes article, citing an expert report by Chainalysis, shows that crypto in criminal activities is not as large as commonly believed [6]. While this fraction was deficient, 2.1% in 2019 and 0.34% in 2020 out of the total transaction volume, the article shows that the traditional non-crypto methods may still facilitate illicit activities much more frequently than these methods. Although this is a positive indication for authorities to welcome the technology, there is no guarantee that they would be exacerbated in the developing nations with relatively weaker institutions once popularised. With that being said, the overregulation approach may not be the best answer, but the easiest and costliest approach that wipes out complete benefits in the dash for DeFi.

The Way Forward

Despite the debate around cryptocurrency, the decentralised currency together with DeFi, the alternate decentralised financial system, undoubtedly can cause a significant impact on the developing world to increase the productivity of those economies. In particular, it is more pronounced to allow financial intermediation for those who found refuge under the conventional system for various reasons. It has gone mainstream now on Wall Street while top-level universities and researchers are involved in the development, despite all chaos surrounding cryptocurrency. More importantly, the underlying technology, blockchain, is considered one of the most promising emerging technologies at the moment.

From the Sri Lankan perspective, now it seems the government insists on looking deeply at the crypto and blockchain space[7]. This initiative is a positive sign and, if successful, will be a good foundation for exploring the ecosystem, DeFi, more broadly and carefully for better policies.

Not to mention, diving down the rabbit hole of DeFi requires a cohesive approach strengthening the digital infrastructure, facilitating a healthy Conventional-DeFi integrated ecosystem, hunting for policy instruments to combat the knock-on effects, and establishing a healthy and supportive regulatory framework. So, it will help the country shape the landscape to stay on par with the peer trading partners trying to reap the full potential of the technology under a controlled environment, and, of course, without blindly embracing it nor throwing out the baby with the bathwater.

The writer, a former Senior Assistant Director of the Central Bank of Sri Lanka, is a PhD candidate attached to the Monash University, Australia. He pursued his undergraduate studies in Engineering from the University of Moratuwa and graduate studies in Finance/Economics from the University of California, Berkeley, USA and the University of New Mexico, USA. He would like to thank Abigayle Goldstein (Lobo Friends Program at UNM) for commenting on the article and helpful suggestions. The views and opinions expressed in this article are those of the writer, and he could be reached via charith.gamage@monash.edu



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Art becomes outrage: Kolkata festival confronts crime against female doctor

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One puja chose Lajja or shame as its theme to focus on the alleged rape and murder of the doctor [BB]

On 9 August, the Indian city of Kolkata was shaken when a trainee doctor was found raped and murdered at one of its oldest hospitals. Though an arrest was swiftly made, accusations of a cover-up and evidence-tampering quickly surfaced, fuelling public outrage. Since then, daily protests, human chains and candlelight vigils have filled Kolkata’s streets. Now, the city’s largest festival unfolds amid some of the city’s most fervent protests in years.

Kolkata is celebrating its biggest annual festival – Durga Puja, when the ten-armed Goddess Durga is said to visit her earthly home, her entire family in tow.

At Durga Puja pandals – or temporary temples – the goddess stands in the middle astride a lion, flanked by her children – elephant-headed Ganesha, warrior god Kartikeya on his peacock, the goddesses Lakshmi and Saraswati – while the defeated buffalo demon lies at her feet, symbolising the triumph of good over evil.

These days, it’s not just the gods that draw the crowds. The pandals have become quite elaborate. Some recreate landmarks like Dubai’s Burj Khalifa or the mangrove forests of Sundarbans. Others are installations with social messaging – conserve water, pray for world peace, save handicrafts.

That led to Durga Puja being billed as one of the biggest street art festivals in the world. Arts organisation Mass Art has been putting together previews of selected Pujas, especially so that foreign guests can get a sense, says its secretary, Dhrubajyoti Bose Suvo, of how a “city transforms into a public gallery”.

But this year, the largest street art event of the city has come face to face with the biggest street protests Kolkata has seen in years. Some of the idols are different, and even the artwork on the walls reflects anguish and protest with figures of women and animals rendered in stark red, black and white.

Swastik Pal The goddess's image at Tala Pratay has no body, her life force represented by a flickering candle
An unusual representation of a Durga without a body by artist Sushanta Pal at Tala Prattoy puja…[BBC]
Swastik Pal The goddess's image at Tala Pratay has no body, her life force represented by a flickering candle
…where the goddess’s life force is represented by flickering candles[BBC]

The protests broke out after the 31-year-old doctor was found brutally killed at RG Kar Medical College on the night of 9 August. After a gruelling 36-hour shift, she had fallen asleep in a seminar room due to the lack of a designated rest area. Her half-naked body, bearing severe injuries, was discovered the next morning on the podium.

“Of course there is an effect of the incident on us,” says visual artist Sanatan Dinda. “I do not paint inside an ivory tower. I speak of the society around me in my work.”  Upset over the incident, Dinda resigned from a government-run arts organisation. He says, “Now I am on the streets with everyone else. Now I have no fear.”

In September, Dinda and the clay artists who built the Durga images in the historic artisan neighbourhood of Kumartuli led a protest march demanding justice for the woman they called “our Durga”.

Dinda says he has made “improvisations” to the Durga images he was working on this year.

At one in Bagha Jatin in south Kolkata, his mother Goddess looks more fierce than maternal. The lion she normally rides is springing out of her chest. Each of her ten arms holds a spear to slay evil. The artwork on the walls reflects anguish and protest with figures of naked women and animals rendered in stark red, black and white.

Swastik Pal durga puja vidyasagar central
A wall graffiti by artist Santana Dinda at a Puja pandal [BBC]

Swastik Pal A tableau recreates the bereaved family of the doctor whose portrait hangs on the wall at a Puja
A tableau recreates the bereaved family of the doctor depicted in the portrait on the wall at a Puja [BBC]

Art as protest is not new.

Jean-Michel Basquiat’s Defacement, commemorating the 1983 police killing of a man allegedly writing graffiti in the New York subway, found renewed relevance during the Black Lives Matter movement. Public artists like Jenny Holzer, Keith Haring, Diego Rivera, and Banksy – whose stencils span walls from Kyiv to the West Bank – have long used art to deliver political messages.

Durga Puja art is public art, but it’s also central to a religious festival that fuels the state’s economy. A British Council report valued Durga Puja’s 2019 economic impact at over $4.5bn, nearly 3% of West Bengal state’s GDP.

With so much at stake, neighbourhood clubs organising pujas have to tread warily. They cannot alienate thousands of ordinary citizens looking for a good time, not a sermon. They get financial grants from the government that’s facing the protests. They have to work with the police on permits and traffic control.

Swastik Pal At one of the pandals, the idol stands before the Constitution, with windows illustrating scenes that spark dialogue on social issues
The idol stands before the Constitution, with windows illustrating scenes that spark dialogue on social issues [BBC]
Swastik Pal Actors perform street theatre to teach viewers about the gap between rights and realities
Actors perform street theatre to teach viewers about the gap between rights and realities [BBC]

A few have opted to forego taking money from the government.

One puja in Kankurgachi, in the northeastern side of the city, chose Lajja (Shame) as its theme after the protests erupted. Its Durga is covering her eyes, her lion keeping vigil over the body of a woman wrapped in a white sheet. The organiser is openly affiliated with the state’s opposition party.

Close by, another puja creates a tableau of the bereaved family, the mother sitting on the bed, the father at a sewing machine, their daughter’s picture in doctor’s scrubs on the wall. Other organisers are more circumspect, not wanting to wade into political waters.

“But we still want to make a point, especially as a women-led women-run club,” says Mousumi Dutta, president of the Arjunpur Amra Sabai Club.

Their theme this year is Discrimination. The artist uses the Constitution of India and its articles promising equality as the backdrop to the goddess while local actors enact the gap between the promise of the Constitution and reality through street theatre.

The theme had been decided earlier but the tragedy gave it a different urgency. “We have decided to not call this year’s Durga Puja a festival,” says Dutta. “We are calling it a pledge instead. A pledge to create a world where we won’t have to keep coming out on to the streets to demand justice.”

Swastik Pal Baghajatin Puja pandal
At Bagha Jatin puja in south Kolkata, the Goddess looks more fierce than maternal [BBC]
Swastik Pal Artist Sanatan Dinda inserts Tilottama, the name the media uses for the rape victim, into his own signature
Artist Sanatan Dinda integrates the name used by many media outlets for the victim, Tilottama, into his signature [BBC]

The demand for justice for a woman resonates with Durga Puja anyway, a festival built around a goddess vanquishing evil. One puja had already chosen women power as its theme which now matches the zeitgeist.

Durga puja theme designers say they were already neck-deep in work when the protests erupted.

“Perhaps if it had happened earlier it would have been different. By August I was committed to the organisers and to some 450 people working with me,” says Susanta Shibani Pal. But he says the issue “subconsciously” crept into the art.

His installation Biheen (The Void) for the Tala Prattoy puja, covers 35,000 sq ft, immersing the viewer into what he calls a “black hole”.

His Durga has no body, her life force represented by a flickering candle, much like the candles that are part of the protests. “A viewer might read this as my protest. I might call it coincidence. I started this work before RG Kar happened,” he said.

While some are bringing the mood of protest into their Durga Puja art, others are bringing protest art to their Durga Puja. Chandreyee Chatterjee’s family has been celebrating Durga Puja at their home in Kolkata for 16 years. Chatterjee also participated in many of the street protests.

Swastik Pal A durga puja pandal
Millions flock to see the pandals during Pujas in Kolkata [BBC]

She admits she was in no mood to celebrate this year. They will still have a Durga Puja but with a difference. “We will do what the rituals require, nothing more. Anything that comes under the heading of celebration, like dancing, is being done away with this year.”

She and her friends have also had an artistic little badge made. It shows a hand grasping a flaming torch. Underneath in Bengali are the words “We want justice.”

“I will be giving it to friends and family who come to our Puja,” says Chatterjee. “We want to remind people we have a long long way to go.”

[BBC]

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Hope rekindled but expectations need be reined in 

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Things are moving forward in the right direction under the interim triumvirate Cabinet of President Anura Kumara Dissanayake, Prime Minister Amarasuriya and Minister of several ministries – Vijitha Herath. A new system is obviously set in place and we are hopeful for the future of Sri Lanka. Officials of the government have successfully negotiated with the IMF so we are safely assured of financial help. These are further loans, but we do not shiver as we did under previous regimes because repayment had to be done and we lacked faith in those previous regimes.

Why can this renewed faith be repaid in due course? Because the most damning curse that throttled the country is to be curtailed and eliminated– corruption that syphoned off millions to private pockets. Cass remembers jubilation when the first IMF tranche was given SL. It was like a gift being given, forgetting that it was a further loan to be repaid. No such nonsensical celebration this time.

One warning that wiser counsel gives is hemin, hemin. Many shout for quick action from outside and within the JVP, too. People are asking for this and that and mostly that the corrupt be caught and punished. There is time for that. First priority is to improve the economy of the country. We have confidence in the new President that he will set priorities in government action and will see they are followed.

Interview with NPPer 

Much of the caution Cass advocates in her previous paragraphs was pronounced loud, clear and authoritatively by the NPP Executive Committee member Attorney-at-Law Harshana Nanayakkara in an interview with Alanki on the Conversation talk show. Its subject of discussion was the immediate future after the general elections, in particular the law and order policies and action taken or proposed. Harshana was very vocal as he usually is and spoke clearly, precisely and very convincingly, Cass opines.

The first criminal incident discussed was the bond scam; next was the Easter Sunday attack. The interviewer then moved to the subjects:  abolition of the Presidency; new Constitution and position of women and children. In the first two undertakings, the question asked by the public is how soon will the corrupt be exposed and punished. This was Alanki’s tag to most of her questions

Harshana’s replies were minus rhetoric, instead sensible and to be approved of by the wise, mature and staid citizens of the country. Firebrands and youth in a hurry to witness punishment were told in no uncertain terms that all the above takes time; that the new government will not rush into matters, particularly ‘catching rogues’ and meting out punishment. Harshana made it very clear that each case will be studied very carefully and action will be taken. He said that most financial crimes are committed 100% cautiously and cleverly, with no trails left, but ‘crumbs’ may be lying around.

These can be picked up and worked on by very smart and trained sleuths, given complete freedom to get on with their work, especially political or ‘high-up’ pressure. However, he judiciously noted that even suspected criminals, if law and justice cannot prove them guilty, will go free.

He gave the assurance that the arms of law and judiciary will be given independence and freedom to work with no governmental interference, least of all influence. Another fact he emphasised was that no timeline nor time of accomplishing such undertakings could be given. However, results will be given before the five years of the NPP government are over; more so closure to the Easter tragedy.

Corruption, he made clear, calls for elimination but alongside prevention is important. To ensure the latter he said one method was to reduce interaction of government officials and members of the public. This to be achieved by increased digital services and more transactions between the public and government officials to be on-line.  Institutions will be made accountable. He also noted that checks and balances were required.

He mentioned we have 21 amendments to the Constitution. A new one will be placed before the country. Work had already been started by previous governments but they lacked the will to complete the job. The NPP government would achieve this, since committees are already working on it.

Thus, the abolition of the post of president. Cass’ gut feeling is that the majority of Sri Lankans want this and a return to parliamentary system as pre-1977. Cass’ additional other personal gut feeling is that the presidency should be eliminated after Prez AKD’s term or just before it ends. We need a sole leader to control and further the good policies outlined.

What was mentioned was that women’s and children’s issues, which differ, will be given consideration and corrections made. Idea is for 50% representation in government and other institutions by women. Awareness creation and education were still necessary to bring about gender equality. Policies would be outlined and implemented and antiquated laws be abolished or revised to create inclusive societies. However, laws alone cannot achieve equality.

Harshana mentioned that the northern issue or problem would be dealt with.

However, it is hoped that the NPP will not receive a 2/3 majority in Parliament. That is not at all healthy and has proved to be disastrous in Sri Lankan politics. A hope that Cass harbours is that a sort of cooperative government will be the necessary outcome of the 14 Nov. general election. Twenty five Cabinet Ministers is what is stipulated by the NPP. Fine. Hope is that among them will be outstanding persons from other parties – the SJB and others. Cass bravely names two: President’s Counsel M A Sumanthiran and Attorney–at-Law Aly Sabry who have proved to be highly competent and country-loyal politicians sans racial and religious biases.

Exposes

MTV Channel 1 is telecasting a programme on corruption in Sri Lanka. The series is titled, “What happened to Sri Lanka” and we have been given details of the Teasury bond scams during  Ranil Wickremesinghe’s premiership; Sri Lankan Airlines’ nosedive after President Mahinda Rajapaksa sacked the SriLankan Airlines CEO. It was also revealed how brother-in-law, who was SriLankan Chairman rerouted flights arbitrarily. Also documented and aired over were President Gotabaya Rajapaksa’s disastrous ban on agrochemicals. Uncovered also was the import of thousands of cows to boost milk production. Instead they infected local cattle, fell sick and soon died. But, of course, some people collected huge commissions, we believe. All these were heinous ways of earning money for some. They happened during the elitist families’ regimes; the R brothers, too, considered elitist. So, having a non-elitist leader and most probably a government of the non-rich persons, we may be on a path of good governance at long last. No wonder a descendent of the truly elite – the first PM of Ceylon and Father of the Nation – voted for the NPP at the presidential election and will surely vote for NPP contenders in the forthcoming election too.

The world scene is gloomy. Two wars, one in the Middle East threatening to conflagrate due mostly to the stubbornness of Hamas and Hezbollah and of course Israeli Netanyahu, rage on. The race for the White House is still said to be neck to neck, unbelievable to us over here that Trump is still running strong against eminently suitable Kamala Harris. We turn inward from these to feel a sense of satisfaction that our bankrupt nation is being given a chance to change and be what it could and should be. So, on that hopeful note Cassandra says her goodbye for a week

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Towards a sustainable and secure energy future for Sri Lanka

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by Eng Parakrama Jayasinghe
parajayasinghe@gmail.com

A new Dawn

It is everyone’s hope that we could at last be moving towards a new dawn of prosperity and a future of sustainable growth in all aspects of economy and social wellbeing.  With the President Anura Kumara Dissanayake leading the way.  This hope is most prevalent in the energy sector, which has remained in the clutches of the fossil fuel lobby. While the transport fuels still remain near 100% dependent on imported fossil fuels, energy sources used for the generation of electricity have shown some progress in gaining none dependence on such imports using indigenous sources of renewable energy. While the present contribution of only 12% of the total energy mix by electricity may not seem significant , what is more important is to recognise that electricity being the most desired and flexible form of energy for energy sector of energy demand , projects a future of near 100% electricity based energy sector, by the optimal utilisation of our bounty of nature.  Sri Lanka is blessed with renewable energy sources of magnitude which is far beyond the energy needs of the country, covering all sectors, many fold even with the projected growth over many decades,

This is even more significant is the fact that Sri Lanka has no indigenous fossil fuels, which makes it imperative that we utilise this   bounty to arrest the continual drain of the valuable foreign reserves, as fast as possible. The great fortune of advances in technologies in recent years enabling the development of such renewable energy without delay should therefore take the highest priority of the new government.

The recent presidential election has brought to the sharp focus the urgency of this with the realisation that it is the present unwise dependence on imported sources of fossil fuel which is the primary reason for the fall of the previous government of President Gotabaya Rajapaksa and the false claims of energy security claimed by the last interim government’s  defeat.

The more pragmatic Vision of the New Government

The established policy of reaching a target of 70% contribution of renewable energy for electricity generation by year 2030 have been confirmed by all presidential candidates, as well as the eventual achievement of status of zero emissions by 2050. with even more focus by the NPP.

Under these circumstances, it is topical to discuss the way forward and the path that President Anura Kumara Dissanayake would choose in arriving at these targets, particularly  since the portfolio of Energy is listed under his purview, which we hope he would retain after the parliamentary elections and the formation of the new cabinet of ministers.

It is therefore relevant to be reminded of the references made in the Presidential Manifesto on the energy sector., which has laid much emphasis and recognition of the bountiful renewable energy resources of Sri Lanka.  The much wider relevance and the potential of such resources to play a major role in the economy beyond mere supply of energy to the other sectors of energy, is for the first time has been recognised by the policy makers.  The section title of the Manifesto on energy itself highlights this recognition: 3.10 A Secured Energy Centre – A sustainable Revenue Resource”

This is further elaborated by the item listed as the “Principles”

  • Energy as an essential national service
  • Sustainable and secure energy supply
  • Energy Economy as a source of foreign exchange

While agreeing wholeheartedly to these principles as the basis for a future energy policy we would like to propose few more inalienable principles or policy imperatives to this list

  • The nation’s energy resources belong to the people and the benefits of their utilisation must primarily flow to the people.
  • It is no longer true that the energy sector development needs to be the purview of the large-scale entrepreneurs, either in the state or private sector, requiring very large capital investments, nor is there a need for centralised large power plants remote from load centers.
  • Under no circumstances should we pay Dollars for our own RE resources.
  • National Security is closely linked to national Energy Security. This can be guaranteed only by ensuring that the energy industry remains in control of the national entities both public and private.
  • The main consumers of energy are electricity and transport fuels. It is imperative that any energy policy should consider at least these two in conjunction and concurrently.
  • The facility of creating “Prosumers” can be the means by which the low-end consumers can be rescued from the trap of eternal poverty in spite of the many forms of state handouts which over the years have proven futile in poverty alleviation.

  The Specific Activities Proposed

The proposed activities in the manifesto support the above principles and if implemented with courage and conviction with combined commitment of all the related agencies, unlike the present practice of totally disharmonious and opposing actions, the success of achieving the targets can be guaranteed.

The important message that should be brought to the attention of The President is the need to ensure no action or policy be permitted from now on that would hinder the progress or form barriers in achieving these goals.  A distinct change in the attitude of the state agencies and officials is required. Hitherto that has been totally lacking with even the target of achieving the 70% RE goal not being assigned to any agency.

This is due to the unfortunate situation prevailing in the state sector of there being no sense of accountability, either mandatorily or voluntarily.  The most essential and urgent change needed is to mandate the task of achieving the stated goals to particular officials in the primary agency identified as the most appropriate when many agencies are responsible. Such a mandate must flow from the Chairman downwards with measurable Key Performance Indicators (KPIs) assigned with time targets. This is most easily done in the electricity sector immediately and the transport and other sectors of energy usage to follow without delay.

The present government has brought in a number of new appointees to head the key agencies in the energy sector. We propose that these personnel inconsideration of their past record of knowledge and experience (unlike in the past when appointments were given to friends and relatives only irrespective of their suitability) be given strict instructions with the responsibilities for achievement of set targets and to pass down such responsibilities to their staff.  Gaining the support and cooperation of other related agencies and overcoming any barriers should be strictly their responsibility.

While the transport sector without any form of future vision or programmes working in total ignorance of the major changes happening in the world would  be  difficult to be brought to this form of sustainable and future proof status, the already established and adopted policies in the Electricity Sector and the technological advances made even in Sri Lanka provides the base line on which such time based targets can be assigned.

The current target of 70% renewable energy based power generation by 2030 has proven to be quite achievable and non-challenging based on recent experiences.  In fact, this target was surpassed in some days during the latter months of 2023 as shown below. (See graph)

  • The first KPI to be issued is therefore a directive to the Ceylon Electricity Board to develop a time based programme with annual targets commencing now towards progressively enhancing this RE contribution of 70% minimum by 2030. CEB must be held responsible for the achievement, for which of course they would need to get the support and assistance of the private sector developers.  With the co-operation and commitment of their own staff. and facilitation the “Prosumers” themselves would reach the expected 5000 MW well before the target year 2030. (The target of 2000 MW in five years as stated is well below the potential of the local Solar Industry)
  • A further commitment made by the new government is to lower the cost of electricity to the consumers. It is obvious that this could only be achieved through the rapid expansion of the contribution by the renewable energy based generation, which is now universally accepted and proven by the records of the CEB itself.  Towards this task another action point in the NPP manifesto can be cited as the next KPI to be issued to the CEB. “Directing the currently oil-based electricity generation towards low-cost renewable solar and wind sources” This feasibility is illustrated below.
  • The objective of lowering the cost of generation and thereby the consumer tariff would certainly not be achieved by the recent cabinet decision to reduce the Feed in Tariff for the Solar Rooftop PV, which fortunately has not been approved by the PUCSL. Each unit of Solar PV added would reduce the equivalent unit generated using oil costing at least Rs 63.00 as per data below. (See Table)

The potential saving of Rs 113.65 Billion annually could provide the means of lowering the consumer tariff by Rs 7.5 per unit on average.

Should we pursue LNG relevant anymore?

About five years ago Liquid Natural Gas (LNG) was very much in discussion as a clean fuel and a possible intermediate solution to eventually eliminate the use of Coal and Oil for power generation. Perhaps under the prevailing circumstances then, when the Renewable Energy Options such as Solar and Wind had not gained the favorable status, both of technical acceptance and financial viability, this consideration may have been correct and timely. However, a much-detailed analysis with wide stakeholder consultation is required at present before pursuing this option.

However, Sri Lanka not having any land based Natural Gas, and the challenging issue of the infrastructure required for the utilization of imported LNG for economic use needed to be evaluated in depth. This still remains unresolved.  At the same time being typical of the disjointed decision-making process in Sri Lanka, the tender for the development of a 350 MW LNG power plant to operate on nonexistent LNG was awarded and the plant is nearly complete. It is reported that even in Australia with its own Natural Gas resource the cost of NG based power is reported to be exorbitant.

Under these circumstances, although listed in the Activities in the Manifesto, we propose that this issue requires a much deeper and coherent analysis and evaluation before any concrete steps are taken. It is our opinion that Sri Lanka no longer needs any imported LNG.

If we are fortunate to get funding to develop our Mannar resource viability of which is now established, it must be considered as the means of achieving the principle of v Energy Economy as a source of foreign exchange But under no circumstances should we build any more LNG based power plants as listed in the current Long-Term Generation Plant and still being promoted by some with their tunnel vision.

Conclusion

It is quite obvious that Sri Lanka is at the threshold of change in all aspects. This is most essential and urgent in the Energy Sector which if handled properly would give Sri Lanka the much-needed window of opportunity for economic prosperity. It is most encouraging that the present government has clearly identified this opportunity.

This article attempts to highlight the need to be warned of many decades of vested interests by many parties, which has kept Sri Lanka over dependent on imported fossil fuels thus preventing the flow of such prosperity to the people. The danger also exists of such elements trying to propagate antiquated principles and themes, with the underlying objective of keeping Sri Lanka trapped in fossil fuels for obvious reasons.

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