Ensuring energy security with high oil prices
Newly formed Sri Lanka Sustainable Energy Authority has a
By Indika Sakalasooriya
Fulfilling a long felt national need the Sri Lanka Sustainable Energy Authority
(SLSEA) was established recently through a new Act of Parliament. The
institution is aimed at correcting some of the anomalies in the energy sector
that have been causing immense loss to the economy.
When it was time for coal power plants and at a time when the entire world was
going for coal power plants, Sri Lanka liberalized its energy sector and paved
the way for the private sector to build up mini diesel power plants. Then the
government agreed to buy their production to the national grid over a fixed rate
which is way beyond what the CEB charge for a unit from a user.
However, it is very encouraging to see that the present government is going
ahead with the proposed coal power plants. Further it is even encouraging to see
that they have understood the value of a national energy policy.
Renewable energy is a concept that is literally beyond coal power plants and the
fruits of it can only be plucked in the next 50 to 60 years with the
developments in the technology. Therefore the energy experts believe that
setting up of the SLSEA is correct decision at the correct time which will
benefit the country immensely.
The Nation Economist had the occasion to meet with the Chairman of the SLESA,
Ananda Gunasekera and following are the excerpts of the interview.
Q: What are the main responsibilities of this newly formed Sri Lanka
Sustainable Energy Authority (SLSEA)?
A: The main responsibility is that we have to see that energy security is
well established in Sri Lanka. In fact our vision is energy secure Sri Lanka.
The present energy supply system is not sustainable. We depend heavily on
imported energy and that is fossil fuels. In a situation of very high oil prices
the energy security can not be insured. In fact this is a global crisis and also
it is a threat to human civilization as the human civilization is based on
fossil fuels that are petroleum and coal.
After the industrial revolution, the entire economic system in the world was
based on these two fuels. But these fuels are gradually diminishing and they
will last only, may be petroleum in another 15 years and coal in another hundred
or two hundred years. So the foundation of the entire modern way of life is
threatened due to the low supply of theses oils. So the ultimate solution to
this situation is we must look for the development of sustainable energy
sources. That might take a long time, sometimes end of this century or may be
the next century. What we have to do right now is we must join hands with the
other nations in this effort of transforming the present unsustainable energy
system to a sustainable energy system. In the short run we have to see that the
current difficulties caused by the recent oil shock should be addressed. To
minimize that, we have to take some short term actions like developing our
renewable energy sources and enhancing energy efficiency. So the main
responsibilities of the organization are to facilitate renewable energy
developers by creating and enabling environment and also to improve the energy
efficiency. Both these things are now constrained by various barriers. There are
various barriers like financial, regulatory, technological etc. This authority
will have to see that these barriers are removed and pave way for the rapid
development of renewable energy on one hand and on the other hand improve energy
efficiency. Both these areas have huge potential.
Q: You said that one of the responsibilities of the SEA is facilitating
renewable energy developers. But as far as we know, the production cost of
renewable energy is very high? How is your authority going to handle this
A: Well, the capital cost is very high in some of these renewable energies.
That is why we recently introduced a cost and technology based tariff system for
grid connected renewable energy sources. There we are setting the tariff based
on the actual cost that the developers have to incur. So that it is a sort of a
front loaded system and during the first seven years we are paying a higher
tariff for them to cover the capital expenses. This will perform like a subsidy.
Q: What are the immediate priorities of SLSEA?
A: The immediate issues that we have to address are that there are around
hundred mini hydro power developers who are prepared to develop their sites. And
CEB has already issued them letters of intent. But they cannot develop their
projects because of various problems. Therefore our immediate priority in the
renewable energy development area is to resolve this problem for them. Under the
new sustainable energy Act we have some powers to handle their problems. And
also there is a main potential is developing dendro power. But again there are
some problems and we will be resolving them as soon as possible.
Q: Experts in the sector say that there is an absence of a national policy in
the Sri Lankan energy sector and they point out that as the key reason for the
present tragic situation of the energy sector. What is your response to that
A: Now there is a national policy. Recently the Cabinet has approved a
national policy for energy sector and that is a very comprehensive policy. The
next step will be presenting the draft to the Parliament in the near future.
Q: Have you already contacted the renewable energy developers and what is
A: Continuously we are having very good dialog with the developers. Even
when we were preparing the new tariff we consulted all the stake holders
including the developers. And also when we were drafting the new Act for the SEA
we accommodated their views. In fact in the management board of the SEA, these
developers are represented. Therefore we can say that we have a close
interaction with the developers and we take actions in consultation with them.
Q: Regarding energy efficiency, the usage of CFL bulbs is minimum. Will you
be addressing the issue?
A: Yes we are addressing the issue. We are going to have a big promotion
campaign very soon. There are several reasons for this situation. One reason is
that the bulbs are too expensive than the normal bulbs. This is the main reason
why CFL has not penetrated into the rural areas. And the other reason is the
electricity bills of the people in these areas are very low because up to 90
units CEB charges are very low. So they are not very keen on investing on CFL
bulbs. Therefore we want to introduce some sort of a subsidy scheme. Apart from
that we will propose the government to give at least one bulb to each household
who are using less than 90 units and that is around 1/3 of he consumers. Anyway
it will cost something around Rs.500 million but it will not be a waste.
Q: What are the renewable energy sources you are presently looking at?
A: Mini hydros, wind, dendro power and solar power. Those are the four main
areas we are looking at presently and we have identified Sri Lanka has a lot of
potential in these areas.
Q: Will the SEA be looking at imposing legislations on energy efficiency?
Does SEA have the power to do that?
A: Under the new SEA Act we have power to enforce some measures. But our
approach is not to go and impose law as the first step. So we want to educate
and encourage people and various big companies who neglect energy efficiency. We
will also facilitate businesses to obtain bank loans and credit facilities for
them to implement energy efficiency projects. And also we are going to have a
labeling system for electrical appliances. We are going to give stars to
electrical appliances depending on their energy efficiency. The very efficient
will be given five stars and then the consumer will know about the energy
efficiency of the product before he purchases it. Presently we are going ahead
with ceiling fan labeling system and gradually we are going to expand into
mainly all household electric appliances.
Q: What s the response of the market forces for this new ‘star’
A: We don’t worry about their response. We have the powers and we will
implement it. This will enable the customers buy good and efficient products and
it will indirectly make the inefficient, cheap and malfunctioning appliances
that have been flooded the Sri Lankan market to take their leave. And also we
are thinking of proposing to the government to impose tax barriers to these type
Lanka’s debut sovereign bond oversubscribed
Sri Lanka’s debut International Sovereign Bond for US $ 500
million has been oversubscribed more thrice when bids closed on Wednesday. The
bonds have a 5-year maturity at 8.25 % per annum.
The distribution of investors in the Bond Issue was 40% from the USA and 30%
each from Europe and the Middle East, and Asia respectively.
This spread of investors indicates the positive outlook on Sri Lanka’s economy,
and the country’s unblemished debt service record among international financial
The oversubscription of the Sovereign Bond demonstrates that the international
financial community has accepted the remarkable resilience the Sri Lankan
economy has displayed despite many shocks, over a long period of time,
sustaining negative growth only once in recent years, in 2001.
Leading establishments in international finance JP Morgan, HSBC and Barclay’s
Capital were Lead Managers to the Sovereign Bond issue for the Government of Sri
Lanka, and the Bank of Ceylon was Co-Manager.
Investors have noted that the Sri Lankan economy expanded at 7.4 per cent last
year, its fastest rate for more than decades, despite the shocks of
international fuel prices, terrorist violence, adverse weather conditions
affecting agriculture production, floods, landslides and similar natural
disasters affecting production. The expansion of the economy was underpinned by
rising domestic and foreign investment and record inflows of remittances from
The net proceeds of the bond issue will be utilized by the Government to
supplement available concessional funds to develop infrastructure projects that
have been previously approved by the Government and included in the current 2007
Budget, including in areas such as electricity generation, water supply, roads,
ports, roads and railways development, especially under the Mahinda Randora
The oversubscription of the Bond Issue by more than three times the offer was
possible despite many attempts by sections the Opposition to obstruct the issue;
a vigorous publicity campaign against the issue and the nation both locally and
abroad; with leading members of the Opposition even threatening HSBC, one of the
managers of the issue, with having its banking license cancelled if it went
ahead with the issue.
The success of Sri Lanka’s inaugural international sovereign bond issue will
also help open the door for Sri Lankan corporate sector to tap the international
A spokesman for the Presidential Secretariat said: “The oversubscription to the
Sri Lanka Sovereign Bond indicates the confidence the international financial
investors have in Sri Lanka and their willingness to be partners in our
As the investors were informed, proceeds of the Sovereign Bond will enable the
generation of additional growth and also sustain the momentum of growth of the
IFS Sri Lanka chosen as a solutions provider
for Saudi ministry of defense and aviation
IFS Sri Lanka the pioneer in Enterprise Resource Program has
been chosen as the application solution provider for Ministry of Defense and
Aviation United Arabia through the introduction of Kerfi Arabia the Saudi branch
of IFS Applications.
IFS provide Enterprise Resource Planning (ERP) solutions, which are a merger of
global ERP best practices to Sri Lanka which facilitates resources to be used in
a more agile way to accomplish Sri Lankan business performance and competitive
advantage, which has been developed to suit all the business concern.
Thus IFS Sri Lanka was called upon to formulate a solutions for the Human
Resource administration, pay roll management and distribution operation of MODA
Kingdom of Saudi Arabia.
Speaking his thoughts on the success of being chosen as a solutions provider
Vice President IFS Sri Lanka Jayantha de Silva said “It is indeed an honor for
IFS Sri Lanka to tie with the Ministry of Defense and Aviation as its solutions
provider in the region. The introduction through our network in Saudi Arabia
staged the platform for this process. IFS Sri Lanka has always been at the
forefront as application solutions provider for many countries worldwide which
contributes to the continuous trust and reliance placed on us by our clients
worldwide. The knowledge and skillful consultants and the relationship
maintained both within and outside the organization has been the core
contributor for such enormous achievement by IFS Sri Lanka. So whilst feeling
honored by this new connection we also thank our network company based in Saudi
Arabia for the confidence placed on us and our service delivery.”
IFS Human Resource solution will include skills and qualifications, employee
development, recruitment, project reporting, time and attendance, expense
reporting and pay roll administration; whilst IFS Distribution will compose of
inventory management, purchasing, invoicing, customer orders, customer
scheduling and supplier scheduling.
The leave and attendance solutions for MODA is a customer need oriented solution
which has been entirely developed after extensive analysis of the strategic
human resource management of Saudi Arabia taking into consideration the culture
and the employee packages provided by the Ministry.
Commenting on the process of the MODA, Manager Software Development Asanga
Marasinghe stated “The focal point that made us win the deal of MODA is the
consultant strength that IFS Sri Lanka boasts over the other networks in the
region. The 700 consultants employed by IFS Sri Lanka are trained in various
locations and entrusted to work for Sri Lankan business solution requirements
whilst adapting for the regional needs. Their capability and potential their
hands on experience has been our core strength. More over the inter relationship
maintained between consultants and technicians has also been a contributing
IFS Sri Lanka will act as the interface between Nexus a German based technology
already embedded in the MODA operation and Kerfi Arabia. More over this initial
start up of providing solutions to MODA will spread the spark in the region for
IFS Sri Lanka. The application solutions provided for MODA has been developed
based on the extensive and detailed analysis conducted by Sri Lankan consultant.
Thus this 5 team member 4 months period project hopes to be live by early
January next year whilst representatives from MODA will fly in to Sri Lanka to
test the entire solutions developed prior to implementation. Though challenges
were faced at early stages on infrastructure and server log in time they have
been sorted out by both parties involved giving IFS Sri Lanka to function
independently with more efficiency.
Wheat and rice price outlook dismal
Record wheat prices to escalate
By Samantha Whybrow
The global supply and demand outlook for wheat and other cereals, looks grim for
2007/2008, showing no significant signs of improvements to production, says the
Food and Agrictulture Organisation (FAO), almost guaranteeing already record
high prices will escalate.
“Given the anticipated growth in world cereal demand in 2007/08, the current
level of production, if it materializes, will not allow any replenishing of
world reserves from their very low opening levels,” says the FAO in its latest
report on Global Crop Prospects and Food Situation.
The report warns prices of wheat are likely to increase from the record highs
witnessed in September given the deterioration in southern hemisphere crops,
while, world wheat stocks will reach their lowest levels since 1982.
“Wheat prices remain highly vulnerable to the prevailing tight situation in the
markets and are therefore likely to stay volatile,” says the report.
Meanwhile, in a worrying outlook for Sri Lankan consumers, the FAO also predicts
a global increase in the price of rice, especially if there is a shift in import
demand from wheat to rice.
The prediction that does not bode well for Sri Lanka, with the government
recently announcing it is set to start importing rice from India in an attempt
to bring down the noticeably escalating costs of this food staple amidst
depleting local stocks due to drought.
With the price of essential food items set to increase across the board, the
toughest times are yet to come. Combined with hikes in oil prices—increasing the
costs of production and distribution—and swelling inflation, the chance of these
commodities becoming affordable to the average consumer is dismal. In a telling
statement, the report labels Sri Lanka as a ‘country in crisis requiring
external assistance’ with regards to severe localized food insecurity on the
island. This is apparently due to a variety of factors including the
after-effects of the tsunami, the escalating conflict, and floods.
Chairman Ernst & Young, Global meets the
The Chairman of Ernst & Young Global Jim Turley visiting Sri
Lanka to celebrate the 100th anniversary of Ernst & Young Sri Lanka met the
President at Temple Trees recently. On this occasion the President was presented
with the book titled Ernst & Young Sri Lanka 1907 – 2007. At this meeting Jim
Turley shared the experience of Ernst & Young in the rapid transformation of
China and India as fast growing economies and discussed Sri Lanka’s plans for
economic development and infrastructure development and the role of Public
Private Partnership in this process. The Country Managing Partner of Ernst &
Young Sri Lanka, Aiste Talwatte, who accompanied the Jim Turley briefed the
President on the significant contribution Ernst & Young has made to the commerce
and industry in Sri Lanka and to the overall economy of the country during past
100 years and pledged to continue its efforts to effectively contribute towards