1 December, 2021

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Patriotism, Economy & Yugadanavi Power Plant

By Harsha Gunasena

Harsha Gunasena

Eleven constituent parties of the government have staged a protest against the government under the banner Mahajana Manthrana Sabhava-MMS (Peoples Council). This in fact is not a people’s council rather a council of frustrated politicians since there were no people involved there. MMS came into the limelight with the real participation of the people during the former autocratic regime of Mahinda Rajapaksa where the opposition had no say.

What they say is that they are against the agreement with respect to the Yugadanavi Power Plant reached by the government with the US company, New Fortress Energy (NFE), a liquefied natural gas (LNG) company founded in 2014. The trade unions of the Ceylon Electricity Board (CEB) along with affiliated trade unions are also taking the same stance and planning to stage a major protest including a blackout.

Yugadanavi power plant, which is having a capacity of 300MW, was constructed by Lanka Transformers Limited (LTL- a joint venture between CEB and Bonar Long of Scotland) and owned by West Coast Power (pvt) Ltd of which the owners are, the treasury (51%), EPF (27%) Lanka Electricity Company -LECO (18%) and LTL (4%). When Yugadanavi was completed in 2010 the intention was to use LNG but since the inception the plant was using diesel. In the past neither the CEB nor the government took successful initiatives to use LNG in this plant.

There are several advantages of using LNG against diesel. LNG burns efficiently which is highest energy content fossil fuel. LNG burns cleanly, it has lower maintenance costs and low emissions of carbon dioxide and other greenhouse gases. LNG is attractively priced which means more power for the same money. In order to liquidize the gas, it has to be brought under minus 160 degrees Celsius. There are special storage facilities in the ships to transport this.

The Government signed the agreement in July with NFE. It was signed at midnight without getting proper approval from the Cabinet of Ministers. According to the agreement NFE will built a floating storage in the sea to store LNG and they also will build a pipeline to transfer LNG in the form of a gas from that storage to Yugadanavi. In turn it is mandatory that the government should buy gas 35 trillion BTUs (British Thermal Units) per year. Even if the government does not buy gas to that extent the payment should be made. The capacity of Yugadanavi is only 15 trillion BTUs. Therefore, the government will have to pay NFE for the additional unused 20 trillion BTUs which would amount to around USD 215 million per year. Even if the new power plant under construction in Keravalapitiya is completed the government will have to pay around USD 90 million to NFE for unused BTUs.

This minimum buying quantity is fixed since probably otherwise it would be uneconomical to maintain a floating storage and a pipeline for NFE. Therefore, in order to reduce the losses, the government will have to build an additional pipeline to Kelanitissa as well. Moreover, when there is heavy rains and hydropower stations are running in full capacity the intake may have to be reduced from these LNG power plants since Norochchole coal power plant cannot be stopped. The government also agreed to sell 40% stake of West Coast Power (pvt)Ltd which owns Yugadanavi to NFE for USD 250 million. When the agreement was signed CEB has already called for tenders for the floating storage and the pipeline.

All so-called patriots including the unions of CEB are against mainly for this 40% sale. Even if a company is selected from the tender procedure the monopoly of supplying LNG should have been given to that company because the country does not have the capacity to have several floating storages. If this company were a Chinese company these patriots probably would have agreed to it. Their problem is that the monopoly of supplying LNG to the country is vested with an American company. However, the main issue is neither 40% sale nor the monopoly given to NFE but the unfavorable condition to buy over the requirement LNG of the country. If the arrangements can be done to fix that by increasing the usage enabling Kelanitissa as well to use LNG the agreement can be converted to an advantageous one.

Not following the tender procedure and not informing the cabinet were major flows. Previously, the contract of developing the Port City was granted based on an unsolicited bid submitted by China Communications Construction Company Ltd.in 2013. Thereafter the then government did not follow the Public Procurement Guidelines and called for other interested parties to bid for the project whilst offering a first right of refusal to the original proposer. This issue was not raised sufficiently at that time by the persons who opposed the agreement and the main opposition at that time was to the environmental issues. However, following a wrong procedure in one instance does not justify following the same for other instances as well.

When running an economy especially at this juncture giving too much priority for this silly type of patriotism is a menace. When the government tried to sell less than 50% stake of the Eastern Container Terminal (ECT) of Colombo Port to Indian and Japanese companies based on an agreement reached by the previous government there was a stringent protest from the trade unions who kept mum when 85% of Colombo International Container Terminal (CICT) was given to a Chinese company by the previous Mahinda Rajapaksa government. As a result, the government gave 85% of Western Container Terminal (WCT) which is well above 50%, to an Indian company to which the trade unions were in agreement. Now the government does not have funds to develop the ECT. This time also the trade unions of CEB has threatened that they would take strong trade union action if the government would not move out from this agreement.

These eleven constituent parties are keeping mum on the wrong decision taken by the President banning chemical fertilizer. The President reiterated his decision at UN and then at a side event of the UN Climate Change Conference. Several blunders were made after the initial decision. Now the government is trying to accommodate the questionable Chinese company which tried to supply substandard organic fertilizer. Chinese embassy is trying to undermine our legal and banking system. This is interference to our sovereignty and the eleven constituent parties have no issue with it.

The main opposition should not fall into the situation J.R.Jayewardene adapted soon after the Bandaranaike-Chelvanayakam pact was signed in 1957. Bandaranaike came to power with Sinhala Buddhist sentiments. He used that only to come to power. After realizing the repercussions of Sinhala only Act, he signed B-C pact to mitigate it. JRJ opposed it taking the argument that Bandaranaike should follow the principles by which he came to power. As a result of the Kandy march and several other protests by the Buddhist clergy B-C pact was withdrawn. Had it been there we would not have to face a 30 year long war.

The present regime came into power by giving false promises to the people that they would not privatize any government asset. Now facing the ground reality, they work against their own promises. However, SJB and UNP should stick to their principles of privatization of the government assets for long lasting economic benefits to the country rather than asking the government to work according to their promises. If one example is given, we now reap the benefits of privatizing the telecommunication department during the time of Chandrika Kumaratunga. Hence the main opposition should not follow the precedence of JRJ in 1957.

Thinking of Sri Lankans is influenced by the thinking of the old left and false patriotism especially false economic patriotism. Trade unions are concerned about their job security and are covering behind this false economic patriotism which promotes inefficient large public sector and idling public assets. This is a sure recipe for an economic disaster for a country like Sri Lanka.

(The writer acknowledges the contribution made by Keerthi Godigamuwa in writing this article)

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Latest comments

  • 5
    1

    One thing Sri Lankans do not understand, this also includes the opposition, Buddhist Priests and even the “monkey politicians” of SLPP Vasudewa, Game-Pilla, Weerawansa cabal, is that any foreign investment that comes into the country does not take the land or the building or the project to the investors country. Although the Hambantota Harbour was given on a 99-year lease to the Chinese and the Part of Port City sold to the Chinese, these are still in the territory of Sri Lanka.

    Even in the case of the US power project the investment or the assets will be in Sri Lanka, the investors will only take their profits which will also include the investment. Since only 42% of gas is to be supplied and power generated, this in no way result in a total breakdown of gas supplies or will harm the territorial integrity of Sri Lanka. Maximum, it would be like a power strike or gas shortage. Alternate sources for gas could easily be found, maybe at a different price, as gas is a commodity.

    The “monkey politician group” is today climbing onto stages and making protest speeches is for their own benefit. We saw the same drama played by this group and the Buddhist Monks during 20A. What happened at last, nothing, it got passed and these monkeys voted for it.

    • 2
      0

      This fake patriotism is the bane of this country, whichever quarter it comes from.
      “Trade unions are concerned about their job security and are covering behind this false economic patriotism”
      True, the CEB is a monopoly, and the employees have got themselves many perks and very high wages through threats of strikes. Just like the GMOA. They successfully resisted attempts to break up the CEB in the past. The overpaid employees are part of the reason why we have the highest electricity charges in the region. It is all very well for self-interested unionists to claim that state enterprises are capable of developing themselves, but why has it not happened, and where will the money come from? More loans?
      This agreement is not perfect, but if it results in cheaper and more reliable electricity, so be it. Fake patriotism doesn’t keep the lights on.

      • 0
        0

        OC
        True what you say that the CEB engineers are a pampered lot.
        But the high wages are not the cause of the excess cost per unit.
        In fact corruption had at times cost more then excessive wages.
        One university was asked to test insulatrors for the CEB. The lecturer who investigated reported that the standards were below par. Since then that department was blacklisted by the CEB foe some years.
        I do not know if things are better now.
        *
        The CEB itself was a victim of government robbing Peter to pay Paul.

    • 1
      0

      Thanks, Harsha, for the article, and thanks also to Buddhist1 who always makes rational comments.
      .
      This is Professor Kumar David, whose field of Specialisation this is, saying, a month ago, the same same thing, that not calling for tenders is the only real problem here, but endorsing the use of LNG. Being 80 years old now he wants somebody to check the facts:
      .
      https://www.colombotelegraph.com/index.php/lng-scam-is-a-hangmans-noose/
      .
      And now, today, we have Anura Kumara Dissanayake of the NPP explaining it in 30 minutes of clear Sinhalese.
      .
      https://www.colombotelegraph.com/index.php/lng-scam-is-a-hangmans-noose/
      .
      There is no bogus patriotism or obsession with Static monopoly clouding their thoughts.
      .
      Just one point, Harsha. Your statement is clear but somebody reading this may imagine that the temperature of the gas during transport has to be minus 160 degrees Celsius; as I understand it, the liquid LNG is transported in very strong containers at normal temperatures.
      .
      Incidentally, what do you make of these 5 minutes? The fertiliser ship has had a new name painted on, and returned to the country, this time to the Hambantota harbour! A ship’s name can be changed, but not its identification number!
      .
      https://www.youtube.com/watch?v=yV5xd_s5AvI
      .
      Panini Edirisinhe

      • 9
        0

        Dear SM.
        …the temperature of the gas during transport has to be minus 160 degrees Celsius; as I understand it, the liquid LNG is transported in very strong containers at normal temperatures…..
        Yes the temperature has to be that, as Liquefied Natural Gas (LNG) is NATURAL gas that has been cooled to a liquid state at about -260° Fahrenheit, for shipping and storage. It is in a cryogenic tank and needs to be installed with a vaporizer.
        While LPG is Petroleum based and storage, transport and vapourising for final use, is different, and the cargo tanks are designed to carry LPG (at −50 °C).
        Two different entities – may be cousins!

        • 1
          0

          MV
          “Two different entities – may be cousins!”
          Yes, rather distant cousins like diesel and petrol.
          The carbon atoms per molecule of the component hydrocarbons are substantially different. That makes a big difference to liquefaction temperature and pressure.

      • 1
        0

        Dear MyView,
        .
        This is what Harsha has said in his article:
        .
        “There are special storage facilities in the ships to transport this.”
        .
        An honest man! But that word “special” denotes things that innocents like me (and perhaps him as well) can hardly understand without years of study in our youth! I believe you are an engineer.
        .
        I thought that I’d explore what you have said:
        .
        https://en.wikipedia.org/wiki/Cryogenics
        .
        I know when something is beyond my competence. I also realise that you’ve given a proper “explanation”, and that I wouldn’t be able to easily understand all that, although in commonsense terms I felt, on first reading what Harsha had said, that such transport would be impossibly expensive.
        .
        https://gcaptain.com/photos-inside-a-lng-carriers-giant-cryogenic-tanks/
        .
        However, I realise that even that is probably a solvable problem if I were to follow all those Wikipedia links.
        .
        So, GambadaIngirisiIskoleMahattaya thanks both Harsha and you.
        .
        Panini Edirisinhe

  • 6
    0

    “The sting in the tail” in this agreement is in….
    …..”In turn it is mandatory that the government should buy gas 35 trillion BTUs (British Thermal Units) per year. Even if the government does not buy gas to that extent the payment should be made. The capacity of Yugadanavi is only 15 trillion BTUs…….
    The stooges, Chairman and GM of CEB tried to justify on TV (to fool the masses) that the cost per unit quoted by NFE was US$1.45 per BTU while in the tender it was US$3.15 (the US$3.15 was for actual usage). But then every year we pay for the EXTRA for 25 TR BTU and hence over 5 years the cost per BTU is well over US$3.15 and the payment by us for the gas in any year, is for gas already paid for by us in the previous year. It rolls over till we reach 35TR BTU consumption but we will never reach that in the 5 years.
    Quote: …..The firm (NFE) had said it will charge 1.45 dollars per one million British thermal units (MMBTU) of LNG but a minimum commitment or capacity charge could push up it up to 5.50 dollars if the committed volumes are not used, the unions said, in addition to compensation paid for unused gas……….

  • 1
    0

    Harsha Gunasena,
    Yes !
    Let us pursue a pragmatic economic policy- not to be carried away by old discredited slogans,
    A public, private and Civil society partnership in a corruption- free environment will steer the country towards development and prosperity.

  • 4
    0

    I would not comment on the Technicalities of the Yugadanavi Power Plant; Besides this was extensively exposed by Prof: Kumar David a few weeks ago on this platform.

    However, there is something shady about this whole affair…….
    ……….Signed at Midnight
    ………..No approval from the Cabinet of Ministers.
    Further, the fact that the man behind this whole Saga is Basil Rajapakse makes it still more shady……..

    • 4
      0

      …”Signed at Midnight”…..
      Basil leaves suddenly for USA 2nd week May.
      PM & Prez “apparently” surprised as they “did not know” why or when.
      He returns 3rd week June.
      Were discussions with NFE completed ? And where ?
      He is appointed Finance Minister in July. NFE Agreement signed 17 Sept midnight.
      Signed and sealed.
      Midnight ? Am I dreaming all this?

  • 2
    0

    Why will not all leading political parties declare that the deal is illegal and corrupt and that they will not be bound by its terms and inform the company and its government accordingly, and make the statement public?

    • 1
      0

      S.J,
      “declare that the deal is illegal and corrupt “
      You know as well as I do that heinous treachery pointed out by the opposition becomes rational economics when they get into power.

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