27 October, 2020

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The Electricity Tariffs, Populism And Smarter Consumption: Some Reflections

By Pradeep Jeganathan

Dr. Pradeep Jeganathan

In midst of the noise of populist political posturing on the electricity tariff increase, there has also been, as always, a considerable amount substantial discussion on the issue. While a number of OpEds have been edifying, and of our legislators, Harsha de Silva‘s lone, yet richly informed analytical voice has been most stimulating, I do feel there is an aspect of the matter that has still not drawn attention. In the paragraphs below, I will attempt to delineate this.

I will not go over all the numbers here, yet suffice to say that simply throwing out percentages of the increase does not paint a worthwhile picture. For example telling us that a 30 unit consumer’s bill will rise, 52% is a great, factually correct but misleading headline – that may allow the reader to miss, the fact that for nearly half the electrified households in Sri Lanka (0-30), this increase will amount to Rs. 75/=. Consider at this point that a loaf of bread is 60/=, a packet of milk powder 400/=, and the cost of mobile telecommunication perhaps 400/=, to say nothing of other utilities. Tub thumping about a 75/= increase of one utility is neither here nor there. On the other hand, electricity subsidies, unlike many others are beautiful and elegant since they are not easily transferable to an affluent consumer. Comparing this to the old style ration books, which were, and the new style car permits that are, would clinch the case. In any event this small increase comes in at some thing like Rs. 575 million, which again given the CEB short fall of nearly 60 Billion, is neither here nor there.

The brunt of the increase in rupee terms is borne by the lower-middle band 90-180 consumers. A 150 unit household will see its bill rise, from 2850/= to 4515/=. That’s not just 58%, its also Rs. 1,670/= or so. A 180 unit household will see its bill go up to 5130/= an increase of only 33% and rupee addition of 1275/= ( Yes, the rate of increase decreases with consumption. All figures have been rounded off, and are rough).

That’s a lot.  For a family of four, in the urban service sector, living on some thing like 40,000/= a month, spending some thing like 12% of its income on one utility is a heavy burden, given others like cooking gas, water and telecommunications. Transportation while not a household utility is another thicken slice of the families budget.

So what should be done? Indeed one can agitate for a reduction; but unless this cost is recovered, those very households will see price inflation in other segments of their monthly basket of goods.

Promoting energy efficiency is the other way to go. Indeed if we are to accept and live with the form capitalism we have, it seems rather contrary to suggest as some do that the answer is to discourage consumption. That may be one model of using resources, but its silly to impose it in electricity consumption and promote it in other areas.

For example are we to have a sliding scale of pricing for personal miles flown each year? In this model, if you’ve flown 10,000 miles this year your next ticket would be twice the price of your old one. On the contrary, airlines encourage frequent fliers, by giving them perks. At the bottom of this system of capitalism – which is flawed but still viable – is the idea that flying becomes more energy efficient each year. So its not that you fly less. You fly more, at lower energy cost.

Returning to the lower-middle band of 90-180 customers of the CEB, we can make the same kind of argument, which a false, child like populism is masking. What does that mean? Well, we only speak of light blubs when we speak of energy efficiency. Since lighting is so basic, it seems safely populist to speak of moving from incandescent lighting to CFL or LED lighting. Yet is it unclear, if these well known new technologies are supported by duty waivers.

But once we leave lighting behind we will find that a household in the 90-120 band has both a refrigerator and a television. 40% of Sri Lankan households have a fridge, 80% a TV. But in the lower-middle band I speak of ownership of these appliances has to be pretty universal. It stands to reason; or else where would the units go? What is the average energy efficiency of these appliances as used in the lower middle band? I am not sure any one knows – but we can guess estimate that the turnover cycle among this consumer is long – unlike with the affluent who may turn over their appliances every 3-5 years. Older appliances are far more inefficient than new ones.

Let us look at some numbers. Switching from a 17” CRT TV to a 15” LCD TV (which has the equivalent viewing area), will save 13+ units a month, if daily viewing is set at an avarage 8 hours a day. With a refrigerator, switching from a 8 CF model that’s 20-10 years old to a fresh model, will save more than 50 units a month.

Lets say a savings of 59 units a month. Our 150 unit household is down to 91, and their bill is back down to, 2,225/= or from 4,500/=. A reduction of huge proportions. Our 180 unit household is down to 121 in this simple calculation (the reductions could be higher if the TV and/or fridge was bigger); and their bill is now 3,500 down from 5130. (If 60 units were used as the savings, the drop would even larger, but perhaps misleading, because of the quantum jump at the pricing bands).

No doubt its not that simple; new appliances do have a considerable capital cost. Yet, there is little doubt that home appliance chains sell new low end TVs and fridges by the truck load; the question is how does a consumer learn about her choices?

Shouldn’t we be rating household appliances on an efficiency scale? Shouldn’t such rating be regulated, just as the ingredient listing on a can of fish or packet of sausages is regulated? Shouldn’t there be huge duty concessions for the highest energy band? Shouldn’t consumers be told at the point of purchase, this model will cost you so much a month to run, the other one more?

We don’t seem to doing any of this. At the very top end of things, several retailers advertize energy efficient air conditions. But even they do not actually tell us what the power consumption of the model is. If you walk into one of the large home appliances chains in Sri Lanka  – there are three big ones – and ask casually or other wise (I’ve tried both) – what the power consumption of the reverent appliance is, you will find that the sales staff are clueless. In fact, when recently at the service center to pick up an appliance, I asked the technician in front of me, at the testing table, what was the power consumption of a LCD TV he was testing. He looked blank. I rephrased the question a number of ways; he looked about the back of the TV and said, ‘220.’ Yes he did. He was pointing to a white sticker that said, the appliance was rated for 220-240 A/C. For the uninitiated, the rated voltage of an appliance has nothing to do with its power consumption; if a trained repairmen is as clueless as a sales person on these matters, I am very much afraid the consumer may be quite lost. We really need to do better.

My numbers are rough, and I am skeptical, to say the least, about the great project of consumer capitalism. But that’s where we are. Populist protests mask this because consumer capitalism seems dirty, and unworthy of street protests. I think we need to grow up, and for the time being at least, simply consume  smarter.

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Latest comments

  • 0
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    Quite rightly a consumer protection act to get them to know what they are selling. When housewife’s start”home appliance enterprises” they sell any dam thing to the masses with their “poya pandam” and clenched fisted policy.

  • 0
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    The inefficiency of governance, malinvestment, lack of moral values, corruption are some of the ripple effects that causes the rise in cost of living. When the government distort, waste, confuse or mislead it’s citizens; disaster will be the inevitable result.

  • 0
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    Dr.Jeganathan,
    Thanks. I was bothered about the percentages bandied about and was unable to figure out how to present the problem in real rupee terms. No wonder the middle-class – which is mostly a pretence today- are worried about their next electricity bill. While what you say about energy-saving appliances is true, the substitution of presently used equipment is a long way off, considering costs and incomes. Many are also now switching off their refrigerators at night! They may also watch TV less ( a blessing in disguise, given the fare). I was surprised to see the other day, most houses in Cinnamon Gardens were in semi-darkness around 8 pm. Even, the so-called rich, are trying to cut back on electricity. If the consumption of power falls significantly, the income for the CEB will fall too. How will it then pay off its debts and meet its salary + perks bills?

    The next electricity bill and other related increases that will be passed on to the consumer, are bound to break the camel’s back. This issue unless resolved will turn out to be the death knell for this government.

    Dr.Rajasingham Narendran

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    Sri Lankan middle class is not exactly basking in luxury. 150-200 units is achieveable without much effort. The only other soliution is to stay in the dark and sweat it out without even a fan. Although what the author says makes rupees and sense it does not detract from the scandolous state of affairs in the CEB and othe state institutions.

    Why should ordinary people pay when the leaders and legislators dont pay any bills or taxes? Also if they cannot get their act right and reduce the cost of electricity. Instead all the garbage is being heaped on the ordinary people and middle class.

  • 0
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    Pradeep,

    Is not the dumbness of the government, that consumers pay extra for ?
    How come you have not factored that in ?

    Instead of going from 17 ” lcd to 15 “, what about going from 66 member cabinet to 33 ?. If you take out the bloated military budget, then we can enjoy the ongoing political fiasco not on from 17 ” screen to but on 60 incher.

    Get your calculations right.

  • 0
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    Energy Saving Home Appliances advertised in Europe are Coded A,B,C etc
    guiding consumers. In fact in certain parts of some countries, the
    Elect. Board gives a rebate direct when one purchases an Eco type
    fridge. The use of Eco. grade bulbs, duly subsidised will go a long
    way to help consumers.

    All street lighting should be Solar powered, in the less populated Provinces.

    CEB day to day working should be managed by a Firm of Auditors for
    a trial-period to start with.

  • 0
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    LET US ALL GO BACK TO THE GOOD OLD DAYS OF CANDLE LIT MEALS.

    SING SONGS IN THE FRONT GARDEN AFTER DINNER.

    DO OUR HOME WORK BEFORE DARK.

    USE CLAY POTS ON OPEN FIRE TO PREPARE OUR MEALS WITH A LOT OF GORAKA.

    THIS WOULD KEEP THE FOOD FRESH FOR AT LEAST TWO DAYS WITHOUT SPOILING.

    NO NEED OF FRIDGE, DRINKING WATER IN THE BURULETHTHUWA TO KEEP COOL.

    WE SURVIVED WITHOUT THESE FACILITIES THEN, SO WHY NOT NOW?

    THEN WE COULD SEE HOW THESE GOONS COULD PAY THEIR DEBTS.

  • 0
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    Heres a good solution
    The Public Movement Against the Electricity Hike (PMAEH) yesterday urged President Mahinda Rajapaksa to do away with the recently imposed electricity tariff revision by closing down the Mihin Airways which, it said, gobbled up some Rs. 20 billion annually. The PMAEH which comprises members of public corporations and civic organizations said it had informed the President that the 20 billion wasted could be utilised for turning around the debt ridden CEB.

  • 0
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    The comparison between the new electricity tariffs in Sri Lanka and New Delhi given below shows that PUCSL has produced a sensible tariff, under difficult circumstances. Their stern recommendations to CEB should be implemented to reduce the cost of production.

    Sri Lanka – new tariff in LKR 20.04.13

    0 – 30 5.00
    31 – 60 6.00
    61 – 90 8.50
    91 – 120 15.00
    121 – 180 20.00
    181 – 210 24.00
    211 – 300 26.00
    301 – 900 32.00
    900 -> 34.00

    New Electricity Tariff New Delhi at Exchange rate IRS = LKR 2.34

    Cost/unit – Rs. (LKR)
    0 – 200 = 8.66
    201 – 400 = 13.24
    401> 15.6

  • 0
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    Oh Danny boy,

    The debt is ours. The party is thiers.
    Dont mix the two.

  • 0
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    This increase is to cover CEB costs, not to reduce consumption. Lower consumption will not solve CEB’s problems but add to them forcing a further increase down the line.The consumer on the other hand cannot afford the increase and will switch off lights and fans and bear the pain and suffering imposed by Mahinda Rajapaksa’s profligacy until the next election, when it will be wise to vote him out.

  • 0
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    No they wont switch the lights off. They will curse the minorities for it and be prepared to attack when the signal is given.Some trial runs have begun.

  • 0
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    DID YOU KNOW THAT OUR ELECTRICITY TARIFFS ARE THE HIGHEST IN THE WORLD.?

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