Power drama in Jaffna peninsula
Dispute over insurance claim affects electricity supplies
Sri Lanka's biggest power plant in the north serving Jaffna town and the
rest of government-controlled territory in the peninsula is caught up in
an insurance dispute.
The plant, owned and run by Koolair Ventures Power (Pvt) Ltd, was disabled
by artillery fire in a Tamil rebel attack on the KKS cement factory premises
The company then made an insurance claim to the National Insurance Corporation
(NIC) as the cover included terrorism. But it was told that the foreign
re-insurance company had informed NIC that "the machines have been damaged
by artillery fire which comes under civil war and not terrorism" and thus
there is no liability.
"What do we do in this situation? We had taken out terrorism cover and
the insurance companies tell us this," said frustrated company chairman
Asela de Livera. The plant with a capacity of upto 20 megawatts is now
cranking only 8-9 megawatts of power for Jaffna, resulting in heavy losses
to the company and shortages for residents.
Koolair, specialists in refrigeration, air-conditioning and power generation,
is challenging NIC's decision in court and papers are being prepared for
In the meantime, the government is considering a bailout package for
the company as it is the residents of Jaffna who are suffering. "We are
looking into the problem and it looks a genuine case for some relief,"
said Sagala Ratnayake, Deputy Minister of Power and Energy.
He said the Ministry of Rehabilitation is hoping to release some funds
to the company to repair the machines and get back its full capacity. Koolair
power is sold to the public through the Ceylon Electricity Board (CEB).
CEB officials said Jaffna now has 46,000 power customers compared to
75,000 in the mid-1990s but the Koolair plant and other smaller plants
are unable to meet all the needs. "Jaffna needs at least 25 megawatts power
but we are supplying much less," one official explained.
The Koolair company imported the plants in 1996-1997, responding to
a CEB invitation for private power plants upto 20 megawatts capacity at
a time of shortages and an energy crisis.
Livera said the plants – 17 machines in all – were then installed at
Kotte and Malabe. Due to protests by residents over noise pollution, etc.
and objections by local authorities, the CEB told the company to shift
the Kotte plant to Jaffna due to a requirement there.
The CEB said it would consider whether a government guarantee could
be provided to the company in case of damage to the machines through LTTE
That was not necessary as the NIC had agreed to provide general and
terrorist cover and the company then paid a premium of Rs. 7 million.
The Kotte plant was transferred to the high security complex at KKS
in Jaffna in mid-1998.
Livera said power in Jaffna was restored after this plant was installed
and given its success, the CEB told Koolair to transfer its Malabe plant
also to Jaffna. Together the plants were supplying 18 megawatts of power
When the LTTE began advancing towards Jaffna town in 2000, KKS came
under attack and the power plants were severely damaged. Livera said 16
of the 17 machines were disabled in the attack.
"We presented an insurance claim of Rs. 61 million to the NIC and was
told that the re-insurance would not pay up because the plants were damaged
by artillery fire and not bombing," he said. However, NIC made an ex-gratia
payment of Rs. 21 million, which was accepted by the company under protest.
The company borrowed Rs. 10 million from the CEB and invested its own
money to pay for the Rs. 40-plus million in damages and repair the plants
to supply 9 megawatts of power.
Livera said the company has lost a lot on capacity costs and insurance.
"We had to fork out Rs. 30 million as the insurance company refused to
Ironically the company is still running without proper terrorist cover
and is hoping the government would come up with a cost recovery plan. "It
is ultimately the residents of Jaffna who are suffering," said Livera.
Rise in JCT productivity
Productivity at Colombo port's main transshipment facility, Jaye Container
Terminal (JCT), has made record gains in the last few days, the Sri Lanka
Ports Authority (SLPA) said.
Ships operated by main lines such as P&O Nedlloyd, Zim, Hanjin and
NYK have seen gross berth productivity (number of boxes moved by cranes)
rise to over 60 moves per hour from an average of 38 previously.
"The significant increase in productivity is a result of a major programme
launched by the SLPA to enhance productivity at the JCT," an SLPA statement
said. It has set a target of achieving a productivity growth of 50 percent
in handling containers at the JCT in three months.
Poor person's preference!
Three-wheelers or trishaws are the most convenient mode of transport these
days for everyone. It is also the cheapest if you are able to knock down
the asking rate from the driver.
What happened to the taxi meters? Why were they discontinued? Most people
prefer a return to the taxi meter era to ensure reasonable rates. What
have you got to say? With the government receptive to ideas, The Sunday
Times Business invites views from readers on this issue. Write to the Business
Editor, c/o The Sunday Times, 8, Hunupitiya Cross Road, Colombo 2 or on
e-mail – firstname.lastname@example.org.
Up and down the milky way
By Hiran Senewiratne
Sri Lankan milk food companies are seeking clarification from the government
on a plan to impose a duty on milk powder imports which could force them
to raise prices.
The move could go against current government efforts to reduce milk
prices, industry analysts say. Last month milk firms reduced the retail
price of full cream milk powder by between Rs. 2 to Rs. 7 per 400 gramme
pack at the state's request.
Minister of Agriculture and Livestock Development, S.B. Dissanayake
has said he plans to impose a tax on milk food imports, except infant milk,
to encourage the local dairy industry. "We intend to impose a tax on powdered
milk, except infant milk," Dissanayake said in an interview last week.
"We want to be self-sufficient in milk in ten years."
Chetiya Sri Nammuni, commercial director at New Zealand Milk Lanka Pvt.
Ltd, which handles Anchor, said the company has written to the minister
seeking a meeting to clarify this issue. "Yes, if a tax is imposed, milk
prices will go up," he said when asked whether prices would go up if there
were fresh taxes.
Nestle Director Corporate Affairs, Cubby Wijetunga said that the company
might have to limit imports if the government went ahead with the plan
to impose an import duty on milk foods. But he noted that an import tax
could help to boost Nestle's local production of milk foods.
The government should improve storage facilities which would encourage
the local dairy industry, he added. New Zealand Milk's Nammuni said local
production could improve if the farmer was given proper prices and if the
LMF marketing director, L. Saranapala said that if the government imposes
an import tax, the company would study world market prices before deciding
whether or not to increase local prices.