The Special Report
21st January 2001
Cost of Living
Hard hit by hikes
By Faraza Farook
Aseries of price hikes ushered in the new year and with more anticipated in the coming months, a negative trend is seen among the business community and a paralysing effect on the general public.
With every commodity including essential items going up in price, making ends meet has been a trying task. While the Government claims that the internal conflict and external factors are solely responsible for the sky- rocketing cost of living (COL), the public are questioning the maintenance of a jumbo Cabinet paid for with public funds.
The double hike in diesel prices late last year, massive LP gas hikes, increase in kerosene prices, electricity and water rates hikes and the constant rupee devaluation has had a deleterious effect on all sectors of society.
The inter-connected price hikes have not only pushed many towards criminal activity but has resulted in the collapse of some businesses.
The rupee depreciation, the fourth in seven months, has sent tremors through the local economy. Business leaders have expressed disappointment at seeing their business turnover coming down.
"The worst is yet to come," says N. Rajabdeen, Vice President of the Hardware Merchants Association. The situation which is bad as it is, doesn't allow development, he points out.
"There is no buying power because the general public doesn't have the money," Mr. Rajabdeen, a leading business magnate himself said, adding, "We can't increase prices despite suffering heavy losses because we are unable to sell existing stocks".
Businessmen who make large scale purchases and sell stocks under Forward Agreements have suffered colossal losses and face the prospect of closure of their enterprises.
President of the Old Moor Street Traders' Association K. Palaniyandy said that traders including himself, were unable to pay bank loans which have accumulated with the increasing interest rates. "My shop and other property will be auctioned soon, if I don't pay up my loans," he said.
"We have obtained an advance from traders on the earlier exchange rate, promising goods on arrival of the shipment. And now, though we have to pay the importing agent under the current exchange rate, the goods will have to be given to the traders as agreed earlier leaving us with no choice but to bear the loss" he said.
With products ranging from drugs to door handles being imported, every sector of trade or service has increased prices while some have proposed to increase them with the arrival of new stocks.
The President of the Chamber of Pharmaceutical Industries Upali Panditharatne confirmed price hikes in pharmaceuticals which were imported and paid for at higher rates. "All imported pharmaceuticals are paid for in US $ and every item has gone up in price" he said, adding, "especially last year was really bad because the depreciation was in big blocks".
Many private hospitals are also contemplating increasing their charges to cover up the soaring costs of drugs, equipment, electricity, water and labour charges.
An official of the Fair Trading Commission said that commodities already imported will be sold at the existing price but new shipments will be priced in keeping with the current rate of exchange.
The COL increase has badly hit the food market making people cut down on their menus. Inevitably, food outlets and catering services have jacked up prices to cope with the high costs.
"I have not come across such a crisis before", said one caterer who supplies a tourist hotel in the South. He said he had increased prices by 10% to cover the escalating costs.
Mrs. Subhashini Chandrasena who has been running a catering service for the past ten years admits that she has lost business having increased prices of her menus and today has to run behind customers to keep the business going. "People are always trying to bargain on the prices.
We lose orders trying to maintain standards and not reducing prices," she said.
She said that she had increased the prices by Rs. 20 - Rs. 25 per head for an average menu while cheaper menus will go up by Rs. 15.
The unstable economy that has widened the gap between the rich and the poor holds a grim future for tomorrow's generation. Protests held by politicians and trade unions have been of no avail.
Legislators confess the soaring COL has done little to help matters, attributing the crisis to 'inevitable circumstances' such as world oil prices and the devaluation of the rupee instead of cutting down on the perks and luxuries they enjoy.
Tourism feels the pinch
Amidst a gradual drop in tourist arrivals even during the peak season, those working for the industry are protesting against a stagnant income with which they have to meet the increasing cost of living.
Tourist guides, transport operators, chauffeurs and other employees in the tourist industry are complaining of poor pay despite soaring price hikes and frequent rupee deprecations.
The Rs. 9 per kilometre paid for hire of tourist coaches has remained the same even after the devaluation of the rupee, Mr. Mohotti Munasinghe who works in the tourist industry said. Similarly tour guides protest that their salaries have dropped from US $ 10 paid in 1982 to US $ 7 paid now.
"The guide fees should be increased to US $ 20 per day since we work for 12-16 hours daily while on tour," Mr. Ravi Amarasekera, Treasurer, National Tourist Guide Lecturers' Association of Sri Lanka (NTGLASL) said.
He said those fluent in foreign languages were paid an extra Rs. 50 (US $ O.5). Many engage as tour guides on a freelance basis and among the 1000 guide lecturers licensed by the Tourist Board, none were eligible for EPF, ETF, insurance or medical cover, Mr. Amarasekera lamented.
The drop in tourists has prompted tour operators to offer attractive packages to draw more visitors. "Sometimes, we have to pay out of our pocket to buy a drink or for tickets to enter some place, and we are not refunded," one of the tour guides said.
Meanwhile, the Association of Tourist Transport Operators, the NTGLSL, Chauffeur, Tourist Guide and Lecturers' Association and the Tourist Services Employees Union has put out demands to the Minister of Tourism to resolve problems faced by the individual associations.
Following a meeting with the representatives of the relevant associations the Minister has appointed a committee headed by the Ministry Secretary, to resolve the demands within a period of 10 days.
'Increasing COL is nothing unusual'
Government Information' Department Director, Ariya Rubesinghe in an interview with The Sunday Times admits the hardships of survival with the increasing cost of living, but claims it is a common phenomenon in many parts of the world.
"Even I am affected, having to buy LP gas at Rs. 509" he said.
Mr. Rubesinghe's comments came following a statement released by the Special Media Information Unit last week criticising Sunday newspapers for undermining military achievements and focussing on the COL, the poor economic conditions and the privileges of legislators.
The statement claimed that the Sunday newspaper reports on the increased cost of living and protests carried out in Colombo was a proof that there was a 'conspiracy' to undermine recent military achievements.
Mr. Rubesinghe explained that the country would have to find the money required to fight the war and pay for escalating world oil prices. "The Government successfully managed the economy during the financial crisis in the neighbouring countries. Likewise we will manage during the present situation," he said.
He said the people should appreciate the country's (military) achievements , at great financial cost, despite hardships.
Mr. Rubesinghe said he felt that things were comparatively better than in the past and what we experience today was inevitable.
"The present situation has nothing to do with local economic problems and it is definitely due to a problem somebody else has created. Still, we are doing very much better," Mr. Rubesinghe said.
Commenting on the diesel and gas hike he claimed, "Though world oil prices have come down now, we can't lower prices here because we have to recover massive losses sustained due to a diesel subsidy".
Claiming that the Government was doing its best to minimise the hardships, he said that similar situations were experienced in all parts of the world and 'nowhere in the world has COL decreased'. Mr. Rubesinghe said that the country would do better if more and more investors come in and if local production goes up.
Double crisis hits CEB
By Shelani de Silva
The CEB plunged into further financial crisis last week, with a State bank refusing to honour the January salary cheque owing to insufficient funds in the account, while the Government determined to avoid power cuts signed a Rs. 500 million contract last week to obtain emergency generators, which would cost the CEB a colossal sum of 1.2 billion rupees a month.
The People's Bank which handles the CEB accounts on Thursday informed the Finance Manager of the CEB that it is unable to honour this month's salary cheque to the staff drawn on the bank due to insufficient funds. In addition the CEB is running on a four billion rupee overdraft. The salary payments which would total a sum close to Rs. 160 million for a staff of 13,000, hangs in the balance.
In a desperate attempt to salvage the CEB it is planning to get a Rs. 500 million loan from a private bank, which is in addition to the existing loan of one billion rupees taken from the Bank of Ceylon to which it pays a monthly interest of 25%.
With the CEB facing both a financial and power crisis the Government is yet to provide a solution.
The CEB recommended that an immediate increase in electricity charges should be implemented but the Government is yet to decide on the increase.
In a bid to save power the CEB has informed the Government to implement at least one hour power cuts in the night. However the Government has refused to do so.
The contract signed last week to get 50 MW emergency generators which would cost 500 million rupees is in addition to the 80 MW emergency generators which are already with the CEB.
The contract was signed with Agrigo to avoid any power cuts.
However CEB officials point out that it will have to spend a sum of 1.2 billion rupees per month to avoid a one hour power cut.
Board wants one hour blackout
The CEB has warned the Government that a power cut has to be implemented with immediate effect to avoid a major power crisis in the country.
The CEB has recommended that a one hour power cut be implemented as the situation looks bleak. However the Government has decided not to have power cuts but to rely on emergency generators.
A few months back too the CEB suggested power cuts with the impending power crisis but the Government ignored the call.
The power crisis has further deepened with several power projects coming to a halt.
The proposed Norocholai coal power plant which came to a halt has also contributed to it.
Former Chief Engineer, Planning Dr. Tilak Siyambalapitya told The Sunday Times that the main cause for the CEB having to face such a crisis is because it uses fuel (diesel) to generate power.
'Nowhere in the world is fuel used as the main supply. It can be used during an emergency' he said.
He added that according to the CEB plan for future electricity generating systems published in July 1996, the demand for electricity at the point of generation by the year 2001 will be 8000 million units.
"The plan stated that certain projects should be implemented-the extension to the Sapugaskanda power plant, new gas turbines, diesel power plants and two combined cycle plants. No one should blame the weather.
The problem is with the non-implementation of power plant projects on time," said Dr. Siyambalapitya.
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