Shock waves send industries reeling!
Industries will face a crisis as they get clamped down with an increased electricity tariff that is set to cause a surge in production costs resulting in Sri Lanka becoming less competitive in the global market.
FTZ Manufacturers Association Secretary Dhammika Fernando told the Business Times that the recent increase in electricity tariff will lead to rates rising by reaching 180 per cent.
In August, 2022 the tariff was increased by 110 per cent and with the latest addition of 66 per cent the costs will further increase as the fixed cost has also been increased. This would mean Sri Lanka will not be a favourable destination since competitiveness of a location depends on the profitability of the business operation.
In the current context, industries are contemplating on moving out of the country to other attractive destinations, Mr. Fernando said adding that some others are also opting to downsize their operations that will result in layoffs.
Currently most organisations are reducing work hours especially in the factories that have resulted in a drop in the earnings of employees as they have to now depend only on their basic salaries.
In the long term it is expected that business will simply close operations as a result of the current high cost of operation, he noted. Although the uninterrupted power supply is a positive move, the authorities are not working on any plan to encourage a shift towards renewable energy and sustainable energy.
Due to these issues the association was scheduled to meet on Friday the newly appointed Board of Investment chairman Dinesh Weerakkody and raise these concerns as well. In the meantime, they are also looking at the possibility of going in for litigation against the authorities highlighting that the increased tariff is illegal.
Joint Apparel Association Forum Deputy Chairman and Omega Line CEO Felix Fernando said that the impact of the electricity tariff will be felt mostly on the fabric manufacturers.
During the peak hours the tariff is increased by 65 per cent and during non peak hours the increase is by 200 per cent, he said. Fabric mills that are run 24 hours a day will be severely impacted by this latest move that would mean the cost of fabric will also increase resulting in an increased cost of production for the apparel industry.
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