By Asantha Sirimanne
The Ceylon Electricity Board has initiated a feasibility study to set up a coal powered power station in the West Coast of Sri Lanka, The Sunday Times Business learns.
The study is financed by the Overseas Economic corporation Fund (OECF) of Japanese.
A pre-feasibility study on the possibility of siting a coal power plant on the West Coast had been conducted by the Japanese Consulting Institute (JCI) two years ago.
The study had identified four sites in the west coast. Based on this, a full scale engineering study has also been completed on siting a power plant in the Kalpitiya peninsular in Puttalam district.
Pure construction costs are expected to top US 270 mn for a 300 MW plant. However the site could eventually be developed to have a 900 MW plant.
Once the Environmental Impact Assessment is completed funding options would be considered and a decision taken on whether to CEB is to construct it with foreign aid or to call for private proposals on a BOO or BOT basis.
A coal powered station takes around six years to build with two years for preliminary preparation and four years for construction.
The CEB has earlier identified Mawella in the Southern Coast and Trincomalee to build coal powered stations.
Attempts to build the Trincomalee plant on a BOT basis has been delayed for years and embroiled in controversy.
These long term projects however would do little to avert the immediate power shortage facing the country.
A recent study by the CEB has predicted that Sri Lanka would again face an energy shortfall of 565 Giga Watt hours (GWh) under average hydrological conditions in 1997.
At present storage capacity in reservoirs were sufficient to produce more than 800 GWh of energy with 4 to 5 GWh being added each day.
In 1995 CEB had generated 4782 GWh of energy.
To avert power cuts the CEB estimates that storage level should increase to around 1,100 GWh by January. This would cater to the lean period and enable CEB to scrape through to April with around 300 GWh worth of water remaining.
Till the coal power plants come on line, the latest CEB Generation Expansion Plan has recommended the development of Diesel, gas turbine and Combined cycle power plants with a total capacity of 530 MW between 1998 and 2000.
At present CEB had 1135 MW of installed hydro power capacity and 224 MW of thermal power.
This comprised of Kelanitissa gas turbines (originally 120 MW now de-rated to 108 MW), Kelanitissa steam (50 MW now delivering 44 MW) and Sapugaskande diesel (originally 80 MW, now de-rated to 72 MW).
The 40 MW ADB funded diesel plant that is presently under construction is expected to come on line early next year.
Action had already been initiated to procure and install 100 MW Gas turbine plant at Sapugaskande, which is also expected to come on line early 1997
The Kelanitissa steam plants are due to be retired in 2000, and the Sapugaskande diesels are due to be retired starting 2003.
The Kukule hydro-electric plant with a capacity of 70 MW capable of producing 305 GWh of energy is expected to be commissioned in 2002.
The CEB Long-term Generation Expansion Plan has recommended urgent action to construct a 90 MW residual fuel plant and 140 MW gas turbine plant by January 1998.
It also recommended the speeding up of the two 150 MW combined cycle power plants to be located at Kelanitissa and Kerawalapitiya.
"As the soft loan OECF funds are already available for the 150 MW combined cycle power plant at the Kelanitissa premises, utmost priority should be given for its implementation," the report said.
By Analyst
The market dropped below the psychological ASPI index barrier of 600. With gradual declines expected during the seasonal period to the 'CSM' is expected to shed another ASPI 10-15 points, before any buying pressure can be expected to stabilize the indices.
Corporate results published by companies for the third quarter mainly show turnover increases and profit declines compared to the previous year's third quarter figures for example.
Vanik Inc., in the third quarter of 1996 has a gross income of Rs. 699m, a 31% increase compared to 1995. Their net income of Rs. 19m is an 80% decline compared to 1995. The reason for the drop is mainly due to interest expenditure increasing. Threats for the future are limiting depreciation allowance only to leasing firms as in the '97 budget proposals.
MBSL's third quarter of gross income of Rs. 810m is a 30% increase compared to 1995. Their net profit of Rs. 17m is a 76% decline compared to 1995. The reasons for the drop is a net trading profit. Threats for the future are limiting depreciation allowance only to leasing firms in the short term and very high exposure to the plantation sector.
Labour unrest is raising its ugly head again. Two quoted companies i.e., Pure Beverages and Veytex, had labour problems last week. It was also witnessed at the Steel Corporation which is owned by the Korean Hanjung Group. With more labour unrest likely, it is hoped that the government would ensure that employees don't resort to strike action at first resort, as this has already led to foreign investors to pulling out and also preventing potential investors to Sri Lanka.
The added burden of absorbing two million youths to the workforce every 4 years is worsening and an acute and self destructive unemployment problem could lead to recurrence of a youth rebellion (history repeats itself) as of 1970,1987-1991. Unemployment (north/south) is the crux of the problem which the government should have on top of its agenda.
With the 'CSE' moving into a fully automated trading averaging 20,000 transactions per day, next year, it is hoped that trading costs, for clients and CSE quotation and operation fees also do not increase due to the full automation of the CSE. In the present context, and for the foreseeable future, the automation do not seem to be essential as the present CDS (Central Depository System) seems to be adequate with a maximum of 5,000 transactions processable per trading session.
With the establishment of two new telephone companies geared to expand telephones in the country there is every hope and expectation that Sri Lanka would soon have a modern telephone network throughout the country. In fact, we may have even leap-frogged in technology and our new telephone installations could be one of the most modern systems in the world.
If within the next year there is a substantial increase in telephones in the country, and every nook and corner of the country is served by a phone, then the country's communications could indeed be in keeping with the needs of the twenty-first century. Upto now telephones had been a privilege which only a few could obtain either owing to official or business clout or money. Telephones were doled out as if they were a restricted commodity to only those who could spend large amounts to obtain them or had other political or economic clout. Now we are assured that the two new companies would give telephones on demand, quickly and speedily, and provide an efficient service.
The pent up demand for telephones is indeed very high. Even these two companies may find the rush difficult to cope within the first few months. But hopefully they would be able to provide a telephone on the same day during the course of 1997. This was a facility available in the United States and Canada as long as 40 to 50 years ago. It may be revolutionary to us.
Sri Lanka has much to gain by having a modern telephone system. Investors would find the country more attractive. There would be speedier transactions. It would be possible to use modern information technology once we have a telephone system which would not only be accessible to most people, but efficient and dependable. Small enterprises could gain much. They would have an ability to communicate not only faster but cheaper. Hopefully their transactions costs would be reduced.
If the telecommunication revolution is to take root in this country there is one other factor that has to be fulfilled. Still the connection of a telephone is a high cost and telephone calls too are not that cheap. The new companies must bring down the price of installing a telephone. The tariffs must be reduced. The companies would in the long run benefit by reducing their prices because turnover could increase substantially and thereby enhance their profits. The telecommunications industry is particularly well poised for enhancing profits by increased turnover. That is precisely what has happened in the United States, Canada and other advanced Western countries. We trust that the new companies would endeavour to bring down costs very quickly. The competition among them should help.
Bringing down costs of telephones and telephone calls are vital to justify privatisation as well. While one of the strong justifications for privatising telecommunications is the possibility of expanding telephone facilities throughout the country, the full justification would be seen only if that expansion is coupled with reduced costs. Such reduction in costs would serve the interests of the telephone companies themselves. It would of course serve the interests of the community and nation. The day when telephones would be so cheap that students would have them as in North America or Sweden is the objective we must try to achieve.
The Telecommunications Department and its modern version Sri Lanka Telecom has generally taken a narrow view fearing that it would lose its monopoly. This is indeed a myopic view. Sri Lanka Telecom itself would gain by an expanded service. For instance, if telephoning becomes more widespread, then Sri Lanka Telecom itself would increase its revenue even if no additional phones are added to their network. This would be so as the total traffic would be a multiple of what it is today and Sri Lanka Telecom's share would be such as to increase their traffic from what it is today.
Besides this, Sri Lanka Telecom workers must put the country before their own self interests. This is precisely what the Minister of Posts and Telecommunications, Mangala Samaraweera has done. He has been committed to expand telecommunications facilities and gave unstinted support to privatisation. He has been able to carry the Sri Lanka Telecom with him and we hope that the privatisation of Telecom, which was considered one of the more difficult privatisations, would be successfully negotiated. There is one more hurdle to cross. Sri Lanka Telecom must give up its monopoly of international telephone connections. It is then that the country can benefit even more from international communications and commerce. We hope this would happen within 1997 and not later.
By Asiff Hussein
The Ceylon Textile Manufacturers Association (CTMA) recently voiced fears that under invoiced fabric detained by customs would be released to the local market at a rate far below the prevailing market rates.
A toy official said that 15 containers of printed cotton fabric (chintz) had been under invoiced at the rate of 20 US cents per metre.
"Although the fabric has been detained by customs, we understand that they are to be released shortly at a rate of 40 US cents (Rs. 21) per metre", the official said.
"We understand that the customs had come under ministerial pressure to release the fabric by getting the duty paid", he alleged.
"However, the release of the fabric at such a low rate is unjustifiable, especially in a situation where local manufacturers, whose costs of production are much higher, would have to compete with the culprits in the open market," he said.
We noted that the detained stock, with a duty of 60 percent imposed, would amount to Rs. 36 and could be easily marketed at Rs. 42-45.
"However, the cheapest printed fabric from India, China, Taiwan or Singapore would cost well above 60 US cents (Rs. 32) per metre to import".
He said that the selling price of locally manufactured fabric of the same type would be in the region of Rs. 53-55 per metre. Profits are marginal, the manufacturing costs being in the region of Rs 50.
The official said that they had also received information from reliable sources to the effect that suiting material under invoiced at less than 1 US dollar per metre had been detained at the customs.
"At prevailing rates, such fabric would cost nearly 2 US dollars per metre to import", he observed.
He said that the local textile industry is already facing ruin due to smuggled goods finding their way into the market. "Under invoiced fabrics and dumping by BOI sector manufacturers have also contributed to this situation".
"If such fabrics are released into the market during this festive season, we would be deprived of the only means by which we could sell our products," he added.
A high ranking customs official told The Sunday Times that at present, there are a number of cases of under invoiced fabric being detained by the customs.
"Whenever we have suspicions as to the value of the goods concerned, we undertake investigations and penalties are imposed by the relevant authority depending on the rate of under invocing," he said.
By Business Bug
Last week's unruly scenes at Oruwala has certainly had the desired effect - the Korean boys are now caught in two minds.
It is true that most of the formalities of the deal are over, but there still maybe a way out of it, they seem to think.
It is not that they have made a final decision about it, for they know that they have got a good bargain. But they are indeed reconsidering the affair, which is why the boys at the embassy are working overtime, trying to figure out the pros and cons...
Some industries like beer, never had it so good. Others, like footwear manufacturers are feeling the crunch of competition.
Which is why one major manufacturer is ordering a ten per cent production cut next year.
With labour charges in Vietnam even lower than in Sri Lanka, they just can't compete, they complain.
Bidding for the rights to the Bird of Paradise is entering it's last stages, and the lobbying is reaching a feverish pitch.
No one knows who the ultimate winner will be, but most are confident that the perky boss will, true to form, deal an honest hand.
Even so, those in the industry believe that the virgin will at last, get a taste of paradise.
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