Abstract:
Government of Sri Lanka provides subsidy on electricity to uplift the living condition
of citizens for decades. This research project mainly scrutinize, whether the objectives
of the electricity subsidies have been fulfilled or not. Further, both positive and
negative impacts of electricity subsidy is descriptively discussed. Appropriate
remedial actions are proposed for the betterment of identified indirect negative
impacts. In the analysis, it was found that some primary objectives of the electricity
subsidy have not been achieved. One of the most subtle negative impact recognised is
the encouragement of energy inefficient equipment usage among subsidized
consumers. A case study was conducted in Ratnapura District to investigate the energy
inefficient equipment usage and to quantify the electricity wastage. Findings were used
to estimate the electricity wastage in whole country due to inefficient equipment.
Further, it was found that the existing tariff structure encourages the energy inefficient
equipment usage and it acts contradictory to the fundamentals. As a possible way of
saving electricity and catering the demand at night peak, replacement of incandescent
lamps were analyzed and possible saving were estimated. Moreover the investment on
replacing incandescent lamps by energy efficient equipment was estimated and
financially evaluated with the returns.
Additionally, it was found that the eligibility criteria of current subsidy is having many
loopholes. The major shortcoming is that it allows unwanted people to enjoy the
subsidy. The additional burden to the treasury has been estimated as LKR 11 billion
per year. It was seen that modifications are needed for electricity subsidy eligibility to
ensure only needy people receive the electricity subsidy.
Meanwhile modifications are needed for tariff rates fixing method. New equation shall
be introduced based on actual generation cost for the tariff rates calculation with
appropriate justifications. Further it is recommended to reduce the electricity subsidy
gradually to zero. Discouragement of energy inefficient equipment usage by
introducing new taxes, promoting energy efficient equipment, introducing subsidies to
energy efficient equipment and conducting awareness programs regarding the
electricity conservation are the other recommendations to minimize the negative
impacts of electricity subsidy.
