Monday, June 10, 2013

Why Did The 21 May Electricity Strike Fail?

By Kumar David -
Prof Kumar David
The strike was not defeated, it failed. Those who remember the July 1980 strike will appreciate the difference; the government attacked the strikers and demonstrators, sacked over 80,000 and arrested the leaders. JR and his fascistic thugs broke the strike. That is not what happened this time though the government used threats, enforced rigid attendance records and messed around with salary payment dates. Nevertheless this is not the main reason why the strike fizzled out; the reasons were more fundamental to the issue itself.
It can also be argued that the JVP as well as the other political parties over-politicised the issue. That is, electricity cost is not specifically a working class or trade union demand, but a mass issue, hence the basis of the organisation should have been as a people’s action and not a trade union action. Readers who know about the Great Hartal of August 1953 will recall that the LSSP, which led the event, organised a mass protest and civil disobedience movement in the towns, the villages and in the unions too. Like the electricity price issue, the immediate trigger was mass economic protest against the rice subsidy cut. The leaders strategized correctly, and the people responded massively. Nevertheless, the main reason for the failure of the 21 May strike was not strategic or tactical mistakes by the leading political actors, though these were contributory. The fundamental reasons were to do with the issue itself.
To say that the strike was unsuccessful is not to say it was a flop. It was not a flop because there was a good turn out in the private sector and a radicalised mass of young workers participated with enthusiasm. Even in the public sector there were pockets in which participation was good – government press, the railways (though not enough to perceptibly affect train services) and teachers in some districts. Buses seemed to run normally, this reduced the visible impact of the strike.
Three main reasons
There are three fundamental reasons which are more important than the tactical manoeuvring of the government and the strike leaders that explain the reduced impact of the strike.
a)      The concession granted to low-income households consuming up to 60 units a month.
b)      The broad realisation that some increase in electricity prices was unavoidable.
c)      Bills on the new tariff scheme have not yet reached households; the shock is still to hit.
Households consuming up to 60 units a month will not face any price increase at all. This is a major victory for the protest movement. The President backed down when he saw the rising tide of the anger and made a panicky May Day announcement retracting part of the tariff hike proposal. Power Minister Pavithra Wanniararchci told a press conference that 48% of electricity consuming households belong to this 60 or less category; if this is true, nearly half the electricity users in the country who belong to the low income bracket will face no price increase. They have no reason to join a strike; this divided the lowest rung of the working class.
The second reason is that everybody knows some electricity price increase is unavoidable. The average cost of supply of a unit (kWh) of electricity up to the consumer’s plug-point is estimated at Rs 20 to Rs 21 for 2013. Adding together unit-charges, fixed-charge and “fuel adjustment”, the averaged charge per unit, for a consumer using 30, 60 and 90 units a month is Rs 4.75, Rs 6.20 and Rs 12.73, respectively. Even a consumer using 100 units a month pays at an average rate of Rs 20.30 per unit after including all charges. Only when a consumer reaches 105 units a month does the average price reach the cost of supply. (Middle and upper income households pay an exorbitant price compared to supply cost. At 200, 250 and 300 units per month, households pay an average price of Rs 33.08, Rs 38.22 and Rs 41.65 per unit, respectively).
It has long been known that electricity is sold below cost to low and middle income households and a price increase was going to come at some point. I believe some government and private sector workers accepted this as inevitable. It is the middle and upper-middle class household that is in for a shock when the bills start arriving!
So this brings me to the third factor. Bills had not arrived by May 21 for the great majority of users. When they do come there are shocks to expect. A household using 61 units will be hit by 80% price increase – a 60 unit user will pay Rs 372 and have no increase, but a 61 unit user will get a bill for Rs 763! New bills on the way and percentage increase compared to the previous bills are as follows; 91 units a month Rs 1696 (72% increase); 121 units, Rs 2814 (50% increase); 181 units, Rs 5498 (41% increase). Consumers in the 300 to 500 units a month range face increases of 20% to 25%, but the bills and absolute amounts payable are huge.
Business, hotels, industry and government offices pay less than domestic consumers using over 105 units. That is, these households are cross-subsidising business and commercial premises, hotels and tourists, government offices and industry, in addition to subsidising low-end domestic consumers! If the public is agreeable to this as a matter of principle, I have nothing to add, but how can the public agree or disagree when none of this has been brought into the open?
Corruption and inefficiency
The reason why generation cost is higher than it should be is not because past corruption has added a huge burden to the capital cost of plant. The bribes that were taken and given in the 1990s and early 2000s, though large, are not large compared to the capital cost of power projects. The real problem is that instead of building coal power-plants 10 to 20 years, due to corrupt influences and also because of pressure by environmentalists, coal was delayed over and over again while oil-fired plant was built. Coal power can be brought to the plug point for less than Rs 15 per unit, but electricity from oil-fired plant costs between Rs 30 and Rs 40 by the time in arrives at the plug point.
Hence though Lanka has 30 to 35% hydro and now about 16 to 18% coal, when the unavoidable oil-fired power is added, the average cost (fuel, capital repayment, interest, maintenance, management) is Rs 20 to Rs 21 per kWh. This is not an unreasonable if you recall that the best managed systems in the world like Hong Kong,Singapore,New Zealand and theUK apply an electricity tariff in the range of Rs 25 per kWh. (These systems have little or no hydro so their generation costs are higher). Therefore the argument that theCEB is highly inefficient is not true. The main problem is the high use of oil power. We are stuck with much oil-fired capacity due to wrong and/or corrupt project decisions in the past.
Governing without policy
This government has no industrial policy; it lives by day to day decision making. The confusion in electricity pricing is the tip of the iceberg. The government has undertaken a great deal of infrastructure development, some of it very creditable, some useless white elephants, but on industrial policy it is directionless.
Lanka’s electricity price increase will render exports less competitive, discourage investment and further slow down growth that has been stalling since August 2012. There is no long-term thinking, planning or strategy. The mish-mash in the electricity sector, the President jumping this way and that, the inability to reform the CEB for enhanced productivity and a similar state of affairs in the petroleum sector, all have the same root; absence of, policy, managerial discipline, and political will or understanding. You can’t teach old dogs new tricks; this government will not learn or reform.

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