The Sunday Leader

COL Hit By Electricity Hike

By Camelia Nathaniel

The country’s rising inflation rate has dealt a devastating blow to the average family while it is struggling to keep up with the sharp increases in prices, especially the increase in electricity tariffs. The recent increase in electricity tariffs has accounted for an increase of 1.96 percent in the monthly expenditure of families during the month of May.

Economists meanwhile say that the electricity price hike has affected the population in the lower income deciles the most.
The most immediate effects of inflation in Sri Lanka are the decreased purchasing power of the people due to the rupee and its depreciation. Depreciation is especially hard on people with fixed incomes because they find that their money buys a little less each month.

However inflation never affects everyone equally. It shifts buying power from one group to another.

The inflation rate in Sri Lanka according to the Department of Census and Statistics was recorded at 7.30 percent in May of 2013. In Sri Lanka, the Consumer Price Index (CPI) is composed of two main groups: Food items (41 percent) and Non-food items (59 percent).

Food items are mainly composed of: bread and cereals (7.9 percent), fish and sea food (6 percent) and vegetables (5.7 percent). The most important non-food items are housing, water, electricity, gas and other fuels (23.7 percent), transport (12.3 percent), and restaurants and hotels (5.8 percent).

As announced by the Prices Division of the Department of Census and Statistics, there was an increase of 3.9 index points or 2.3 percent in May. This increase represents expenditure value of Rs 1,094.72 in the “Market Basket”.

Food prices continue to rise while many families have been forced to reduce on nutritional foods that are vital to their children’s proper development.

The prices of most varieties of Rice, Vegetables, Fish and Sea Food, Red Onion, Milk Powder, Chicken, Beef and many other essential items have increased significantly. Meanwhile electricity also increased significantly in accordance with the new electricity tariff revision effected from 20th April, 2013.

On average, expenditure value on items in the Food group increased by Rs 136.19. Of the total increase of 2.3 percent, food items account for an increase of 0.29 percent mainly due to Rice (0.02 percent), Fish and Sea Food (0.41 percent), Milk Powder (0.08 percent), Chicken (0.04 percent), Red Onions (0.04 percent), Vegetables (0.12 percent) and Lime (0.03 percent).

However, price decreases were experienced in: Eggs (0.05 percent), Coconuts (0.02 percent), Coconut Oil (0.02 percent), Papaya (0.15 percent), Mangoes (0.09 percent), Big Onions (0.03 percent), Green Chillies (0.08 percent) and Sugar (0.05 percent).
Electricity charges accounted for an increase of 1.96 percent during the reference period.

Meanwhile the rate of inflation as measured by the CCPI on a year-on-year basis considerably increased to 7.3 percent in May 2013. The annual average inflation rate stagnated at 8.8 percent during the last three months of year 2013.

On a year to year basis, the highest contribution to the overall increase of around 52 percent came from non-food commodities which increased by 4 percent in May 2013. The combined effects of both domestically produced and imported food commodities contributed to the increase in the food sub index, according to the Department of Census and Statistics.

Among the food commodities – rice, vegetables and fish and sea food which have substantial weights in the CCPI basket recorded price increases on a year to year basis. Under the Non Food category, the prices of Petrol, Diesel, and Gas rose by 9%, 5% and 17% respectively. Kerosene Oil remained unchanged.

Speaking to The Sunday Leader, Ms I. Mendis a mother of two said that for her family of four she needed at least around Rs 50,000 to pay for food and other expenses.

“Prior to May this year we used to pay around Rs 8,000.00 for electricity. However now with the revised rates our May bill amounts to almost Rs 12,000. In addition to the increase in electricity rates the cost of food items have also increased and I am forced to cut down on some food and other necessities that I used to give my children.

As I am a housewife, my family depends solely on my husband’s salary and it is becoming increasingly difficult to manage. The extra expenditure also means that we are unable to save anything even for an emergency. We basically lead a hand-to-mouth existence,” she added.

Yatiyana Levangala a father of three said that he needs around Rs. 35,000 to 45,000 for food for his family of five.
“Our electricity bill prior to May has been around Rs 8000 but we have still to receive the May bill which I am dreading. In addition I need around Rs 4,600 for the water and telephone bills. For all our expenses we need over Rs 80,000 per month to sustain my family. Both my wife and I work in order to meet the funds required expenses of our family,” he said.

Anoma Hettiarachchi said that it costs around Rs 45,000.00 per month for food for their family of three. “Our monthly electricity bill prior to the increase in rates was around Rs. 5,500 to 6,000 however we have yet not received the bill after the increase.”
Similarly Pathma Perera said that her family of three has to spend around Rs 1,500 to 1,800 on electricity per month prior to the increase in rates.

“I am worried about the increase and am waiting anxiously to see what our next bill will be like. In addition we have to allocate a further Rs 15,000 to 20,000 for food excluding the water and telephone charges. It is becoming increasingly difficult to make ends meet with the rising cost of living on just one person’s salary,” she added.

Meanwhile expressing his views to The Sunday Leader on how the rising cost of living especially the increase in electricity rates, has affected the average family in Sri Lanka, Dr. Muttukrishna Sarvananthan, Development Economist and Principal Researcher, Point Pedro Institute of Development said that the electricity price hike has affected the population in the lower income deciles the most.

He stated; According to the Household Income and Expenditure Survey (HIES) undertaken by the Department of Census and Statistics (DCS) the population in the lower income deciles spends a greater proportion of its household expenditure on ‘fuel & light’.

The population in the lowest three deciles spends the second highest share of its household expenditure on ‘fuel & light’ next to ‘housing’ (rent). According to the latest HIES 2009 – 2010, the population in the lowest decile (less than Rs 11,431 household expenditure per month) spend 16.5 percent of its total household expenditure per month on ‘fuel & light’ (housing consumes 32.0 percent of the total household expenditure). The population in the second lowest decile (Rs 11,341 to Rs 14,750 household expenditure per month) spend 13.5 percent of its total household expenditure per month on ‘fuel & light’ (housing consumes 29.2 percent of the total household expenditure). Similarly, the population in the third lowest decile (Rs 14,750 – Rs 17,916 household expenditure per month) spends 11.9 percent of its total household expenditure per month on ‘fuel & light’ (housing consumes 26.4 percent of the total household expenditure). Therefore, the lowest income groups in the population will be hardest hit by the recent electricity tariff hike.

However, when asked what areas families might cut down on expenditure in order to cope with the rising cost of living, he said that it may be different for each household.

“Households may cut down expenditure on education in order to cope with the rising cost of living which would result in disastrous consequences for society as a whole,” he added.

He observed that the only solution to the rising cost of living is for people to try to earn more in order to cope.
The key to higher income is higher productivity, harder work, and better quality education, said Dr. Sarvananthan.

1 Comment for “COL Hit By Electricity Hike”

  1. len

    [Electricity tariff hike affects poor people]

    According to RB Governor Sri Lanka in a year or so will be a middle income country and motoring towards gaining on to be high income country so this electricity hike will only affect hand full of so called poor families.

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