Sri Lanka's new coal plant boosts generation by 11 per cent

• 13 years ago (2011-03-25)
• Junior Isles

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Sri Lanka has boosted its electricity generating capacity by 11 per cent, with the opening of a Chinese-financed coal power plant. The government says it will cut its foreign exchange needs and high electricity costs that have dulled investment.

The 300 MW plant built by Chinese engineers at Norocholai, on the northwestern coast, is the first coal-powered generation station on the Indian Ocean island nation.

President Mahinda Rajapaksa threw a breaker switch to fire up the plant, which the Power and Energy Ministry dubbed Lakjawiya, or "Victorious Lanka" in the local Sinhalese language.

Rajapaksa said the completion of the first phase, started in 2006, was tangible proof his $6 billion infrastructure and development drive to reinvigorate the economy could help reintegrate a nation which until very recently was split by civil war.

"Some people believe they should stage protests to prevent investors coming into the country. We have got back many things we were to lose or we lost, and this is one example of that," Rajapaksa said in a speech at the opening.

Overseas backers of the defeated Tamil Tigers have protested against Rajapaksa's government, urging investors to avoid Sri Lanka to protest what they say were human rights violations at the end of the war.

The Power and Energy Ministry in a statement said it sourced low-sulphur Indonesian coal to fuel the plant, and expected a cost savings and lower demand for foreign exchange owing to the lower cost of coal.

Sri Lanka generates 60 per cent of its 2689 MW of generation capacity from heavy fuel oil, which has to be imported. The exposure to oil prices in 2008 caused record inflation, and the central bank this year said oil prices are the only threat to growth.

The dependence on fuel oil has produced one of south asia's highest energy costs, which has discouraged potential foreign investment and frustrated local manufacturers. Up until now the remaining 40 per cent of generation has come from hydro.

Sri Lanka's government heavily subsidises fuel and electricity  for political reasons, which puts a significant $50 billion burden on the economy, leading to a budget deficit which hit 8 per cent last year, down from 9.9 per cent in 2009.

Sri Lanka has committed to the International Monetary Fund, as part of a $2.6 billion loan programme, to make the state-owned Ceylon Electricity Board break - even along with the state-run Ceylon Petroleum Corporation.

Sri Lanka supplies electricity for around 87 per cent of its population of 21 million.