How do the proposed electricity tariff revisions affect you? #defaultlk
1/There are ~1.1 million users consuming between 0-30 kWh and ~1.5 million users consuming between 31-60 kWh per month. A user in these categories will experience a maximum of Rs 255 and Rs 500 increase per month on their electricity bill, respectively.
2/There are ~1.4 million users consuming between 61-90 kWh, 693,000 users consuming between 91-120 kWh and 461,000 users consuming between 121-180 kWh per month. Users in these categories will experience a maximum of Rs 939, Rs 1,817 and Rs 2,897 increase per month, respectively.
There are approximately 187,000 users consuming more than 180 kWh per month. The minimum increase in the electricity bill per month is Rs 3,400. A household consuming 600 kWh of electricity will experience an increase of Rs 15,976 per month on their electricity bill.
A summarized version of the changes proposed to electricity tariffs👇
👆While the percentage increase for low-end users is high, the maximum increase in the monthly electricity bill is less than Rs 500 depending on the no. of units consumed. 50.7% of users fall into the 0-60 kWh category.
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In a previous tweet, we gave an explanation of what the increase in someone’s electricity bill would look like in rupee terms, instead of focusing only on the % increase.
1/ Although the bills go up, a less focused fact is that the subsidy for lower-end users actually increases substantially (details below). Looking at the whole evidence implies that there is little to suggest the tariff hike is as regressive as a first glance might suggest.
2/ The main reason for the increase in tariffs is the rise in generation costs for the CEB, stemming from the rising price of oil and higher foreign exchange costs. In a recent PUCSL conference, the following was provided
Ministry of Finance removed license requirements for imports and replaced it with a surcharge on the duties - as Sri Lanka struggles with both a rupee and dollar deficit. (1/5)
The surcharge on import tax (customs duty) helps manage import demand while increasing revenue for the government - an attempt to hit 2 birds with 1 stone. (2/5)
However, there seems to be some misunderstanding of the tax increase. What has happened is that tax rate has been increased by say 100% (that is times two), not a new tax of 100% of value of import. (3/5)
Tax hikes are important for a few key reasons 1) Reduces need to borrow to finance budget deficit 2) Reduces excess demand in the economy to reduce imports and support the LKR 3) Allows the financing of strong social spending programs (especially safety nets in a crisis) (2/5)
Sri Lanka has had falling tax revenue and low tax collection for a while now, and this was worsened by the 2019 tax cuts. These charts show how this compares with other countries and over time. (3/5)
1/CBSL held a press conference on 29th April to provide an update about the discussion with the IMF and to announce new measures to improve the domestic forex market. The thread below👇
2/During the Washington visit, greater support was shown by the US Department of State, the Indian Government, the IMF, and the World Bank. Technical negotiation rounds with the IMF have started.
3/The next step is to attain a staff-level agreement with the IMF about the External Fund Facility Program. Where the approval will be given by the Executive Board.
Cabraal suggests a 'do-over' of one of the same catastrophic mistakes that led to #DefaultLK
What happened the last time and should we let this happen again? #EconomicCrisisLK
1/ Remittances dried up as foreign earners moved money to a grey market, massively undermining confidence in the local banking system. (2/4)
2/ Our dollar inflows from remittances are finally starting to recover, and with a critical period ahead, forcing further forex shortages will lead to massive shortages on the ground as well. (3/4)