September 16, 2014 / 6:13 PM / 4 years ago

Sri Lanka cuts energy price after start of Chinese-funded coal power plant

COLOMBO, Sept 16 (Reuters) - Sri Lankan President Mahinda Rajapaksa cut energy prices across the board on Tuesday after officially opening a completed $1.35 billion Chinese-financed 900 MW coal power plant project.

He announced the cut after a meeting in Colombo with Chinese President Xi Jinping, now on an official visit to Sri Lanka.

“Electricity bills of the people will be reduced by 25 percent with effect from today,” the president said.

“The price of kerosene will be reduced by 20 rupees per litre, price of petrol by 5 rupees per litre and price of diesel by 3 rupees per litre from today. This will benefit all households in Sri Lanka.”

With the reduction, the price for petrol has been reduced by 3.1 percent to 157 Sri Lankan rupees ($1.21) a litre, for diesel by 2.5 percent to 118 rupees a litre and for kerosene by 18.9 percent to 86 rupees a litre.

The coal power plant on the northwestern coast near the town of Puttalam opened its first section in 2011. The ceremony on Tuesday marked the opening of the second and third sections, which completed the whole project.

Sri Lanka has until now maintained higher electricity and oil prices to help recover from losses built up before the state-run Ceylon Electricity Board (CEB) and Ceylon Petroleum Corporation (CPC) stopped price subsidies early last year.

Deputy Treasury Secretary B.M.S. Batagoda said the price reduction will have no impact on the fiscal deficit this year.

“Both CEB and CPC have improved their balance sheets due to higher prices. We were expecting a reduction for sometime. I don’t see any impact on the fiscal balance,” he told Reuters.

Constraints faced in importing cheap crude oil from Iran in the face of sanctions imposed by the United States because of its nuclear programme have also hit Sri Lanka’s energy prices.

Sri Lanka’s only 50,000 barrel-per-day refinery is designed predominantly to refine Iranian light crude, though crudes from Oman and Saudi Arabia can also be refined at a lower refining efficiency. (1 US dollar = 130.2700 Sri Lankan rupee) (Reporting by Shihar Aneez and Ranga Sirilal; Editing by Tom Heneghan)

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