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Low-income earners and industries hit hard

28 Aug 2022

By Maheesha Mudugamuwa   The recently-increased kerosene prices have hit the most vulnerable communities hard. The price hike is also impacting those who contribute to export industries, which earn much-needed foreign exchange. With the economic crisis worsening, the recent hike in kerosene prices is likely to push more coastal fishermen to move out from their fishing communities in search of new jobs in towns. Many coastal fishermen use kerosene-fired outboard motors to propel their small fishing boats along the coast. Residents in highly-populated shanty towns, low-income housing complexes, and employees of the apparel sector who live in small boarding houses, especially around Katunayake, are struggling to find alternative energy sources to cook meals. Some families in estates stay in complete darkness when night falls and are forced to cook outside in groups due to kerosene being out of reach. On 21 August, the Ceylon Petroleum Corporation (CPC) revised the price of kerosene, increasing it from Rs. 87 to Rs. 340 per litre. Accordingly, the price of kerosene was increased by Rs. 253 per litre.   Forex contributors hit hard   According to Export Development Board (EDB) statistics, in 2019, Sri Lanka earned a total of $ 81.3 million in foreign exchange from exporting fishery products, while it earned nearly $ 1 billion annually from the tea sector.  As per the statistics, in 2018, the country exported tea worth $ 1.4 billion and in 2019 it was $ 1.3 billion. Sri Lanka had received $ 1.2 billion for tea exports in 2020. Meanwhile, the apparel industry’s aggregate export revenue amounted to $ 4,960 million in 2018.   Yet, the communities that contribute to this foreign exchange earnings are suffering daily due to the Government’s unwise policy decisions, according to community groups and worker unions representing these affected communities.   Speaking to The Sunday Morning, All-Island Fishermen’s Federation (AIFF) National Convener Rathna Gamage said the recent kerosene price hike had directly affected nearly 10,000,000 fishing families around the country. “Earlier the price of a litre of kerosene was Rs. 87 and now it has been increased to Rs. 340. The prices have increased by 291%. Earlier there were no kerosene stocks in the country and fishermen suffered because of that. They stayed out of fishing for nearly three months and the families lost their main income so they obtained loan after loan. Now there are stocks available but suddenly the Government increased the prices. Again, the fishermen are staying out of fishing as they can’t afford to fish with these prices,” Gamage lamented. He urged the Government to immediately reduce the prices and to sell kerosene at the subsidised rate of Rs. 87 as before.    Gamage said that unless the Government revised the prices, the entire fisheries industry would collapse: “An industry cannot survive at these rates. Not just fisheries, but several other industries too have been directly affected.”   Fisheries sector’s pivotal role   The fisheries sector plays a pivotal role in Sri Lanka’s social and economic life. Some 2.4 million people are directly and indirectly employed in this sector. The major stakeholders are fishermen, breeders, processors, logistics, cold chain, packing and other service suppliers. There are more than 75 medium- and large-scale companies engaged in exporting seafood, with 32 companies operating European Union (EU) approved processing plants. According to the EDB, the inland and aquaculture fish production in 2019 was 90,340 MT. The total export volume of seafood and fisheries products was 28,771 MT, which brought in $ 81.3 million in foreign exchange earnings. “We are in a hopeless situation. Prices of all goods have gone up and now they have increased kerosene prices too. We don’t have money. We took loans and now there is no way of paying them off. We don’t know what to do,” K. Annarasa, a fisherman from Negombo, lamented. He told The Sunday Morning that he had earned a comfortable income before kerosene went out of stock three months ago. “Now I don’t have money to buy kerosene. My boat needs around 50 litres per day and now it costs Rs. 17,000, which means I have to spend around Rs. 400,000 per month. How can a poor fisherman spend such a massive sum per month and at what cost do they expect us to sell the fish to earn back the increased price? People won’t eat fish at a massive price,” he stressed.   Annarasa urged the Government to bring down the prices immediately and give them kerosene at the previous rate.   Activists up in arms    Meanwhile, consumer rights activists are up in arms against the recent kerosene price revision, alleging that the Government is gradually putting the entire economic stress on the public without even considering the plight of marginalised communities in the country. “There are millions of families directly dependent on kerosene for cooking. What does the Government expect them to do now? They use kerosene because of their poverty; they can’t afford high electricity costs as well as cooking gas,” National Movement for the Protection of Consumer Rights Chairman Ranjith Vithanage told The Sunday Morning. He said kerosene was used heavily by low-income families, fishermen, and the estate sector. “Those who work in the Katunayake apparel factories are also using kerosene cookers. All these communities have been severely affected by this decision,” he stressed. Vithanage urged the Government to provide some relief to the consumers without putting the entire economic weight on the public, especially at a time when the country was experiencing a severe economic crisis. “I don’t think that people will be able to afford a piece of fish in future,” he stressed. Meanwhile, according to All Ceylon Estate Workers’ Union (ACEWU) President K. Selvaraj, around 20% of families in estates are not connected to the national grid yet and therefore they use kerosene lamps and cookers. He said the estate workers were the least benefited section of the country compared to the facilities enjoyed by other communities. “At least provide them with the very basics,” he urged, stating that the recently-increased kerosene prices had severely affected their day-to-day lives. As per the Tea Exporters’ Association (TEA), tea exports for July 2022 totalled 22.76 million kg with a FOB value of Rs. 1,863.74, recording the highest-ever value in a calendar month surpassing the previous best of Rs. 1,779.63 recorded in June 2022. The FOB value has seen an increase of Rs. 962.39 compared to Rs. 901.35 of July 2021. The FOB value has also shown a gain of 0.66 in USD terms. Cumulative exports for January-July 2022 totalled 148.05 million kg, showing a decrease of 14.47 million kg (9.77%) vis-à-vis 162.52 million kg of January-July 2021. All categories have witnessed a decline in comparison with the corresponding period of 2021. The FOB value of Rs. 1,395.74 records an increase of Rs. 467.56 compared to Rs. 928.18 of January-July 2021, according to TEA. Highlighting the foreign exchange earnings, Selvaraj stressed that it was the responsibility of the Government to uphold the living conditions of these marginalised groups in society.   CPC losses   According to CPC statistics, the CPC has continued to incur losses on account of kerosene being sold at a highly-subsidised price, with the sector incurring a loss of Rs. 7.4 billion. Kerosene is supplied at a highly-subsidised price, even below the cost of sales, to low-income families and the fisheries community to provide them relief, according to the CPC. Consumer subsidies are generally determined as the differential of the full cost reflective price and the determined price. The full cost reflective price, which consists of the sum of supply cost, transportation cost, profit margins, and taxation, is the total cost of the product. Kerosene has the largest subsidy cost per litre, generating the subsidy amount of Rs. 7,697 million for the year 2019. Meanwhile, according to Minister of Power and Energy Kanchana Wijesekera, the kerosene price revision had been necessary for many years. He says that a main reason for CPC losses was selling fuel at subsidised prices. “With prices now on par with costs, the Government has proposed a direct cash subsidy to low-income families and fisheries and plantation sectors that depend on kerosene,” the Minister tweeted. Last year, former Minister of Energy Udaya Gammanpila said that the CPC was losing Rs. 23 million a day from the sale of kerosene. Gammanpila told the media that the CPC was incurring a loss of Rs. 33 per litre of kerosene, while some 550 MT of kerosene was sold daily.


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