Col R Hariharan
Sri Lanka Perspectives
February 2025 | South Asia Security Trends, March 2025 | https://www.security-risks.com
Marcus Tullius Cicero, Roman
scholar and statesman, said “A budget should be balance, the Treasury should be
refilled, public debt should be reduced, the arrogance of officialdom should be
tempered and controlled and the assistance for foreign lands should be
curtailed lest Rome became bankrupt.”
We do not know whether
President Anura Kumara Dissanayake has read Cicero’s advice before presenting
his maiden budget of the country for the year 2025. However, he seems to have
generally kept in mind the counsel of the Roman statesman while constructing
his maiden budget presented in the parliament this month. In this process, AKD
seems to have opted for economic stability rather than ideology as the centre piece
of budget-making.
This is understandable as the
NPP government’s first-ever budget was expected to come under the scrutiny of
the International Monetary Fund (IMF) before releasing the third tranche of the
Extended Fund Facility (EEF) worth $333 million. AKD should be happy that the
IMF met on February 28 and approved the release of the third tranche. IMF
Deputy Managing Director Kenji Okamura, urged the government to continue the
reforms, tax collections and better state energy pricing. He said “As the
economy is still vulnerable, it is critical to sustain the reform momentum to
ensure macroeconomic stability and debt sustainability, and promote long-term
inclusive growth.” He cautioned there was no room for policy errors.”
The JVP theoretician and
veteran of the 1987-89 insurrection, Kumarage Don Lal Kantha, minister for
agriculture, speaking in parliament went on an overdrive to
explain the forced marriage of dialectics and pragmatism behind the budget
making. He explained it as part of NPP economic philosophy. He called it ‘aarthika
prajaathathrawadaya’ (Economic Democracy.”
Explaining its dialectics, the
yesteryear revolutionary said “Thus far, our economy had been undemocratic and
monopolised by a few. The uniqueness of the budget, therefore, was that for the
first time, the economy aims to be democratic (inclusive); foreign investors,
the government, individuals, the private sector, plantation workers,
cooperative societies, public servants, and pensioners all will be stakeholders
and will receive their due share. Just treatment will be meted out by the
Government to all those who were previously marginalised, giving priority to
the oppressed classes.”
According to AKD, the Budget
addresses three main facets of the supply side of economic policy objectives:
the growth of production of industry, services, and agriculture. Production
must take place with the active engagement and participation of people, and the
benefits and gains from production must be equitably shared across society. It
envisages higher spending on education and health as well as public investment.
The budget shows an increase
in the State sector salaries and wages by SRs.15,750 a month (including
pensions). The minimum basic salary has been increased from Rs. 24,250 to Rs.
40,000 by including existing allowances into the basic salary.
The budget has paid attention
to social welfare and healthcare also. The monthly allowance for kidney
patients and people with disabilities will be increased from Rs.7,500 to
Rs.10,000 and for the elderly persons the increase is from Rs.3,000 to Rs.5,000.
The compensation paid for death or permanent disability in natural disasters
has been increased from Rs.250,000 to Rs One million.
Overall, the budget has been
widely welcomed by stakeholders. These included the Central Bank
of Sri Lanka, Sri Lanka Banks Association and Ceylon Chamber of Commerce.
However, the Frontline Socialist Party (FSP), a splinter group of the JVP, has
raised objections to waiving penalties of 1.5 percent to monthly interest and a
25 percent fine for tax evasion contained in the 2025 Budget
Technical Notes. To qualify for the waiver, such cases will have to settle
unpaid taxes from 2022–2023 within six months without penalties or interest.
According to FSP leader Pubudu Jagoda, companies had evaded SRs. 243
billion from March 2023 to December 2024, with total unpaid taxes
reaching SRs.1,068 billion. The FSP has asked former comrades in the
government to clarify their stand on this issue. We can expect such
uncomfortable questions from JVP ideologues as the AKD government progresses.
Of course, leader of the
opposition Sajith Premadasa commenting on the budget has questioned the NPP
“commitment” to conduct an alternative debt sustainability analysis when they
came into power than adopting oppressive IMF norms. This was not unexpected.
Squabbles on energy security
In a modern re-enactment
Hanuman, the messenger of Lord Ram setting fire to Sri Lanka’s capital, on
February 9 a monkey intruded into an electrical substation and played havoc
with power supply on the national grid on February 9. It plunged the nation into
darkness for six hours before power was restored. The Ceylon Electricity Board
(CEB) attributed the nationwide failure to an “imbalance between generation and
demand” caused by high solar power input and “low system inertia” leaving the
grid “vulnerable to faults.” In simple terms, the national power infrastructure
is in a poor state and needs immediate attention. But power infrastructure is
only a part of the problem of energy management the country faces.
Hydropower contributes about
20 percent of Sri Lanka’s electricity generation. According to the CEB, thermal
sources supply about 65 per cent, while renewable sources supply the rest.
Maximum demand recorded so far is at 2,695 megawatts. In summer months when
hydropower falters, thermal plants based on coal and fuel oil become the
mainstay with the Norochcholai coal power plant as the largest
contributor. Solar and wind power, which are variable generative systems,
need a grid infrastructure when they are integrated in
centralised systems of thermal and hydro power plants. At present,
Sri Lanka faces challenges of integrating renewable energy into the power grid
and ensuring grid stability.
The government has set
ambitious targets to generate 70 per cent of its electricity through renewable
energy by 2030, and to be fully carbon-neutral by 2050. This is where
India’s role has become important for Sri Lanka’s energy security. India’s approach
addresses the need for reliable, affordable and timely energy resources to meet
the basic needs of Sri Lanka. Indian and Sri Lankan leaders had agreed to take
steps towards the implementation of the solar power project in Sampur and
continue discussion on supply of LNG from India to Sri Lanka. Establishing a
high-capacity power grid connecting India and Sri Lanka is also on the cards.
The two countries have also agreed to cooperate with the UAE to implement a
multi-product pipeline from India to Sri Lanka to supply affordable energy.
They had also agreed to jointly develop offshore wind power potential in Palk
Straits, paying attention to environmental protection.
But internal and international
politics in Sri Lanka seem to be at work to stymy India related projects from
progressing beyond the “talking stage." There seems to be a
strong anti-India (more particularly anti-Adani) force behind this.
The way Adani Green Energy Sri
Lanka Limited’s 500 MW wind power project in Pooneryn and Mannar had been
handled is a case in point. According to CEB, the project costing $442 million
was expected to generate at least 350 MW by 2025. The company says it has
already spent $5 million on the preliminaries connected with the project. The
Cabinet Appointed Negotiations Committee (CANC) and the two
parties negotiated a tariff of 8.26 cents/kwh. This was approved by the Cabinet
on May 6, 2024. However, the CEB report stated the rate was 5.5 cents/kwh.
Following this, the Cabinet revoked the agreement on tariff and appointed
another CANC. On February 12, Adani Green Energy informed the Board of
Investment (BOI) chairman that it was withdrawing from the project as another
CANC and a Project Committee were being formed to renegotiate the project
proposal.
Adani is quitting after two
years after obtaining most approvals? It is time for Sri Lanka (and AKD) to
find an answer if it wants to attain ambitious national goals. Otherwise, they
will be mere political rhetoric.
FBI negotiator Christopher
Voss says, “Successful negotiation is not about getting to 'yes'; it's about
mastering 'no' and understanding what the path to an agreement is."
Perhaps, AKD has to say no to detractors and even some of his trusted supporters.
Can he?
Tailpiece: Health
and Mass Media Minister Dr Nalinda Jayatissa told the Parliament that 14
Commissions had been appointed during the Aragalaya period, at a cost of Rs.
530.1 million. Another sum of Rs 1221 million has been spent on compensation,
including payment to the “soothsayer” Gnana Akka.
[Col
R Hariharan VSM, a retired MI specialist on South Asia and terrorism, served as
the head of intelligence of the Indian Peace Keeping Force in Sri Lanka
1987-90. He is associated with the Chennai Centre for China Studies.
Email: haridirect@gmail.com, Website: https://col.hariharan.info]
