charindra chandrasena 00:05 Hi Riyadh. Speaker 1 00:06 Hi Charlie. Did you get the shock? Yes, yes, yes. charindra chandrasena 00:09 The shock that everybody in the country got yesterday, and before that, hello to you too. Dhananath Fernando 00:18 Hello, I thought like I was discriminated by two others are wearing t-shirts and I was even informed. I'm like wearing long sleeves and long sleeves. And first of Speaker 1 00:29 all, I never seen him in a T-shirt. I couldn't wait to also because he brought the shock. So, so Charlie, in the future, let me wear whatever weekend. You know, you know. Sometimes you know, in the morning, you know, you know, we might not be able to iron. There might be power cuts in the future. Then we can definitely you know be able to iron. So you have to come with you know crumple clothes and all that. charindra chandrasena 00:51 Crumple clothes and all, yeah. So yeah, a lot of people are sort of grappling with this issue of their electricity prices scheduled to go up, and then how that's going to affect their livelihoods, their day-to-day lives, their businesses, all of that. I'm not going to read out the the rates because everybody's aware now. But firstly, let me ask you generally, what is your view on this price increase? A lot of people are saying it was necessary. There is no other way that we could have gone about it. Some other people are saying that this is actually not about the Iran crisis and then the impact of that. That this is more to do with a local issue, specifically about substandard coal, and therefore, what is your view? Dhananath Fernando 01:50 Yeah, so Chari, unfortunately, I have a lot of bad and unpopular things to say on this one. The the truth is, this price revision was based on the information based on February data, so definitely the Iran war hasn't factored in, and if he factored in, the prices has to be significantly higher than the revision. The truth is, this price revision is needed in this case. It doesn't mean again. I think people misinterpret that when you say the price has prices has to go up, it doesn't mean it is good for you know everybody. It is in a way, of course, the prices going up is not good, but I mean the you we don't have the option because you cannot sell a product below the cost, so in that sense, this revision is needed. My view is, yeah, I mean, it has to go up further. The challenge is they haven't revised it adequately to factor the Iran war, and that is not a good sign because that means we are going back to the same mistake that we did in 2022 and before, because the the electricity demand to curtail it, you have to give that price signal because otherwise we have to go for a power cut, which is bad. charindra chandrasena 03:12 Yeah, but but that will be factored in in the next revision. No, that yeah, Dhananath Fernando 03:15 in the next revision. But Shari, the challenge is there as a time lag now. Yeah. So the prices has to the signalling has to come now itself because electricity electricity is a product that you hardly you can store no there's battery power and all that you can store, but or pump storage or something like that. But otherwise the price signalling has to be according to that because otherwise charindra chandrasena 03:36 isn't isn't it done with a month one month lag usually? Dhananath Fernando 03:39 No, it is definitely it's basically every six months now. The the electricity revision. No, what I mean charindra chandrasena 03:44 is, as you mentioned yourself, the data is from February. Yeah. The price revision comes into effect in March or late March, and therefore there is a one month or so lag. Exactly. So that is the usual case. So what I'm saying is that that maybe the next revision, which should come soon after this, probably after Aurudu, will factor in the war. Dhananath Fernando 04:07 Yeah, I mean it has to factor the war. Yeah. But my my my my point is, it would be too late because govern. I think of course for political reasons, government is not going for a higher higher increase before the aurodu, you know. But the more you delay, the the damage will be higher because then you are basically because the cost of electricity then will drastically increase. I I don't I will I'll try to share the slide with Kanishka to insert if it's possible, but if you look at the graph, because with the sunny, as we can see, the people say it's El Nino. I'm not really sure whether it's El Nino or not. But whatever it may be, and the the hydro contribution to the grid is slowing down, and it's shifting towards more coal and diesel. That means the electricity cost is going up, so the prices has to revise now. One month later, after burning lot of diesel at very high prices, it's very difficult to even you know you have already incurred the loss. So that's where the price signal has to come in. So this is the journey that we also discussed last time. The petrol and diesel prices as well as the electricity prices has to move as fast as possible, it should reflect the market demand and supply. It doesn't mean the prices going up is good thing. Prices has to come down on competitive measures, and that's why we have been continuously saying electricity board, CEB has to reform, more supply side shock. I mean supply side contribution has to come. Yeah, that's that's my you know surface level. Speaker 1 05:45 So are you going to throw that same question to me? Yeah. Okay. So the thing is, just picking on what Dana finished off. One thing is the CEB. You get the inefficiency. Plus, there is a level of corruption also that goes right. So that can be only reduced or at least mitigated is by what Dana said. They have to break it up, and then when you go with the different units and all that, then you concentrate on that. Then you can find where the inefficiencies are coming because currently you can't. There's no way to figure it out. No, so that is number one, and the other one is the whole rule of competition because when you say competition, the best the person who benefits mostly from competition are the consumers, right? So competition has to come. Like if you look at any industry, for example, best example I think both of us used to be there, telecommunication before SLT was the what you call the only service provider. Basically, you know, you need to go after ministers and government officials and all to get a landline. And you can imagine when telecommunication, when mobile phone first came, a call was some 15 rupees or something like that at that time's price. But now we know the prices have really come down, and it has become very plural, where everyone has a mobile phone. The quality of service has improved. Then the features have improved, and the price price has really come down. charindra chandrasena 07:08 Absolutely, but somebody might argue, yeah, that competition would not help in this scenario. Okay, in in such a crisis, right, competition may not be able to keep prices. So Speaker 1 07:22 no, the thing is the monopoly. Because the input charindra chandrasena 07:24 costs are higher. Speaker 1 07:25 No, no. Input cost is high, but it's higher for everyone. So then there's competition on pricing, because this is the thing. No, for example, we have a huge government monopoly. charindra chandrasena 07:33 No, no. What I mean is, you can't sell at cost. No, no, nobody's going to volunteer to sell at cost. No, no, no, no. Speaker 1 07:39 Definitely, the prices will have to come up because one thing is there, the thing. It's a global crisis. It's a global crisis, and plus we also have this domestic issue for the last four or five years, maybe last four years. We actually had consistent rains. It was a very wet year for the last four years, right? So because of that, our hydro production, I think, we hit the peak of 70% right? So hydro production 70% means there's no global impact on here, right? Yeah. So charindra chandrasena 08:04 so this is this is unfortunately it's a perfect storm where the Iran crisis is coming. Then El Nino, El Nino is very possible exactly this year. So Speaker 1 08:12 there are multiple things that have happened. Now, for example, there's this whole question going about the coal tender, right? How much of the coal tender going bad or whatever the allegations that are there, how much is that going to impact the price? Because definitely the the burn rate is come down, right? So which means charindra chandrasena 08:31 you have to compensate. You want to compensate Speaker 1 08:33 something else, and the other one is coal runs the base load, so definitely we are going to have impact on price because now even the government is accepting there is some problem with the coal, right? I we don't know what these things they are saying they are still investing. Yeah, but the government is denying that this price increase has anything to do with coal. I mean that is difficult to that is difficult to accept. No, I'm just saying right. Normally pricing and all. If you take any company, let's say you're selling, let's say you're just selling what you call washing liquid or just a commodity, right? If you're selling that, then you you basically you factor in the price of the material that you import, then you factor in the production cost here, and then you come to the sales price with a margin, right? And margin plus you need to keep something for the distribution cost and transport. So that's how this is also going to be done, right? The accounting procedure is the same. So in the accounting procedure, let's say you are looking at the calorific value, you are looking at a particular rate, and then you make right okay to burn that coal, you're going to get so much of kilojoules of energy, and from that energy, that's how the pricing mechanism is done, right? So now, if that has come down, definitely someone else has to pay for it. No, yeah, the only thing. I mean, it's it's absolutely mad if they say that you know this is my personal. That it's it's mad that if they say that this has nothing to do with it. Yeah. charindra chandrasena 10:03 So the only it has Speaker 1 10:04 something to do with it, but it's not the whole reason. charindra chandrasena 10:07 Okay. So only thing I would say in defence of the government there. Yeah. Sorry. Is that it? They may be right, but not in the way they think they are right. Speaker 1 10:17 Yeah. charindra chandrasena 10:18 That eventually substandard coal will lead to higher electricity prices. Yeah, but that's not the Speaker 1 10:24 complete reason. charindra chandrasena 10:26 No, no, wait. But maybe this revision is not that because I think it has not been enough time for the bad this sorry substandard coal to actually lead to higher. I don't. I Speaker 1 10:41 beg to differ. I don't agree with you. Okay. Because the reason is petrol, they make the revision very fast. So in in okay, let's look. Let's go into basic accounting. Accounting there's a system we call a FIFO and LIFO. That's how warehouse management is done. FIFO is first in first out. Whatever you bring in first, you sell out. LIFO is last in first out. Now if you look at the county principal, they are selling all stock of petrol and diesel and whatever they are bought of fossil fuel. They are selling it at the present market value, right? So the price revision was immediately done for petrol, no? charindra chandrasena 11:12 Okay. Speaker 1 11:12 Petrol and diesel revision was done because it was done on the old stock. charindra chandrasena 11:17 Yeah, yeah, no, no. How? So I'm just saying. Speaker 1 11:20 So how can the so then the argument is then they are having a different theory for different levels of knowledge they have a different one for CPC they have a different one for what you call CEB so you can't go on that assumption I don't I don't think we know for sure any of us I'm just saying that may not have had enough time. Dhananath Fernando 11:42 No, my vision. Okay, let's say it is the revision is not caused by the coal thing this time, but eventually it will. Eventually, yes. And the government, I think, has admitted in a way the coal is substandard. It is just a matter of realising whether it is like it's a corruption case or whether it's a so whatever the reason, it's going to impact the prices. That's that's for sure. I think that's the also indicates if it's a corruption case. It's also important to understand because I think many people were under the impression it's the people who are involved in corruption. We also need to understand it is the system, regardless of whoever comes, as long as the system is not kind of restructured, this corruption is going to happen regardless of which political party who comes into pub. Of course, the scale and the gravity may be different. Yeah, Speaker 1 12:28 and there's something on the timelines also. So the coal tender was opened about couple of months ago. Correct. The Iranian co-op started about three, four weeks ago. So the timelines are the same. I'm just saying, you know, don't go into major theory and all that. I'm using common sense, right? And that is something which which is not very common in the in this country also, especially among parliamentarians also. But the thing is, the timelines are the same. No, the charindra chandrasena 12:57 yeah. So so how can they say Speaker 1 13:00 if the timeline, if the timelines are the same for the or or very similar to the coal, and for this thing that that has nothing to do with this, charindra chandrasena 13:09 I think what they do and this somebody may have to explain this, but basically how they price it in Sri Lanka is now say for example fuel, if it's formula based pricing, they actually factor in the purchase. Sorry, not the purchase price. They factor in that future element where they say, okay, it's going up by this much. So Speaker 1 13:32 currently, and charindra chandrasena 13:33 therefore, Speaker 1 13:33 so currently charging. I don't know what the formula is. Yes, they are using. Yeah, let's not go charindra chandrasena 13:39 into fold at all. I'm just using as an example. This Dhananath Fernando 13:41 is the electricity that we are discussing. Yes, exactly. So I'm charindra chandrasena 13:43 wondering whether for electricity also, they are using that rationale to say this is eventually going to cost us, and therefore we are going to increase the prices now itself. That's why I said earlier that so Speaker 1 13:55 that's what that's what I'm saying. So I agree with you. So there's a future component. Yes. So I think already that is being factored in now because then the what do you call the increment curve will be smoother. charindra chandrasena 14:04 So you are saying that they because of the substandard coal they know that the the machines are going to get affected. They know that it's less efficient and therefore they are already increasing it before it has an increase. I think I think I think Speaker 1 14:16 I think that's what probably would possibly charindra chandrasena 14:18 possible. So we don't. That's the thing. So I'm willing to go with any argument on that because we don't know for sure. I would Dhananath Fernando 14:24 like to, however, I mean I think if there's a corruption, we are going beyond a little bit on corruption. Now, Jari, the electricity, but the the the the challenge is the not have. I mean, the the reason why we are going back and forth on this issue is not having the market-based prices, because we need to understand unit of electricity. The price of unit of electricity differs from the time of usage. The same unit of electricity using it at like 7 p.m. versus the same unit using at like 2 a.m. While it is one. Unit the price is completely different because at 7 p.m. likely it is peak time generated through diesel or like the diesel contribution is higher in that one unit and the 2 a.m. probably it is not diesel it's probably with hydro or some lesser source less price source so that's where the market price has to come. The problem is our system is not developed enough to actually capture that based on the time of use. Whether we really can, you know, you will be charged. Your electricity will be calculated based on the time of use. That is not in the system. I mean, there there is on some of the bulk accounts, but not in all accounts. And you mean you charindra chandrasena 15:45 mean the time of use of electricity? Correct. So this is like the off-peak peak. Absolutely. So difference. Exactly. So ideally, Dhananath Fernando 15:51 Chari, when you use it, based on the time of use, the prices has to calculate, and it automatically need to calculate. So that has that's where the digital metre needs to come in, so that you can, and also it's helpful for the individuals who are using it because then they can basically cut down the peak time and usage and move to the off-peak time. The other thing is our electricity structure is quite weird. Structure in the sense the charging structure. One is from the statistics that we have as per the 2024 data, 48% of our electricity total, not of peak peak, all units, is being consumed by industrial. Like the it's called the bulk accounts, right? 48% and how many 48 account holders are there out of about seven to 8 million. There's only 13,000, right? So that means like 0.2% zero point not 2% ah, 0.2% uses about 48% of electricity. charindra chandrasena 16:55 Okay, but you're talking about the industrial level, right? Exactly, and therefore the the I mean this could be huge factories also. Dhananath Fernando 17:04 Absolutely, huge factories. A Speaker 1 17:05 lot of employees. Absolutely correct, Dhananath Fernando 17:07 but their prices being charged is lower for these 13,000. A domestic household will pay a much higher price than these industries. I know the argument because when you say that okay, we need to bring the industrial. I mean, for industries, we have to make it cheaper. Is the argument which is reasonable? Of course, the prices has to come down on electricity, but not as a subsidiary, because when you make it a subsidiary, as you can see, the high users are getting it's a subsidy on the industries, right? Because even if that logic is true, then we should have. I mean, we should be a very powerful industrial powerhouse. It hasn't happened. charindra chandrasena 17:51 So, are you saying the government is subsidising the electricity cost of the industries? Absolutely, Dhananath Fernando 17:57 absolutely. I think I really cannot recall the rate. I think it's 15 rupees or something per unit, which is not the way to do it, because there are a lot of discrepancies. For an example, hotels and reception halls. For an example, Shangri La will fall under a hotel. They will have a much lower electricity rate than a reception hall, but pretty much the usability function is the same, right? charindra chandrasena 18:24 Okay, reception hall wouldn't fall under under hotel, right? Dhananath Fernando 18:30 Their charges are higher than a hotel. They charindra chandrasena 18:33 would fall under which cutting? I think Speaker 1 18:34 like something like a restaurant or restaurant something which is higher, right? So they Dhananath Fernando 18:38 pay higher rate than a hotel. So of course, someone who takes a wedding at Shangri-La has that spending power. charindra chandrasena 18:46 So the the the 13,000 you spoke about that doesn't include restaurants. So you're actually talking like semi to Dhananath Fernando 18:58 correct charindra chandrasena 18:58 large corporation level. Correct. Dhananath Fernando 19:01 So that's why, of course, I understand when you increase the prices, there will be an impact. But the truth is, it is how we are doing it at the moment doesn't solve the problem, because it's in a way a subsidy, and when you give a subsidy, so charindra chandrasena 19:16 what is your proposal? Yeah. So Dhananath Fernando 19:17 my proposal is make it market reflective. Of course, the industry prices will go up. I understand, but you have to bring the prices down through competition. Competition in the sense by okay, first step has been done: the unbundling of electricity and giving the more you know supply side contribution to it. Because already during daytime, even with this hot season, even still the solar panels are basically contributing. But the challenge is our electricity grid is not capable enough to manage that load, right? So that's where you need to bring that supply side contribution, because that's that's suggestion number. You make it market reflective, so its prices. Because even if you look at Tamil Nadu, their prices are higher than us. It doesn't mean the prices being higher is good again. You have to bring it down. But saying that the prices are higher and just because of that the industries will leave is not true. In my view, the other thing is you mean charindra chandrasena 20:19 equivalent rate. If you take the rate has to be Dhananath Fernando 20:23 the same because yeah charindra chandrasena 20:24 so the LKR if you convert to LKR it is lower in Tamil Nadu than sorry it's high in Tamil Nadu than in Sri Lanka Dhananath Fernando 20:32 and you know all the basic countries on a US dollars and the other thing is what we need to do is again going. The other thing is the this net net metering. Now the apartments and all of them, as I said, they have solar panels and all that. So they basically contribute. They produce it in daytime, and they consume it during night time at the same rate, which is not right because the cost of the electricity during daytime versus in the evening is not the same. So, so that is something that we have to revise because some people are. I mean, I'm no offence to them who are using probably some of them. They are just being charindra chandrasena 21:16 smart. Yeah. Yeah, Dhananath Fernando 21:17 they are being smart. That's good. But you know, as a country on economics, we are look at the macro fiction of we are losing now. So those two changes has to happen because 13,000 people using this is not. I mean, if you really want you, then I recommend you give a cash subject rather than not meddle with the prices. Yeah, charindra chandrasena 21:36 because the businesses might turn around and say, Dana, that look at the past decade we have had, okay, and especially the past seven, eight years, where we have had one battle after another to fight, one crisis after another. Are you now telling the government to increase the electricity cost on us also? How are we going to survive? And is this the attitude that a country should have towards its businesses? No, Dhananath Fernando 22:05 absolutely not. I mean, my point is by not doing that, by giving a subsidy for for you 50,000 usage. I mean, 50,050% of the usage for just 13,000 people. Will anyway you have to increase the electricity prices at a later point now. charindra chandrasena 22:23 Eventually, Dhananath Fernando 22:24 eventually. So anyway, you are getting the heat. So why not you adjust it through prices at the beginning? Because ultimately, the you cannot run the system because you are offering a very low rate for the industries, and you are charging higher for the other sectors. So basically, you are you know you are penalising the other people also you are using it by trying to give a subsidy for the industries. It doesn't mean the industries should not have like lower prices. You have to bring the prices down through other means by bringing the infrastructure costs. I mean infrastructure costs down and all that. charindra chandrasena 22:54 Of course, that that takes time. That takes time. That takes time. So there is a certain period that they will have to take the hit Dhananath Fernando 23:00 absolutely. So, but but I mean, and they charindra chandrasena 23:03 they'll be trickle on you know to the economy as well. Yeah, Dhananath Fernando 23:06 this 13,000 doesn't make sense because if you look at Cherry with the power cuts, if they have to go for power cuts, the cost would be much higher for industries than this because then they have to have generator, and for generator they have to have diesel, and diesel they may not be able to pump it at the CPC rate. Already, some private companies are importing diesel, and it's at 700 rupees is the litre price of the litre of a diesel. So then, your what is going to happen to your cost? Electricity cost anyway, it will be very high because if they have power cuts, the cost of moving to generators is much higher than actually having a normal rate, so that's what we are kind of lacking on thinking. We think, okay, you give it, but what is the cost of power cuts? It's enormous, and then so that's why I say you keep it at the market prices, and that's the way to think about it. Yeah. charindra chandrasena 23:59 Right. So, so related point is about these households who are using above 180 units. Now that's the premium band. So for them, it has increased by 25.3 percent. So over 25 percent, over a quarter of an increase. Whereas the next best, I mean the next closest one, the increase is only 7.2% and if you go up, it 6.9% 4.3% so like that, 25% plus, reasonable. Dhananath Fernando 24:36 I mean, my recommendation is the increase has to be same across the board, you know, because when you give this guy a 25% hike, you know, it's not. So this charindra chandrasena 24:46 is this is like basically taxes in the rich. Dhananath Fernando 24:48 Exactly, that's why I said you are the prices of electricity has to be the same to everybody, but it is the prices has to adjust based on the time of the usage, and the increase or decrease has to be across the. Okay, you can have like one or two categories if you really want, but having so many categories and all that doesn't make sense because cost of electricity is cost of electricity. You know, it could be for a religious institute, it could be for an industry. It is reflective, right? So, and also it's you you are in a way discriminating, no? Because if you look at Chari, during the crisis, how come all these again good for them? Again, I have no offence. All the large corporations they record they had record profits. How come? Because it's a subsidy was going to them, right? This indirect subsidy was going because they were when the electricity cost is down with the subsidy, they can make much larger profit margins, and then you come back and say, okay, they have made large profit margins. Let's tax them. Don't do that. I mean, let's impose like 45% tax or 40% Let's not do that. You just adjust it with the prices of electricity. They make it. Everybody do the same. Don't go and like tax okay higher rate for you and higher rate for you know someone else. You just make it simple, but don't because your problem is with the input cost as you discuss. You make it market reflective, but it is I know you cannot do it like within two weeks time. This is a long journey, but at least that's the framework that we need to think about. charindra chandrasena 26:20 What is the impact that you guys see going forward on one is businesses, and then generally about generally on cost of living, and also you know inflation at the end of the day will lead to lower discretionary spending, and then again that goes into the economy impacts that. What is your view? What is the impact that you see? Speaker 1 26:51 So definitely, if you look at the businesses for the rest of the year. Yeah. So the businesses, it's like this. So when they when they take on this thing again, businesses they compete with each other. So I think the cost of the electricity will be passed on to the consumer. They might take small hit on the profitability, but normally the large extent it will be passed on to the consumer. So when consumer when it's passed on, obviously it's going to hit it's going to hit your wallet, right? Then your discretionary income is going to get hit because this is not only electricity, you can look at fuel also, right? So fuel also, the prices have gone up by between I think 25 to 30 percent. Prices have gone up, so that that is that is already you know already you can see the impact because there's fewer vehicles on the road. That's a clear indication. So consumption is going to come down. So when consumption comes down, it's bad for business. Then you're going to see growth coming down, and plus cost, it's going to be cost effective to a large extent, and then you are going to see inflation spiking up because of costs going up. So this is like a complete. I mean, I don't put these things, but it's going to definitely impact the economy. The economy is going to slow down. So we have to wait and see until what extent? Because currently we don't know when this is going to end, and even if it ends, say tomorrow, again it's going to take a it's going to take a while to recover because already there is a complete infrastructure damage is infrastructure damage is one. Second is the complete global supply chain system has got disrupted, and don't forget diesel is the most important fuel in the world, right? Because if you look, global transport is in diesel, food transport is in diesel. Like so, everything runs on everything. Argo, everything, everything. You know, shipping of course runs on runs on heavy oil. Heavy oil. It runs on heavy oil. But if you look at domestic lorries, then what do you call these semi trucks, right? Anything of any magnitude, it runs even in Sri Lanka. You get those little bottle lorries and all that. They all run on diesel, so diesel has a huge impact on actually the price of food. Because end of the day, for human civilization to cause, and even if we can't have don't have electricity, we need food. No, we need food and water. So to run, even for water, if there's a power shortage to run the generator, you need the pump station doesn't get electricity to run the generator. The pump station, you need diesel. So diesel is the most important fuel in the world, actually, in my opinion. So we have to wait and see how that's going to impact globally because there's a huge disruption in the supply chain, and who are the players who can? No, for example, you know it. It was the Middle East, right? If the Middle East is not supplying, who are the other players in the world who can actually step into those big booths? charindra chandrasena 29:30 Yeah, Dhananath Fernando 29:30 and sorry, Rial, to interrupt. Now the other challenge is now this petrol and our refinery is also connected with electricity prices because on electricity generation we have been running on furnace soil and naphtha, and that is mainly coming from the CPC refinery, and now worldwide procuring crude oil is difficult. Procuring refined oil is comparatively easier, right? And while the. People say crude oil is like $100, $110. Actually, when you try to procure, the prices are much higher because financial markets also come into play. No. Speaker 1 30:08 Yeah. So, so, so the technical term for that is cost plus premium. Yeah. So there is a delivery premium because there is so much of demand. So the the the these thing what you call the brain and the the the brain price can be at a particular level, but when you actually purchase, what happens is they put a premium above it because so much of demand. So these all these things also come up to play. Sorry, the no. Yeah. Dhananath Fernando 30:30 So basically, the furnace because of the now with the crude oil slowing down on our refinery, so we will not have furnace oil and naphtha, right? So as a result, instead of naphtha and furnace oil, we have to replace it with diesel, right? The bad news is now this is the really the bad news. The actual, according to our numbers, the spot prices, like if you look at today prices, the diesel has to be sorry about 600 rupees per litre, more than 600 rupees. There is no way meddling with taxes because the loss itself is about 219 rupees or something like that. Like it's about 200 rupees loss. The taxes component is itself is about 100 rupees. So even if you waive off the taxes 100% still you are making 100 rupee loss. Now the real challenge is the other two, other three players may not sell diesel in next round at these prices. Now, at the moment, they are following the, they are shadowing the prices of the market leader. Speaker 1 31:33 CPC, CPC, Dhananath Fernando 31:34 right? But the real prices have already indicated with super diesel prices because super diesel is if you look at at the refinery level at the refinery you have the jet you know jet fuel and then petrol and diesel but in at the refinery level there is not big difference between diesel and super diesel it's not a refinery thing it's like the additives or something that you add basically injector inject. Yeah. So Speaker 1 32:03 basically, what happens with super diesel is it's it's less in sulphur, right? Right. Because certain new vehicles and all that, their injectors are electronic, pumps are electronic, so they are more they are more sensitive for things like you know for impacts on sulphur. If you take the old, if you take the old diesels that were made in, let's say, from the 80s to 2000 and all that, they are not so because they are mechanical, mechanical injectors, mechanical pumps. Right. So that sulphur component, they take they they take they take it out. Right. Right. Right. So the new vehicles, when you run with higher sulphur, these things, your injector pump and the the the nozzles get damaged, and that's a very expensive fix. Dhananath Fernando 32:44 Correct. So the my point is already IOC and Sinopec has indicated that their diesel prices are relatively above 600 range. Right. At the moment they may be because of previous stocks and all that. So that means the next round, if the price revisions were not done, I mean, at the moment, I think they can price independently, right? If they, if the next shipment that they procure is about 600 rupees, they have to procure it at, I mean, sell it at 600 rupees or something. If the CPC is going to sell it at lower price, probably if they want to everybody to bring the prices down, they have to subsidise even the IOC and Sinope. If they don't do that, they will sell it higher. Of course, there will be a massive queue or congestion at the CPC because everyone wanted to, and then they will. Then it becomes worse. Even president indicated that 45th hour prices were lower. Everyone. So, and with that, if we also because of less naphtha and less furnace oil, if our electricity generation also shift to diesel at 600 rupees, the electricity rates prices has to go up further. So that's the challenge. The only way that we can solve it is hopefully the war comes to an end as fast as possible, and of course, the prices to recover it will anyway take a few months. So that's where things have to be carefully considered. One Speaker 1 34:07 more thing I want to add for that. One other thing is when the government has procurement also, I think they are already looking at. I think we got away with it with with LPG is because we we we are getting it from a non-conflict area. So the thing is, that's another challenge. They have to look at mitigating risks. Like for example, if there is some conflict or natural disaster, can be anything. Where if you are traditional place where you source the fuel, you need to have alternative options. That's another one because the reason is that is mitigating risk. So normally corporate sector they do that. So I think the government also has to look that at the at the procurement level. charindra chandrasena 34:44 Yeah, yeah, yeah. Before we wind up, just quick thoughts on government and the government's request to the public and to officers as well to well to to the government sector that all. ACS should be turned off after 3 p.m. The billboards, digital boards, should not be lit up after 8 p.m. That kind of thing. Is that the right approach? Is it fair on the people? Dhananath Fernando 35:19 My view is no. It's I mean on a on a optics point of view, it is the right. I mean, there's nothing wrong with you know switching off the AC and you know even to increase the temperature, not to keep it like 19 degrees probably at like 23 or 24. I Speaker 1 35:32 think minimum they said you need to keep it at 27. Yeah, no. Dhananath Fernando 35:35 So that's not a bad thing. But I think Shari, it also has to have an impact on the prices. Even in this podcast, we discuss now quota system may work, but it is the price increase. I mean, without increasing the prices, only through quota you cannot curtail demand. And what you see is a combination of that. But I think, in my view, it's more skewed towards the higher prices. If you increase further, you can see. I mean, if you hardly see any lines now at the stations, and you hardly see like people. I mean, QR code they check, but it is not the you know not many people are complaining. No matter my QR code again, I only get like 20 litres or 25 litres. I need one litres because you have anyway cut down. You have self-imposed restrictions. Because one thing, Speaker 1 36:15 another thing with the quota is quota is a very inefficient system. Just imagine if someone who lives close to a pump, that's fine. You go, you pump. There are people that have to travel, but sometimes you know who live in the outskirts. Inside Karambo, you don't feel it that much because everywhere you go, there's a petrol shed. But let's imagine you are in the rural, like right, really in the provinces. Then just imagine you only you have a particular quota for your, and mostly there is motorcycles and three wheelers and all that, right? So just imagine you have to travel about seven eight kilometres just to go and pump fuel and come. charindra chandrasena 36:48 Yeah, yeah. Speaker 1 36:49 So that's I'm saying this efficiency thing is not that it's better to give them the option where they'll tank up and use it for this thing where they won't be you know burning fuel unnecessarily on the road trying to procure the fuel, charindra chandrasena 37:02 so all right. We've discussed a lot, Dana. Before you wind up here, I have. Dhananath Fernando 37:10 I have to poke some something that the Sri Lankan Airlines. I know it's not the conversation today. Oh Speaker 2 37:18 yeah, oh yeah. Dhananath Fernando 37:18 But you remember we have. I mean, every time when there's a new administration comes, they say we have a grand plan to expand the fleet, to do this, do that, and we, I mean, we, I mean, allocated taxpayer money, and now you see the result, and you are seeing the same movie with that just poking same title, over and over again, over and over again, but this podcast, yes, support us. No, but charindra chandrasena 37:44 but but just on that before your message. So apparently there was resistance to this foreign CEO that was hired. So again, if it's a meritocratic system, the skin colour of the person or their home country, none of that should matter as long as the job gets done. I think we did an well. Advocata did an interview with former President Chandragar Bandar Nayak, and she was talking about how the state entities there was foreign talent brought in, and and how that benefited. So I think it's important for us to get out of that mentality of it has to be this. Dhananath Fernando 38:30 Is it that the skin colour has been the issue for the? No, no. I'm charindra chandrasena 38:36 I'm using colloquially. Yeah, but basically no no. What I mean is not the skin colour, but they wanted a local. Dhananath Fernando 38:41 Ah, okay, that's the reason. Okay, okay, okay. So charindra chandrasena 38:43 even if it was an African American person, they would have had a problem. Dhananath Fernando 38:47 Problem, right? Speaker 1 38:49 So local, we don't have anyone. I mean, I mean, is there anyone needs the customer experience of running airlines? That's charindra chandrasena 38:54 the whole point. Yeah. That if you don't have the special, you have to bring your local talent. Speaker 1 38:59 Absolutely. Why not bring from outside? Absolutely. Sometimes even if you have the local talent, why not bring from outside? So the best example, Char is you look at the apparel sector, right? If you go back at the inception, when they really start to expand and all the lot of the specialised areas, where actually they have a lot of foreigners working there. Dhananath Fernando 39:14 Even till recently, if I remember right, at John Keels, their their their leisure sector, the CEO is a foreigner. I mean, in many companies, I mean, there's nothing wrong with a foreigner or a Sri Lankan. I mean, the because of the nature of the businesses and all that because of something. And sometimes, charindra chandrasena 39:31 sometimes it helps, no, Dana, to have an outside view on the thing because you are not in the system. Absolutely, you're coming from outside, and therefore you can notice more. Dhananath Fernando 39:40 Correct. Yeah, and also Sri Lanka is like a village, no. So sometimes because of a cultural thing, some hard decisions it's very difficult because someone always calls, the minister calls, and you know. So sometimes we have like a thick skin person to make those decisions, and when you are a foreigner, it's easier because you don't have. You say yes, this is what it has to happen. I just do it. charindra chandrasena 40:00 That legacy is the problem because if you have the legacy in Sri Lanka, the problem. If you're coming from outside, you have no emotions attached. You just not just logic. Just to worry, Dhananath Fernando 40:08 yeah. So anyway, so I just wanted to you know mention that it is. Of course, we also don't have a option like what are we going to do? No, we no bidder, no one came, so it's complicated. But however, just because it's complicated doesn't mean that the government can run it. And you know, another grand plan will work on expanding fleets and all that. And you know, running a aeroplane like at low elevation will help. That doesn't work. However, so coming back to the point, become an Advocata insider. To this content is brought to you free of charge thanks to Advocata insiders. It's 12,000 rupees a year, 1000 rupees a month, and you will get exclusive content about exchange rate, about different markets, stock market, property market, and different types of analysis you will get exclusively. But more than that, exclusivity. What you are supporting us is to become an independent think tank and to build an independent community who supports policy reforms because that's the only way out. Every when then there's a crisis every time is the only time that people are again pivoting back and thinking about the reforms. And what we are trying to do is keep that conversation alive. While what we say sometimes is unpopular, that is unfortunately needed for country to move forward, and that's why you should support us to keep that unpopular, but the much needed medicine for the Sri Lankan economy to keep it alive and for everyone's benefit. So support us, become an Advocata insider. At the same time, while you support, you will also get exclusive analysis by us. All right. That was charindra chandrasena 41:42 very interesting message, but also very important. So the we discuss this issue. We'll see how how it pans out over the next week, and we will catch up again next week. Thank you, Riyadh. Thanks, Dana. Thanks, Jari. And thanks to everybody. Next Dhananath Fernando 42:01 week they will wear like T-shirt or like. I mean, I mean, charindra chandrasena 42:06 if people were not going to complain, I'll I'll come in a skinny even. I don't care. But then a lot of people will complain. They won't watch. Therefore, I'll stop short of that and stick to the T-shirt. Yeah. All right. Thanks, guys. Thank you, everybody, for watching. We'll see you next week. Cheers. Transcribed by https://otter.ai