A national Taskforce to deal with the energy crisis

Here in a series of interviews for the column Horizon, Prof. S.T. Hettige of University of Colombo, examines critical issues from a sociological perspective. He revisits the topic of energy crises against the backdrop of rising fuel prices which has fuelling a worldwide recession.

The price of petroleum products continues to rise relentlessly despite knee-jerk responses of governments and international agencies to contain it.

There is no quick -fix solution to the growing energy crisis and all our energies and ideas should be pooled together to find sustainable and appropriate alternatives to fossil fuel.

Unfortunately, such alternatives will also come from technologically and economically advanced countries that invest resources in R and D in the energy sector and the other countries will have to pay for them said Prof. S. T. Hettige of University of Colombo in an exclusive interview with Sunday Observer.

Given the country’s already serious balance of payment problems and mounting international debts, Sri Lanka can ill- afford petroleum products at a much higher price. On the other hand, it is almost certain that the price of fuel will continue to rise and may even reach a level where not many people will be able to pay for their energy requirements.

The looming environmental crisis in general and the energy crisis in particular are matters that are too serious to be relegated to the level of petty political bickering. The main issue is certainly not whether the consumers are paying the right price in keeping with the world market price.

There might certainly be room for fine-tuning in the area of pricing etc. but such matters are best handled by officials in the relevant institutions such as the petroleum corporation, CEB and Consumer Protection Authority.

People at higher political levels such as legislators and Ministers should elevate themselves to a level where the issues can be deliberated in a more serious fashion, looking at the larger picture and the wider and long term implications.

Oil at present is a totally imported commodity for which we have to pay in foreign exchange. We are not getting foreign exchange cheap and we are not getting it in abundance.

Inward remittances of workers employed abroad amount to about 70% of the already large trade deficit. Since the wages of these workers do not go up rapidly, only way to recover more from inward remittances is to send more people abroad.

Is this feasible and desirable? Already social costs of migration are enormous. Labour shortages are already experienced in different sectors of the economy. More migration can only make this situation worse. What are the other sources of foreign exchange we can tap.

Some of the most important sources are also not very stable such as tourism and garments. So, if the price of oil goes up substantially in the near future, our capacity to absorb the additional costs involved will be very limited.

On the other hand, borrowing money to pay for oil can only make us more indebted. This may not be acceptable to most citizens who are already indebted to an undesirable level. Our foreign debts today amount to over 16 billion US dollars.

There appear to be only two feasible options available to us to deal with the growing energy crisis. The first is demand reduction. Increasing prices will dissuade non -affluent consumers to cut down use of private transport.

This can also have serious negative consequences in terms of productivity losses and loss of employment and income to many people. In other words, we cannot simply leave it to the market to reduce demand. We need to explore more creative ways to reduce aggregate demand.

Investment in mass transit systems can go a long way to reduce demand for oil. Railways can be developed to carry more passengers and goods so that vehicular traffic on roads can be reduced. This can also increase efficiency of road transport.

It is also possible to introduce different types of railway and bus tickets to spread out passengers. Peak and off-peak hour tickets can be introduced at different rates. It is also possible to introduce monthly and even yearly passes at concessionary rates.

Another option available to us to deal with the energy crisis is to develop alternatives to fossil fuel. Tax relief can be given to businesses that adopt energy saving practices and technologies. Even individual households can be given positive incentives to reduce energy consumption.

It is always better to invest in R and D that leads to new innovations rather than import technological products that other countries develop and sell. But, this is easier said than done. Investments needed to develop new high-tech products may be beyond our means.

On the other hand, inter mediate technological products could be developed with minimal capital investments. Such products can be used in households and small industries in all parts of the country. The effect may be a significant reduction in demand for conventional energy sources.

The growing energy crisis is too serious and cannot be left entirely in the hands of the energy experts. What is required is a multi disciplinary and multi- sectoral approach.

A high level task force comprising officials from different sectors, experts from diverse disciplines and relevant stakeholders can be entrusted with the responsibility of developing a national action plan to guide policy and program level decision -making.

This would help avoid ad-hoc decision-making that often aggravates rather than solve problems. Leaving it to the market is no option because a correction by the market will have a domino effect that can be highly damaging to the economy as well as the social fabric. What is needed is demand management.

A sudden market-driven demand reduction can ease the balance of payment problem, yet it can also be economically and socially damaging if it is accompanied by widespread income and job losses, productivity decline and slow down the process of circulation of commodities and labour.

Systematic planning of transportation services could most probably avoid such adverse social and economic efforts. As I have pointed out in an earlier article, re-distribution of economic and social functions to avoid their over-centralization can also help reduce aggregate demand for fuel.