08 April 2013

Consumer Electricity Tariff - Need is for a Long Term Vision - Eng Parakrama Jayasinghe

08th April 2013,By Eng Parakrama Jayasinghe

Energy Security is within our grasp!

What is needed is the courage to grab it.

The current mire
  • The tariff is the highest in the region
  • The cross subsidies cause dissatisfaction
  • The CEB continues to lose money every year
  • There is no solution in sight
  • World energy trends are ignored
Who pays for the subsidies?
  • The electricity bill may seem low with the subsidies
  • But the Billions of deficit is covered by public funds – that is all of us
  • The real beneficiaries are the Oil and Coal suppliers and their local agents
Who is responsible?
  • We all are paying for the cardinal sin of believing the myths of cheap electricity round the corner and abdicating our responsibility to speak out.
  • The latest is Coal power at Rs 7.50 according to the Minister when the fuel price alone per unit is about Rs 7.00
  • Many excuses are offered but !
  • Those in authority has not been able to offer a viable solution and have let the country down
  • It is time for the consumers to make a stand
  • But the solution is not to expect more and more subsidies

How the high tariff should have worked - The Rice Story Vs The Electricity Story

The problem of Peak Load
  • The current generation capacity is enough to meet the average demand. ( 3100 MW Vs 2100 )
  • New coal plants are proposed to meet the additions to peak load ignoring the ever increasing price of coal
  • Indigenous alternatives are not even considered as candidates in the planning
The way out

The tariff policy must have the objectives of :-
  • Time based target for limiting fossil fuel usage to a minimum
  • Do not build new coal plants to meet the peak load  demand – there is enough capacity for many years to come to meet the average demand
  • Promote self generation at least during peak hours to avoid the need for any more coal plants
  • Impose limits on total generation cost  for the coming years.  The current expectation that what ever amount CEB spends have to be recovered from consumers is untenable and unsustainable. The expectation that the fuel surcharge can be removed with termination of oil based power is a fallacy as the coal prices too are moving up
  • Phase out the subsidies gradually
  • Offer time of day tariff to all segments – GP 1 and HP 1 to start with this year
  • Make the peak time tariff cost reflective and the off peak tariff low enough to incentivize self generation
  • Provide additional incentives for self generation using indigenous resources

Daily Load Curve – Up to 2007

Predicted Daily Load Curve - From 2007 to 2026

Fossil Fuels Price Movement

Related Info :

Cost Relective Tariffs for Large Consumers to Encourage Self Generation by Indigenous Sources to Cover Part of Their Requirements. Reduced Burden on CEB May Help Do Away with Coal Power Plants - Eng Parakrama Jayasinghe

Sri Lanka Should Reduce Peak Power Demand and Trim Most Expensive 5pct of Energy to Eliminate Losses at CEB - LirneAsia, a Regional Think Tank

Sri Lanka's Power Monopoly Draws Fire at Public Hearing on Proposed Tariff Hike. Costs Claimed by CEB are Murky and Efficiencies of Plants are not Independently Audited

Electricity Tariff Hike - Industries Get Biggest Subsidy, Hotels Marginally Subsidized & General Purpose Customers to Pay in Excess of Costs - an Analysis by the Regulator

Electricity Tariff Increase - First, Operate Hydro Plants in an Optimum Manner, Improve Plant Efficiencies, Cut Losses and Switch to more Economical Fuel

Sri Lanka Combined Cycle Power Plants more Expensive than Diesel Engines - Information on Power Sector not Available in the Past Now Coming Out

07 April 2013

Cost Reflective Tariffs for Large Consumers to Encourage Self Generation by Indigenous Sources to Cover Part of Their Requirements. Reduced Burden on CEB May Help Do Away with Coal Power Plants - Eng Parakrama Jayasinghe

22nd March 2013, By Eng Parakrama Jayasinghe

From written submission to Public Utilities Commission of Sri Lanka in reference to the call for public comments on the proposed consumer tariff to be applied form the 1st of April 2013. The author, Eng Parakrama Jayasinghe, is the Hony. President  of Bio Energy Association of Sri Lanka,  a Member of the Board of Directors – Sustainable Energy Authority, and a Member of the Board of Directors – NERD Centre.


Achieving a stable and sustainable energy supply, as well as a tariff structure affordable to all segments of consumers requires a long term vision and strategies, applied year by year on a consistent basis.

Subsidies provided for maintaining a generation mix dominated by imported oil or coal is non sustainable and such subsides will only flow to the pockets of the oil and coal suppliers. The deficit run by the CEB is made good by the treasury which means that the supposedly low electricity bill is a myth.

Therefore the only lasting solution is to move towards a generation mix which is by far dominated by indigenous sources of energy as was the case prior to 1995, when 95 % of the generation was from major hydro. The tariff proposals should therefore have this long term goal and everyone must be ready to pay that extra amount now, to overcome the sad situation, created due to lack of proper vision in the past decades, so that we can move towards a more rational and secure energy system. Until such a situation is achieved it is to the advantage of both the CEB and the country to reduce the generation using fossil fuels either by CEB or the IPPs as much as possible.


  • The tariff system should be designed to promote maximizing the indigenous sources. The true cost of generation using oil or coal must be calculated without direct or indirect subsidies and state facilitation provided for such generation. Thus any subsidies given to the consumer is a conscious decision based on the true costs. Since such subsidies are not sustainable in the long run, this would encourage self generation by the high end consumers, thus lowering the burden on the CEB and the treasury.
  • The problem of managing the peak load is not addressed. The time of day metering facility should be extended on optional basis to the domestic consumers with a  demand of over 180 units per month and for the General Purpose GP 1 and Hotels HP 1 consumers. The price per unit during the peak hours should also be the true cost of the fossil fuel based generation, as the lower end users needs could have been met from the lower cost sources such as hydro already in place.
  • The tariff for the high end users should also be cost reflective.  They must be encouraged to use indigenous sources and install self generation to meet at least part of their requirements. This too will reduce the burden on the CEB and will be a means by which the consumers can reduce their electricity cost.
Back Ground for the Recommendations

The CEB is continuing to make losses due to

  • High Cost of Generation quoted as Rs 20.84 per KWh, average , but is likely to be much higher. The low cost of the major hydro capital cost of which have been paid up many years ago is the reason that the average unit cost is so low.
  • Sale of electricity at rates lower than the cost
This is not a sustainable situation and has to be arrested sooner than later. The deficit is covered by public funds. Therefore it is a fallacy to pretend that any of the consumers are receiving “cheap “ electricity. The burden of funding the deficit is carried by all Sri Lankans, now that we are nearly 100% grid connected, irrespective of the level of consumption.

Thus all Sri Lankans should be ready to accept the burden of an increase in the tariff, provided that plans are in place for a more sustainable future. 

Although the proportional increase of tariff for the lower end consumers has been portrayed as high percentage ( 59%) increase, even the increased tariff at Rs 6.25 (Rs. 5.00 per unit with the fuel adjustment of 25% ) is less than 25% of the current average cost of generation of Rs 20.84 Similar situations has existed for many years. The current increase to be paid is only about Rs 200.00 per month, far less than the amount paid for such luxuries as mobile phones. The CEB has quite correctly extended the grid to nearly 100 %  at costs far in excess of the returns that could be expected. This is a subsidy that is fair and proper so that all Sri Lankans are given access to electricity.

It is however not correct for the consumers to expect the energy at prices far less than the cost of generation.

Thus each unit consumed by this segment carries a subsidy of Rs 20.84-6.25 = Rs 14.59

Since the predicted generation mix is 50% thermal based on fossil fuels, this subsidy is in fact a means of subsidizing the suppliers of oil and coal and not the Sri Lankans at any level. This will worsen in the years to come with the contribution by fossil fuels increasing to over 75% as per the current long term generation plans.

Thus there has to be a concerted effort to change the generation mix to maximize the uses of hydro and other indigenous sources of energy. While this cannot be achieved in a year, the tariff policy in the current year and the years to come must be consistently designed to encourage this change continuously.

Contrary to the popular myth, the cost of indigenous energy is cheaper than that of coal power, touted as the cheapest source and promoted aggressively by the CEB, quoting totally erroneous figures and hiding the important elements of cost in coal power generation. The table below of the fuel costs alone for power generation using different fuels illustrates this fact.

•   Diesel 0.28l/kWh  @ Rs 117.00/l                Rs 32.76
•   Residual Oil 0.231 l/kWh @ Rs 67.00/l        Rs 15.41
•   Coal  0.39 kg/kWh @ Rs 17.92/kg             Rs 6.98
•   SRC Wood 1.0 kg/kWh @ Rs 4.50/kg        Rs 4.50    
•   Agro waste  2.0 kg/kWh @ Rs 2.50 /kg      Rs  5.00

Applying similar conditions , the balance costs on capital, O& M etc has to be similar for both coal and Wood, leading to a decidedly lower cost of generation using SRC wood.

The world price trends and the continually depreciating rupee pressured by the huge import bill on oil and coal will make this difference wider in the years to come.

This fact has been demonstrated by the use of the WASP program used by the CEB for the determination of the least cost  long term generation plan. Dendro has been included as the only source of firm energy from renewable sources, accepted by the CEB as a candidate. 

However the outcome of this analysis which clearly indicated Dendro as the least cost option, was newer published.

The cost of generation using Solar PV is coming down year by year.

Thus the only way the tariff can come down or at least be maintained at present levels is by changing the generation mix.

Also since the CEB appears to have no solution other than fossil fuels to meet the future demands which will drive the percentage contribution by indigenous sources even further, the change may have to come from investments on generation by others, mainly the private sector through NCRE.

The problem of the daily peak load

The long term generation plan of CEB is promoting large scale development of coal power plants. This is done only to be able to serve the peak load between 6.30 PM – 10.30 PM  , as even the current installed capacity is adequate to meet the average day time demand for many years to come.

However, the current generation  strategy  discourages  using the abundant solar energy , and perhaps even the wind resource, whichever is available during the off peak hours. The need to operate the coal power plants at near full capacity, even during the off peak hours, acts as a deterrent for the development of the indigenous and potentially cheaper sources.  The lack of interest in promoting the “net metering” concept is evidence of this.

However, there could be many individuals and organizations who would be willing to install self generation facilities, even using such non firm sources , to reduce the burden on the CEB to cater to the high demand over a few hours on a daily basis.

Therefore in order to promote such self generation and also to encourage use of such capacity , primarily during the peak hours, it is proposed that the time of day metering facility be made available to the domestic consumers who consume over 180 units per month and to the G P 1 and HP 1 categories of consumers.

This can be made optional at the beginning and made mandatory in the coming years.

A typical installation would be a 2 kW solar PV domestic installation with adequate battery storage to cater to the four hours of peak . The cost of such an installation could be recovered in less than four years based on current world market prices of PV systems.

The potential saving of the peak load capacity that needs to be provided by the CEB would be in the order of 500 MW by this change, by a  fraction of domestic consumers alone. The details of this calculation can be provided.

Self Generation by large Consumers

The CEB statistics indicate that 11% of the consumers are responsible for 60% of the total demand for electricity.

This is a potential segment where self generation could be promoted even during the off peak hours. In the past CEB was in the habit of calling on such consumers to use their diesel generators during the dry months with incentive payments. There is no reason why this promotion should not be continued, as there are indigenous sources with the potential for generation at much lower costs. The difficulties faced by the CEB and the government in finding the capital for adding new generation capacity can also be overcome by this means.  The proposed tariff structure should provide incentives for such consumers to move in this direction.

Related Info :

Sri Lanka Should Reduce Peak Power Demand and Trim Most Expensive 5pct of Energy to Eliminate Losses at CEB - LirneAsia, a Regional Think Tank

Sri Lanka's Power Monopoly Draws Fire at Public Hearing on Proposed Tariff Hike. Costs Claimed by CEB are Murky and Efficiencies of Plants are not Independently Audited

Electricity Tariff Hike - Industries Get Biggest Subsidy, Hotels Marginally Subsidized & General Purpose Customers to Pay in Excess of Costs - an Analysis by the Regulator

Sri Lanka Should Reduce Peak Power Demand and Trim Most Expensive 5pct of Energy to Eliminate Losses at CEB - LirneAsia, a Regional Think Tank

04th April 2013, www.lankabusinessonline.com

Sri Lanka should push harder on cutting peak power demand as 'average' costs are meaningless and trimming the most expensive 5.0 percent of energy has the potential to eliminate losses at Ceylon Electricity Board, a think tank has said.

About 17 percent of the generation costs of state-run Ceylon Electricity Board went towards the most expensive last five percent of energy purchased, LirneAsia, a regional think tank said in public consultation called by the Public Utilities Commission of Sri Lanka.

The CEB also spent 17 percent of its costs on the least expensive energy, which amounted to 50 percent of the total energy purchased.

"Thus, if energy purchases could be reduced by 5 per cent, it is possible that the losses of the CEB could be eliminated," LirneAsia chair Rohan Samarajiva said.

"This is the importance of managing demand. Not all the demand needs to be reduced in absolute amounts. Shifting it to off-peak, (when the sole base load coal plant, producing inexpensive energy is asked to back down) could also provide substantial relief.

"If peak demand is lowered, the overall costs of supplying electricity will be reduced."

'Average' Cost

Costs range from less than 5.0 rupees a unit of electricity for hydro to around 30 rupees for thermal energy. Average costs have been determined by the regulator at around 20 rupees based on a tariff proposal filed by the CEB, after disallowing at least three thermal plants.

Sri Lanka CEB cost curve

 In a power grid where different sources of energy have different costs, 'average' costs are meaningless and are simply driven by peaks and which types of plants are used and for how long.

"The cost models that underlie the tariff proposal are based on assumptions of levels of use that may change because of the radical redesign of the tariff structure," Samarajiva said.

"If demand is lower than projected, especially at the peak, it is possible that the proposed tariff will yield excessive earnings."

Some of the most expensive power is used during the late evening peak from around 7.00 to 9.00 pm local time, when households light up and demand goes up to 2000MegaWatts

The cheapest large hydros are also used during that time as peaking plants. Hydro is also vital as load following plants to balance generation with fluctuating demand, but the most expensive energy including gas turbines are switched on at that time.

The cost of delivering power at different times therefore is radically different.


 But from around midnight to early morning, when Sri Lanka's power demand plunges to about 1,000 MegaWatts, a 300MW coal plant is operated below full output to accommodate a rule that says a single plant should not be more than 20 percent of total load.

The rule has been put in place to prevent the grid from failing when a large plant goes out of the system. But sources at the CEB say the floor could now be improved to 25 percent or more with load management techniques which has been already developed.

Samarajiva said CEB could also set up a pump storage system, where late night and early morning coal power (where the incremental energy charge is around 8.30 rupees, compared to average costs of 20 rupees) water is pumped back to a reservoir.

Selling energy to India through a proposed cable could also achieve the same effect.

Sri Lanka has cascade reservoirs where such a pump storage system could be set up.

A flatter daily demand curve could substantially cut overall costs, bringing down average costs even with the existing plants.

Samarajiva says investments should be made in demand management. Investments in demand management could be the same as building completely new plants.

Smart Metering

Samarajiva said the proposed tariffs for 2013 where, households are charged at the highest rated block instead of slabs will give an incentive to conserve energy but CEB should communicate better through mass media and text messages to tell people how to save energy.

"In particular, targeted messages printed on the electricity bill of high-consumption households stating that they are paying X rupees more than similar households have proven to be effective in several countries," Samarajiva said.

"A redesigned and more informative electricity bill appears a necessity."

Smart meters where even domestic customers could benefit by shifting activity to off-peak cheaper power (such as running a washing machine cycle), should be promoted.

"For example, it should be mandated that CEB/LECO install smart meters in all new condominium towers with immediate effect," Samarajiva said.

"Next, it should be mandated that the distributors should install smart meters in at least 50% of currently-high-consumption households (possibly defined as those using above 180 units per month) within the next 24-36 months.

"Such metering would enable subtle, yet sophisticated programs that change consumer consumption patterns."

"More importantly, such meters would also enable more sophisticated policy solutions, such as time-of-day pricing and other alternative tariff structures that enable cost-reflective pricing in the future."

 CEB has already proposed low rates for the late night off-peak especially for industries, who could potentially operate a late night to morning production run.

Samarajiva said subsidies could be directed at those who most needed them, perhaps by increasing payments to the poorest Samurdhi receivers.

Related Info :

Sri Lanka's Power Monopoly Draws Fire at Public Hearing on Proposed Tariff Hike. Costs Claimed by CEB are Murky and Efficiencies of Plants are not Independently Audited

Electricity Tariff Hike - Industries Get Biggest Subsidy, Hotels Marginally Subsidized & General Purpose Customers to Pay in Excess of Costs - an Analysis by the Regulator

Electricity Tariff Increase - First, Operate Hydro Plants in an Optimum Manner, Improve Plant Efficiencies, Cut Losses and Switch to more Economical Fuel

Sri Lanka Combined Cycle Power Plants more Expensive than Diesel Engines - Information on Power Sector not Available in the Past Now Coming Out

Sri Lanka's Power Monopoly Draws Fire at Public Hearing on Proposed Tariff Hike. Costs Claimed by CEB are Murky and Efficiencies of Plants are not Independently Audited

04th April 2013, www.lankabusinessonline.com

Costs claimed by Sri Lanka's power monopoly Ceylon Electricity Board are murky, the efficiency of expensive plants and other costs are not independently audited, respondents at a public hearing on a proposed tariff hike said.

Disallowing around 30 billion rupees from the tariff filing also raised more questions about cost transparency he said.

Siyambalapitiya said the inclusion of three retired power plants for dispatch in 2013 by the CEB, and PUCSL’s assumption that such energy can be provided by hydropower plants, were both irresponsible actions.

He said CEB's tariff methodology misinterpreted an established tariff methodology. A bulk supply account which was supposed to have been set up in 2011, which would make many costs transparent, was still not in existence.

Siyambalapitiya said the regulator should also have clawed back 13 billion rupees allowed in 2011. The claw back alone could cut the tariff by 6.0 percent.

He said transmission and distribution losses of both CEB had Lanka Electricity Company (LECO) had come down to 12 percent ahead of target for which they should be commended.

But the CEB's transmission unit had losses of 4.4 percent which was higher than the 3.0 percent target for 2012.

There was no independent calibration of transfer metres between transmission and distribution and also between generation and transmission and most were related parties.

Tilak Siyambalapitiya, a top energy sector expert said the basis on which power plants were to be used in 2013 (dispatch schedule) was unknown.

The dispatch schedule was not according to the tariff methodology required by the regulator but even if another methodology was used, it has not been disclosed, he told a hearing called by the Public Utilities Commission of Sri Lanka.

The efficiency of the plants was not known, he told a public hearing on a proposed tariff hike called by the regulator. The actual heat rates were supposed to be tested by a certified technical auditor.

"Where are these tests?" he asked.

Sri Lanka's thermal plants have peculiar costs with combined cycle plants being more expensive than less efficient than smaller diesel plants.

Laxman Siriwardene, from Pathfinder, think tank said costs at the CEB; a state monopoly was not transparent.

He said the regulator itself has removed 15 billion rupees in costs and refused to allow three plants whose contracts had expired.

Siriwardene said while there was a principle that tariffs should be cost-reflective, there was no way to determine the actual costs. He said there was no information about other expenses of the CEB which had 17,000 employees.

Related Info :

Sri Lanka Hydro Power Generation Picks up Sharply in 2013

Electricity Tariff Hike - Industries Get Biggest Subsidy, Hotels Marginally Subsidized & General Purpose Customers to Pay in Excess of Costs - an Analysis by the Regulator

Electricity Tariff Increase - First, Operate Hydro Plants in an Optimum Manner, Improve Plant Efficiencies, Cut Losses and Switch to more Economical Fuel

Sri Lanka Combined Cycle Power Plants more Expensive than Diesel Engines - Information on Power Sector not Available in the Past Now Coming Out

HSBC Arranges $100mn Export Credit from Belgium to Etisalat to Expand Network with Equipment from Alcatel Lucent

0th April 2013, www.lankabusinessonline.com

HSBC said it had arranged a 100 million US dollar export credit from Belgium for Etisalat Sri Lanka to expand its network with equipment made by Alcatel-Lucent.

"The strong partnership with HSBC, ONDD and Alcatel-Lucent will now enable us to offer the best in technology and services to our customers."

He said Etisalat became the first operator to launch DC HSPA+ technology, to boost mobile broadband service in Sri Lanka.

The bank said it was the largest such deal so far in the country.

"Etisalat is a considerable force in the telecommunication industry in Sri Lanka, and we are pleased to have led this transaction to support their expansion plans..." Nick Nicolaou, chief executive officer HSBC Sri Lanka and Maldives said.

HSBC was sole arranger, sole lender and facility agent for the facility from ONDD, the export credit agency of Belgium.

HSBC had also arranged an additional 25 million US dollar facility in parallel to the export credit.

"Etisalat strongly believes in the growth potential of Sri Lanka and we want to support the ongoing development by providing the latest in technology to the country," chief executive officer Dumindra Ratnayaka, said.

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 • Sri Lanka's Etisalat Spends $163mn on Expansion and 3G Upgrade

Etisalat Launches Sri Lanka's First e-Book Store for Local Publishers & Authors

Altair, Sri Lanka’s Tallest Luxury Condominium, Construction Underway. Unique Tower Blocks Feature One Leaning on to the Other

03rd April 2013, www.island.lk

Construction work on Altair, Sri Lanka’s tallest luxury condominium, is on track with the completion of 100 of 288 piles targeted for March 2013, INDOCEAN Developers, the promoter of the iconic project said.

Announcing the milestone, the company said the four test piles, carried out at the Sir James Peiris Mawatha site overlooking the Beira Lake at 200 per cent of the design load, showed that each pile can successfully bear a load of 2,200 tons, which is twice the load required by the structural design.

"This kind of project demands vision, strength and determination," said Sushil Mohta, Director of INDOCEAN Developers (private) Ltd., who visited the site during the piling. "It’s about testing oneself, always pushing to the limit. That is why INDOCEAN went out and tested the piles to twice their designed capacity."

The Altair team that inspected the site also comprised of Directors Jugal Khetawat and Pradeep Sureka, the Structural Engineer Predrag Eror and the Vice President – Projects Iraklis Andreakis. "The structural integrity of all our projects is paramount among our values," Pradeep Sureka said.

INDOCEAN Director Jugal Khetawat added: "We recently completed Wind Tunnel Tests for Altair in London by the wind-engineering experts RWDI whose project portfolio includes the tallest buildings in the world, the Burj Khalifa, Taipei 101 and Petronas Tower."

Altair’s 288 driven piles will be connected to a raft foundation so as to distribute the building loads. The Piling Contractor for the project is San Piling, a sister company of the leading construction company Sanken Lanka. Piling work is expected to be complete by June this year.

Comprising of two tower blocks, one of which leans on to the other, Altair, with an address of 127, Sir James Peiris Mawatha, will rise to 68 stories, offering its 410 apartments spectacular views of the Beira Lake and the Indian Ocean. The building has been designed by the globally recognized celebrity architect Moshe Safdie. Besides its 1.5 million square feet of high-end eco-friendly living space, the development will also offer 40,000 square feet of up-market retail space.

INDOCEAN is a venture of South City Group, which brings together over 150 years of cumulative development experience. The Group has, till date, completed 10 million square feet of real estate developments worth more than USD 350 million and currently has 20 million square feet of space worth USD 1.1 billion under construction.

Pioneering large-scale urban developments, with the collaboration of international consultants and development professionals, is the track record of South City Group which has pledged to deliver a superior and landmark development for Sri Lankan and expatriate residents.

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National Equity Fund of NAMAL Pays Dividends for a Record 20 Years

03rd April 2013, www.island.lk

National Asset Management Limited (NAMAL), maintaining its continuous dividend payments, announced that the company’s flagship fund the National Equity Fund (NEF) paid a dividend of one rupee per unit to the Unit holders for the year ended 31st March 2013. NEF is the only Equity Fund to have made continuous dividend payments since its inception including the exigent times in the industry, NAMAL said in a statement.

Avancka Herat, Executive Director and Chief Investment Officer of NAMAL, stated that the fund outperformed the CSE All Share Price Index (ASPI) on an YTD, 12 months & 24 months by 5.51%, 9.44% and 17.99% and attributed this superior performance to timely asset allocation.
He further stated that the NEF which is classified as a Balanced Fund, was the best performing fund in its respective segment. The fund also achieved a CAGR of 14.71% on a dividend re investment basis since inception in December1991 to 28th February 2013. NEF was launched in 1991 and currently has Rs. 1.7 billion assets under management with annual dividend payouts being made at a historical average of Rs. 1.22 during the 20 year period.

"NAMAL is Sri Lanka’s first unit trust management company, having commenced operations in 1991, with a 20-year track record of successfully investing in the Sri Lankan equity and debt markets. NAMAL currently operates eight unit trusts including the flagship National Equity Fund and the only listed unit trust. Principal shareholders of NAMAL are Union Bank of Colombo PLC and DFCC Bank PLC."

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Capital Market to Contribute 50pct of Sri Lanka's GDP by 2016. Present Contribution is 30pct of GDP of $ 60bn

04th April 2013, www.dailynews.lk, By H DH Senewiratne

The capital market is expected to contribute US $ 50 billion for the country’s GDP by year 2016, therefore the Stock Brokers should be geared to handle the highest number of deposits in the future, Director General Security and Exchange Commission (SEC) Dr Nalaka Godahewa said.

“Sri Lanka’s GDP would be US $ 100 billion by 2016, out of which 50 percent should contribute from the capital market. Therefore, each stock broker should be geared to manage many retail accounts, “Dr Godahewa said at the launch of the Colombo Stock Brokers Association website and also introduced code of principles of best practices at the event.

He said that right now the country’s total GDP was US $ 60 billion and the capital market’s contribution to the GDP was only 30 percent.

There are more than 220,000, accounts in the Capital Depository System, he said.

“At present the country has 29 stock brokering companies, each company should be geared to manage at least 20,000 retail deposits. Therefore all stakeholders should work together to make a vibrant stock market to achieve that target.

To popularize the capital market education aspect plays a pivotal role because our present market is a speculative market than the research base market,” he said.

” When the foreign investors are investing in Sri Lanka they have little knowledge on few companies.

Therefore, research on companies would help to create a vibrant and strong market in the country.

“With the stability in the market, the debt market has performed well, better than we expected. Therefore, we have to find ways and means to face future challenges to make a vibrant market,” he said

The President of the Colombo Stock Brokers Association (CSBA) Dimuthu Abeysekera said that in developing a vibrant equity market, the role of stockbrokers is crucial and into this equation comes the tenets of transparency and enhancing effectiveness across the market.

He said that facilitating a customer centric solution in securities trading in Sri Lanka would be a primary objective for the stock broking community, while maximizing financial returns for the broader investor community by proving prudent timely information,” he said.

Colombo Stock Exchange is showing stability at present and the development of the overall capital market by introducing Principles of Best Practice that would help to promote the professionalism to the market,” he said.

Related Info :

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People's Leasing to Raise $ 100mn Club Loan from a Mid East Investor. Sri Lanka's Largest Non Bank Financial Institution will be the First to Raise $ 10mn following Budget Incentives for Corporate Overseas Borrowings

04th April 2013, www.dailynews.lk, By Indunil Hewage

Sri Lanka's largest Non- Bank Financial Institution, People's Leasing and Finance PLC is planning to raise $ 100 million club loan, from an investor in the Middle East.

In an interview with Daily News Business, People's Leasing and Finance PLC CEO /General Manager, D. P. Kumarage said, "we are currently negotiating with the relevant party to raise $ 100 million club loan to finance the company's future working capital requirements and a leading Middle Eastern bank is arranging the deal. We have already got the necessary approvals and confident that we will be able to conclude the transaction by late May."

People's Leasing and Finance will also be the first company in the country to raise $ 10 million following last year budget provided incentives for corporates to raise overseas funding. The Budget allows corporate entities to borrow upto $ 10 million per annum.

The local companies with good ratings are allowed to borrow from international markets; those investments are exempted from withholding and income tax. These initiatives will improve debt market where we will be a direct beneficiary," Kumarage said.

People's Leasing and Finance is aggressively looking for new business opportunities both home and abroad, particularly in Vietnam, Myanmar and Indonesia.

Consequent to the Finance Business license approval, Peoples Leasing and Finance PLC merged with its subsidiary Peoples Finance PLC by April 2013 and also concluded one of the biggest debt market deals; Rs. 6 billion worth of debenture recently.

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Sri Lanka's Biggest Securitisation Deal by People's Leasing Company, The Largest Leasing Firm in the Country

Sri Lanka Stockbrokers Unveil Website & Ethics Code. 18 Months of Decline Ending with Stability Brought back to the Market

03rd April 2013, www.lankabusinessonline.com
Sri Lanka's Colombo Stockbrokers Association launched a website and  a code of ethics which officials said would improve professional standards and investor confidence.

"By introducing these Principles of Best Practices, we are intent on promoting professional standards among our members," CSBA president and head of Asha Phillips Securities Dimuthu Abeysekera said.

"This will in turn enhance investor confidence prompting the industry to undoubtedly enjoy benefits of a vibrant market place."

Fundamental Research

The website www.colombostockbrokers.com will also have research for potential investors.

Chairman of Sri Lanka's Securities and Exchange Commission Nalaka Godahewa said more research was needed to educate investors.

Godahewa said the worst was over for the market with 18 months of decline ending.

"But I think all the problems we had at that time, the bad feeling, the bad publicity, the difficulties, accusing each other, mistrust excuses they are all now history," he said.

"We have brought back stability to the market. When we say we, all of us together."

The code was devised by a committee under Ravi Abeysuriya, of Heraymila Securities.

Head of Acuity Stockbrokers Deva Ellepola said even stockbrokers who were not members of the CSBA also contributed to the code and he hoped they would join the association again.

Several stockbrokers quit the association during the collapse of a stock market bubble as controversial measures were taken with some high net worth investors to counter credit rules and other action of the regulator amid allegations of widespread securities fraud.

Foreign investors who sold out during the bubble, are now coming back buying into several fundamentally strong companies with strong management whose valuations have improved with falling prices.

But small investors who bought fundamentally weak shares with margin credit which were also pumped up with margin credit in some cases, are in losses licking their wounds and are not active.

Sri Lanka's stock market bubble was fired by excess liquidity that built up in the banking system largely from inflows of foreign money, driving interest rates down amid euphoria from the end of a 30-year civil war.

Repeating History

Analysts say fraud and mischief always rocket up when lose money drive up stocks.

The world's first SEC in the US was also created after the collapse of a stock bubble in the late 1920s which was fired by excessive Federal Reserve money printing and margin credit.

One of the most well documented of such stock bubbles is one that occurred in France in the 1790s with the introduction of the Assignat paper fiat money.

Excessive printing of Assignats eventually led to the collapse of the French economy amid speculation, inflation, price controls and widespread corruption.

"For at the great metropolitan centers grew a luxurious, speculative, stock-gambling body, which, like a malignant tumor, absorbed into itself the strength of the nation and sent out its cancerous fibres to the remotest hamlets," Andrew Dickson White wrote in his iconic work Fiat Money Inflation in France

"At these city centers abundant wealth seemed to be piled up: in the country at large, there grew a dislike of steady labor and a contempt for moderate gains and simple living.

"Nor was this reckless and corrupt spirit confined to business men; it began to break out in official circles, and public men who, a few years before, had been thought above all possibility of taint, became luxurious, reckless, cynical and finally corrupt."

"It grew as naturally as a fungus on a muck heap. It was first felt in business operations, but soon began to be seen in the legislative body and in journalism," wrote White.

Many of those involved were later guillotined and France returned to the gold money again.

Sri Lanka's interest rates are now higher and inflation is falling, though the currency has also depreciated making everyone poorer and destroying the real value of investible savings in banks.

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Footwear Industry Gets a Boost from IDB Sri Lanka. Footwear Industry Identified as a Thrust Industry

03rd April 2013, www.dailynews.lk, By Ishara Mudugamuwa

The Industrial Development Board (IDB) of Sri Lanka has taken measures to develop the country's Leather and Footwear Industry to cut down on leather and footwear imports, IDB Chairman Udaya Kariyawasam said.

Addressing the media yesterday at the Information Department, the chairman said the government has identified the leather and footwear industry as a thrust industry. So it is important to increase the leather and footwear production and at the same time it is important to promote leather products among Sri Lankans. The IBD has recognized some important areas which should be developed to compete with the international market.

"At present the industry produces 75 percent of all shoes sold in the island. About 95 percent of the local shoes are made from non-leather (synthetic) materials or rubber. The remaining 25 percent of shoes sold in Sri Lanka are imported. This amounts to circa 10 million pairs per year. These are also made from non-leather (synthetic) materials. It is reasonable to assume the local companies will continue to try to seize some of that market, which offers low priced footwear at very competitive rates. These shoes are made from synthetic materials (non-leather) and therefore they offer no benefit for the prosperity of the leather manufacturing industry," Kariyawasam said.

He also said that the industry suffers from five major problems, which limit its ability to compete. Poor and insufficient leather, poor supply base for most material and components which are unsuitable for exported products, inadequate provision of training for operator and technical skills, poor mechanization and practices in production, no marketing strategy or brand identity for the industry.

"If the industry can open the export markets for leather footwear, it will target the overarching objective of this project which is to increase export earning and therefore will be more beneficial to the expansion of the industry, its employment levels and the country' s trade balance," he said.

IDB Director A. G. Karunadasa said leather products are environment-friendly and also using leather shoes is good for the health and has other advantages. He also said the IDB has already discussed with the University of Moratuwa and Colombo University Faculty of Fine Arts to develop the country's leather industry using modern technology and designs. The lack of skilled labour is a major problem in the leather industry. Therefore the IDB in association with the Tertiary and Vocational Education Commission has already introduced NVQ for those engaged in the industry.

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Solid Waste Could be a Money Spinner. 600 Tones Collected Daily in Colombo Metropolitan Area

03rd April 2013, www.dailynews.lk, By H D H Senewiratne

Solid waste that was collected in the Colombo Metropolitan area could be converted into a money spinner and that could be used to manufacture compost fertilizer to meet the demand of the Western Province to a large extent said, Minister of Environment Susil Premajayantha.

“The 600 tones of solid waste collected daily in the Colombo Metropolitan areas alone in the Western Province, could be a real money spinner if we could manage it in a proper way to manufacture compost fertilizer,” Minister Premajayantha said at a seminar on Environmental Law organised by Institute of Legal Studies and Management.

He said that the demand for compost fertilizer is getting high because people are now going for organic products particularly fruits and vegetables.

Therefore the Bloemendhal Garbage Mountain, which was a major issue because of its bad ordour could be converted into a great money spinner if an interested party could venture into a compost fertilizer business utilising it.

Minister Premajayantha said that in Colombo and the suburbs more than 400 tones of garbage were collected daily. “If we could promote this business we could meet the compost requirement to a larger extent. If a private party could get involved in this business it would help to solve the Colombo garbage problem to a large extent,” he said.

He said that Sri Lanka should have a structured administration system to collect solid waste by separating the garbage and collecting them into different bins. Further, the Minister also said that during the last several years the country’s chemical waste accumulation had also increased by 314 percent, which would lead to several dangerous ailments, he added.

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Sri Lanka Czech Economic Forum for Enhanced Trade & Economic Cooperation. Minister Basil Rajapaksa & Czech Industry & Trade Minister Martin Kuba Address the First Forum

03rd April 2013, www.dailynews.lk,

A Sri Lankan delegation led by Economic Development Minister Basil Rajapaksa met Czech Industry and Trade Minister Martin Kuba, during the former’s visit last week to the Czech Republic. Environment and Renewable Energy Minister Susil Premajayantha was also included in the delegation.

The delegation attended the opening of the first Sri Lanka-Czech Economic Forum organized by the Confederation of Industry of the Czech Republic. They also met Czech Prime Minister Petr Necas at his office.

Minister Basil Rajapaksa and Minister Martin Kuba addressed the Economic Forum and discussed prospects for enhanced trade and economic cooperation as well as opportunities for joint collaboration in important sectors of the two countries. The vast potential that exists for investment in Sri Lanka for the Czech Republic in areas such as infrastructure, energy, water and environment protection, food processing, sugar industry, leisure, recreation and hospitality, higher education, as well as in the sector of small and medium enterprises was highlighted at the discussion.

Minister Rajapaksa observed the increased potential for Czech tourists to visit Sri Lanka following the expansion of the island’s tourism sector. Both ministers expressed their intention to conclude an agreement on mutual cooperation between their ministries for creating favourable conditions to develop trade and economic cooperation in areas of mutual interest.

The Czech representation handed over a draft of an agreement to the Sri Lankan delegation in this regard.

The Sri Lankan delegation also met Czech Republic’s Environment Minister Tomas Chalupa. They discussed issues relating to the promotion of sustainable energy and protection of the environment and means of cooperating in this area of global concern in international fora.

The two delegations discussed the possibilities of strengthening cooperation in the areas of renewable energy and waste management. Minister Premajayantha visited a waste recycling plant in Prague.

Minister Rajapaksa also met Czech Republic’s Foreign Affairs Deputy Minister Tomas Dub and discussed ways for enhancing bilateral cooperation in the areas of trade, investment and tourism.

Minister Rajapaksa met Czech Republic Vice President Jan Hamacek and Senate President Milan Stech at Czech Parliament. Their discussion centered on enhancing contacts between the legislative bodies of the two countries. They also emphasized the need to increase people to people contact, among other matters of bilateral importance.

Image: Economic Development Minister Basil Rajapaksa addressing the first Sri Lanka-Czech Economic Forum. Environment and Renewable Energy Minister Susil Premajayantha and Czech Industry and Trade Minister Martin Kuba are also in the picture.

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Sri Lanka Ireland Bilateral Trade Up. Sri Lanka Chambers Should Tie Up with Irish Counterparts to Enhance Cooperation

03rd April 2013, www.dailynews.lk, By Shirajiv Sirimane

The Sri Lanka - Ireland bilateral trade volume has demonstrated an upward trend in recent years. “Sri Lanka's major exports to Ireland include garments, retreaded tyres, tea, coconut and leather products. Major imports from Ireland include chemical and plastic products, machinery and pharmaceutical products.

The Sri Lanka Chambers should forge links with their Irish counterparts in a bid to enhance cooperation between the business communities of the two countries,” Consumer Affairs Senior Minister S B Nawinna said.

Speaking at the National Day reception hosted by the Consulate of Ireland, he added that with the dawn of peace in Sri Lanka, tourist arrivals from Ireland have increased in the recent past.

“There is considerable potential to promote tourism between the two countries. ‘It is important that tour operators in Ireland explore Sri Lanka as a tourist destination having a diverse range of attractions to offer.”

“Ireland's contribution towards the advancement of education in Sri Lanka, remains a strong link between the two countries.”

“With the end of the protracted terrorist conflict and restoration of normalcy in Sri Lanka, I believe it is opportune to explore new avenues for the further expansion of our relations in investment, trade, political and education spheres.

“In the post conflict environment, Sri Lanka had already initiated a number of projects related to infrastructure development in the areas of transport, telecommunication, health and tourism.

“There is enormous potential for investments from Ireland and I encourage Irish investors to make use of this positive business environment. “I'm pleased to note that Sri Lankan businessmen and professionals have started businesses in Ireland, particularly in the hotel and education sectors.

“I also acknowledge the contribution being made by Ambassador Feilim McLaughlin, and also Manic Perera, Honorary Consul of Ireland, towards the strengthening of ties of friendship and economic cooperation between Sri Lanka and Ireland.

Feilim McLaughlin Ambassador of Ireland, said that he had up-dated the Irish business community on the opportunities available for investments in Sri Lanka. “We expect even better economic relations in the future,” he concluded.

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British High Commissioner Welcomes Massive Development in North East Sri Lanka after the End of the 30 Year Conflict

03rd April 2013, www.dailynews.lk, By Chaminda Perera

UK High Commissioner in Sri Lanka John Rankin yesterday welcomed the massive development activities taking place in the North and the East after the end of the 30 year conflict.

He was of the view that this infrastructure development drive will help create more employment avenues and uplift the living standards of the people in the region.

The UK High Commissioner was speaking at a panel discussion at the launch of UNDP Human Development at the Lakshman Kadirgamar Institute for International Relations and Strategic Studies.

The report was presented to External Affairs Minister Prof G.L. Peiris by UN Resident Coordinator and UNDP Resident Representative Subinay Nandy.

“I travel to the North and the East quite often as part of my job and I welcome the infrastructure development taking place in the North and the East of the country”, Rankin said.

He said that the UK also encourages the Government to take further steps in the area of reconciliation as recommended by the LLRC. He said that the UK has genuinely helped the development, reconstruction and the de-mining efforts of the country. The High Commissioner said one of the reasons why UK companies are investing in Sri Lanka is due to human capital particularly in IT sector.

UNDP Resident Representative Subinay Nandy said Sri Lanka has made a tremendous progress in terms of infrastructure development in the North and East.

Executive Director of the Centre for Poverty Analysis Priyanthi Fernando and Deputy Secretary to the Treasury Dr. B.M.S. Batagoda were also among the panelists while former Director, Economic Affairs, Commonwealth Secretariat Dr. Indrajit Coomaraswamy was the moderator.

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Land Rover Defender Assembly Plant in Hambantota. Sathosa Motors to Invest $ 1mn

02nd April 2013, www.dailynews.lk

Sathosa Motors PLC will invest US $ 1 million to set up an assembly plant for Land Rover Defenders in Hambantota District.

“Preliminary work of the project has already been completed and the project is expected to commence shortly. The proposed project would make Land Rover vehicles available and affordable to a wider spectrum of the market,” Access Engineering and SML Frontier Automotive ( Pvt) Ltd Chairman Sumal Perera said.

He expressed these views at the launch of SML Frontier Automotive (Pvt) Ltd, which will be the exclusive distributor and after sales provider for Land Rover in Sri Lanka. SML Frontier Automotive (Pvt) Ltd is jointly owned by Sathosa Motors and Sheran Fernando.

This would be a 50-50% partnership between both parties.

Speaking about the new partnership Sumal Perera, Chairman SML Frontier Automotive said “We are very excited with the new partnership and this will be the first stepping stone to further expand our foot print in the motor vehicle market.

Access engineering Limited, a public quoted company now owns over 86% of Sathosa motors.

We are very much committed to keep the Land Rover name in its deserved status whilst upholding the good name that Land Rover have established in the world.

“The final beneficiary of this venture will be the Land Rover owners and enthusiasts; Today, we made a great emphasis on ‘after sales service’ through this joint partnership,” SML Frontier Automotive, Managing Director Sheran Fernando said.

After sales service is considered the corner stone of strengthening the Land Rover/ Range Rover brand in Sri Lanka and the construction of a new state-of-the-art workshop in Vauxhall Street will be the epicenter of Land Rover’s after sales service and will commence operations shortly.

It is planned to invest US $ 500 million at the initial stage of the project.

Image: SML Frontier Automotive ( Pvt) Ltd Chairman Sumal Perera and Managing Director Sheran Fernando at the launch of SML Frontier Automotive ( Pvt) Ltd. Picture by: Sumanachandra Ariyawansa.

04 April 2013

Sri Lanka Hydro Power Generation Picks up Sharply in 2013

02nd April 2013, www.lankabusinessonline.com

Hydro power generation has picked up sharply in Sri Lanka allowing state-run Ceylon Electricity Board to cut thermal power, while demand was barely growing in January 2013, official data shows.

Total power generation in the month rose just 0.6 percent to 987 GigaWatt hours (millions of units of electricity) from a year earlier.

In December total generation fell in absolute terms by one percent to 988GWh amid a slowing economy and higher tariffs which promote conservation.

In 2012 total generation grew just 2.4 percent to 11,807GWh as the economy slowed, with some power cuts also reducing generation, as a large coal plant broke down repeatedly.

This year the CEB is expecting to sell 10,950GWh of energy. Sales could be lower than generation due to system losses.

Data released by the Central Bank shows CEB's hydro power generation grew 270 percent to 593GWh in January 2013 from a year earlier, while purchases from private power producers plunged 60 percent to 214GWh.

CEB's own thermal generation - which includes coal power - was also down 21 percent to 234GWh.

CEB has sought a price hike from April. The regulator removed three thermal plants whose power purchase agreements had expired but which were listed in the generation schedule for 2013 shaving off 15 billion rupees in costs filed by the power firm.

From late 2011, low rainfall triggered a steep increase in thermal generation, creating large losses in both the CEB and state-run Ceylon Petroleum Corporation which sold subsidized fuel to the power firm.

The losses which were filled by bank loans, was ultimately accommodated by Central Bank credit (printed money), making the Sri Lanka rupee fall from 110 to 134 to the US dollar.

Market pricing energy helps reduce bank credit demand and avoid money printing which in turn helps keep inflation low and the exchange rate stable.

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The Trade Deficit Falls 24pct in January 2013. Fall in Export Earnings is a Worry

02nd April 2013, www.island.lk

The trade deficit fell 24 percent year-on-year to US$ 780.4 million in January 2013 from US$ 1,026.8 million a year earlier, but the worrisome trend in export earnings continue, with earnings falling 18.2 percent to US$ 726.7 million in January, down from US$ 888.2 million a year ago, data released by the Central Bank yesterday (02) showed.

The import bill fell 21.3 percent to US$ 1,507.2 million with petroleum imports falling 47.6 percent to US$ 269.7 million.

Tea export earnings fell 2.8 percent to US$ 101 million. Garment exports fell 8.9 percent to US$ 333.9 million.

The fall in export earnings is a worry, economists point out.

After growing nearly 100 percent in 2011, the country’s trade deficit declined by 4.1 percent in 2012 to US$ 9,313 million as at end December from US$ 9,710 million a year earlier. Imports fell 5.8 percent to US$ 19,086.5 million while export earnings fell 7.4 percent to US$ 9,773.5 million. Export earnings at 30.58 percent of GDP in 2001, declined gradually to 16.44 percent last year.

Releasing the ‘External Sector Performance review for January 2013 yesterday (02), the Central Bank said: "The trade deficit continued to narrow and recorded a 24 per cent year-on-year decline in January 2013. The policy measures implemented early in 2012 to discourage non-essential imports have continued to ease pressure on the trade deficit and therefore on the current account balance. The policy measures adopted have therefore helped withstand the adverse impact of the slowing down of global demand on exports. Inflows on account of exports of services remained favourable in January 2013, further supporting the current account, while total reserves were maintained at healthy levels, strengthening the overall balance of the BOP.

"Expenditure on imports declined by 21.3 per cent, year-on-year, to US dollars 1,507 million in January 2013, reflecting the effectiveness of the policies introduced early in 2012 to curb import expenditure. Imports of refined petroleum declined by 58.4 per cent, year-on-year, in January 2013, partly due to increased hydro power generation. Lower expenditure on imports of transport equipment, gold and vehicles also made a significant contribution toward the decline in import expenditure in January 2013. However, expenditure on imports of certain intermediate goods such as chemical products, agricultural inputs, plastic and articles thereof and wheat and maize which accounted for about 11 per cent of imports, increased on a year-on-year basis in January 2013.

"Import expenditure on investment goods also declined on a year-on-year basis in January 2013, as imports of transport equipment and machinery and equipment declined. Nevertheless, import expenditure on building materials, categorised under investment goods, increased in January 2013. With respect to consumer goods imports, expenditure on imports of food and beverages as well as non-food consumer goods declined. Vehicle imports, which declined by 51.7 per cent, year-on-year, made the largest contribution towards the
decline in expenditure on consumer goods imports.

"As demand for exports remained fettered by the slow recovery of major export destinations, namely, the EU and the USA, the decline in export earnings continued into 2013. Earnings from exports declined by 18.2 per cent to US dollars 727 million in January, as earnings from all major categories of exports declined, on a year-on-year basis.

"The decline was mainly driven by industrial exports which declined by 20.7 per cent. Earnings from exports of textiles and garments declined by 8.9 per cent. Exports of transport equipment, gems, diamonds and jewellary and rubber products were the other categories of export that contributed significantly to the decline in export earnings. Earnings from agricultural exports declined in January 2013, as a result of earnings from both traditional and non-traditional agricultural exports declining.

"Despite exports of tea continuing to fetch favourable prices, the drop in demand from main markets led to a decline in earnings from tea exports in January. However, export earnings from green tea, although its share remains low, recorded an year-on-year increase. While the price of natural rubber has decreased globally, the decline in volumes of rubber exports could be attributed partly to the demand from local manufacturers of rubber based products.

"Of non-traditional agricultural exports, earnings from the export of spices increased in January 2013, led mainly by the commendable performance of pepper and cloves exports. Further, earnings from the export of unmanufactured tobacco increased marginally in January 2013," the Central Bank said.