Sri Lanka’s president formally opened the nation’s first coal-fired power plant this week, as well as announcing a cut to energy prices.

After the commissioning ceremony for the 900 MW Norochcholai plant (pictured), President Mahinda Rajapaksa announced that consumers’ electricity bills are to be reduced by 25 per cent, the price of kerosene by LKR20 ($0.15) per litre, petrol by LKR5/litre and diesel by LKR3/litre.

Sri Lanka’s energy prices had previously been set deliberately high in an attempt to recoup losses from price subsidies. The subsidies were cut in early 2013 and the state-owned Ceylon Electricity Board (CEB) and Ceylon Petroleum Corporation (CPC) have now “improved their balance sheets due to higher prices,” Deputy Treasury Secretary BMS Batagoda said in an interview with the Reuters news service.

Rajapaksa’s announcement came after a meeting with Chinese President Xi Jinping, who is in Sri Lanka on an official visit and took part in the commissioning ceremony. The Export-Import Bank of China was instrumental in funding the $1.35bn plant, which was designed and built by China Machinery Engineering Corporation (CMEC).

The plant, located on Sri Lanka’s northwest coast near the town of Puttalam, is expected to make a significant contribution to the country’s generating capacity, which has stood at slightly over 2000 MW. Oil-fired power plants have provided the bulk of this capacity, supported by a limited number of gas-fired plants, both of which run on expensive imported fuel – but, observers have pointed out, so will the coal plant, as Sri Lanka has no coal mining facilities.  

In addition, a three-year maintenance agreement for the Norochcholai plant was negotiated with CMEC after power and energy minister Pavritha Wanniarachchi told Sri Lanka’s parliament early this year that a series of accidents had taken it offline for 271 of its 1086 days of operating time.

Nevertheless, the nation aims to build more coal-fired power plants, with the proposed 1000 MW Sampoor plant, to be built by India’s National Thermal Power Corporation (NTPC), first in line and the CEB’s Long-Term Generation Plan 2013-2032 including 10 new 300 MW units to be commissioned between 2020 and 2032.