The depreciation of the Rupee by a significant margin during the past few days was not altogether unexpected, as many economists and multilateral lending agencies have been insisting on such a measure for quite some time.
This will automatically make imports more expensive while driving up the costs of goods and services that are paid for in dollars in the final stage, such as airline tickets.
The prices of at least two essentials went up almost overnight after the depreciation was announced – fuel and flour. The Lanka Indian Oil Company (LIOC) raised petrol prices by Rs.50 a litre and diesel by Rs.75 a litre.
The Ceylon Petroleum Corporation (CPC) followed suit. This is by far the biggest such increase in fuel prices in the country’s history. This will have a huge negative fallout on the goods and passenger transport sectors, apart from the fisheries sector.
Moreover, generators, which many companies now rely on to get power due to power cuts, run mainly on diesel. With a heavy duty industrial generator requiring around 200 litres of diesel per hour, one can imagine the extra cost.
We have been hit by a double whammy when it comes to fossil fuel. Depreciation of the Rupee is one factor. The war in Ukraine has already sent crude oil well past the US$ 130 per barrel mark and some analysts have warned that oil could hit USD 300 a barrel if the conflict escalates.
This will spell disaster for net petroleum importers such as Sri Lanka, which is already struggling with an acute foreign exchange crisis. Clearly, we should expedite our plans for an energy transition, possibly to renewable energy such as wind and solar.
But even an expedited renewable energy drive will take a few years - though the Government should explore the possibility of installing solar panels on every rooftop in the country so that practically everyone will be free of the National Grid.
In the meantime, we should focus on conserving fuel and also lessening our dependency on them. This calls for a drastic re-thinking of our current lifestyles. In many countries, it is prohibited to enter the centre of the main commercial city if there is only one person (driver) in the car.
Or else, they have to face a hefty fee. Indeed, our offices should introduce buses or carpooling for their employees with immediate effect as we can no longer afford to waste fuel in traffic jams at these exorbitant fuel prices.
It is also time to revive another concept that gained currency with the Covid-19 pandemic – Working From Home (WFH), which several Ministers have already advocated. The Government and most private sector offices in Sri Lanka have given up this practice with the receding of the pandemic (though another surge could well happen, driven by a new variant of the Coronavirus), but companies in many countries now allow their employees to WFH until their retirement.
There are many advantages of WFH in the present context. First, it will save a lot of fuel. Imagine that there are 10 executive grade officers in a given company who all come to office using their own cars. But if they all can WFH, one can just imagine the savings in fuel alone, not to mention time.
The offices can also save electricity as ACs, lights and fans are also not needed. Meetings can be held over Zoom, so there really is no excuse for not adopting WFH right away, at least in sectors that are compatible with it. Granted, not all workplaces can embrace WFH – a hospital, for instance.
On a personal level, we can also cut down on any unnecessary journeys. For example, there really is no need to take the car to go the junction to buy a newspaper. Walking is a healthy alternative that will also not pollute the environment, unlike your fossil fuel car.
At home and office, we should turn off unnecessary ACs, lights and fans. This will help save electricity and by extension, fossil fuels as they are mostly used to generate mains power at thermal power plants.
We have also argued the case for encouraging the import and use of electric vehicles in these spaces, but there should be a countrywide network of DC superchargers that use less electricity but can charge cars faster.
Otherwise, people will simply plug their electric cars into the national grid, obviating any gains that can be made from going electric.
As for flour, the Government must initiate a drive to wean people away from bread and other flour-based products. In fact, around 20 years ago there was a national program to promote rice and rice-flour based products. Rice flour based bread was also introduced under this programme.
Alas, like most other Government initiatives, this one too died a natural death and people reverted to wheat flour.
Such a program must be revived and rice-based products popularized again. Rice is much more nutritious than wheat flour and could be less expensive too, especially if we achieve self-sufficiency in paddy.
The Government has also restricted the import of 367 items deemed non-essential and a survey must be carried out to check how many of those items can be manufactured or sourced locally.
However, import substitution does not always work as the quality of certain local goods is not always on par with those of their foreign counterparts. Thus a program has to be started in earnest to raise the quality of all local goods to give the economy a boost in these challenging times.