Sri Lanka's Fuel and Net-zero Crisis

In this episode of Energy Insights, Energy Tracker Asia talks to Hemantha Withanage. They speak about the recent multifaceted crisis facing Sri Lanka's people across politics, economics and energy. Topics include a short history of what happened up until this years crisis plateauing, economic mismanagement by government officials, the cause of fuel shortages and who's at fault, the impacts fuel shortages are having, and how this will affect Sri Lanka's net-zero goals.

Hemantha Withanage is the Chair of Friends of the Earth International. Previously, he was an environmental officer at the Environmental Foundation and he co-founded the Centre for Environmental Justice in Sri Lanka. Hemantha has also served as an executive director of Forum, a Philippines-based NGO, a network of civil society organisations monitoring the Asian Development Bank. Elsewhere he has worked in leadership positions across Asian international networks and is a leading environmental activist in the Asia-Pacific region. He is a graduate of Environmental Science from the University of Kelaniya, Sri Lanka.

To follow:
Facebook - HemanthaWithanage
Twitter - @Hemanthawithana

Transcript

In this episode of Energy Insights, Energy Tracker Asia talks to Hemantha Withanage, Chair at Friends of the Earth International. They cover the recent ongoing upheaval in Sri Lanka. Topics included a short history of what happened up until this year, economic mismanagement by government officials, the cause and impacts of fuel shortages, and how this will all affect the country’s net-zero goals. 

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Host: So before we get started on talking more about the ongoing crisis in Sri Lanka, revolving around many issues, would you be able to give us a summary of your background, what you're currently working on, and anything else that you think is important?

Hemantha Withanage: Currently, I'm the chairperson of Friends of the Earth International, which is a grassroots organization network based in 73 countries. The main secretary is based in the Netherlands, Amsterdam. I am the founder of the Centre for Environmental Justice in Sri Lanka, which was founded about 18 years ago. At the moment I am the Senior Advisor to the Centre for Environmental Justice, which is also a member of many different organizations working on environmental issues, bad monitoring, debt monitoring, etc.

Host: I wanted to get into some context first. I think it's a good idea to unpack this multifaceted crisis that's gripping Sri Lanka right now. In a sense, it's almost like a perfect storm of many issues combining together. Can you give us an overview of how Sri Lanka came to find itself in the situation that it's in right now?

Hemantha Withanage: Sri Lanka is going through a serious economic crisis and debt crisis, which most of the people engaged in this sector, explains it as the mother of all kinds of crisis. Due to this economic and debt crisis, we have a political crisis. The people who cannot afford the fuel shortage, liquid petroleum gas shortage, the electricity cuts, increasing food prices and destruction of environmental resources, including forest, all came to the streets on April 9 and started having a people's power, which had a number of results. 

This included ousting the former President Gotabaya Rajapaksa, but then elected a new President, Ranil Wickremesinghe, and the previous cabinets were dismantled. In general, people in the country are not happy with the political system. They have demanded that all 225 politicians in the parliament, plus the President, should leave and let the system change, build the country, and elect new people who can rule the country in a better way to bring a better future for current and future generations.

People have been demanding system change, which I believe motivated many other countries around the world. So there are some successes, but people are still not happy about the achievement, even in this people's power. 

Host: You mentioned many interconnected issues there. So you mentioned there were a lot of environmental issues, food issues, economic mismanagement, etc. Were these issues going on for quite some time before the current upheaval in the country right now? 

Hemantha Withanage: Sri Lanka has gone through a 30 year old war between the single speaking society and the temple speaking society, and it was a military action which ended this war in 2009. Around the beginning of 2000, the government was lifted to the middle-income country level. Then, around the 2010-12 period, we increased to the upper middle-income country level, which allowed many of the private creditors to lend money to Sri Lanka on vulture kind of capital funds that all came to Sri Lanka to invest money into various infrastructure projects. 

We used to get concessional loans from the Asian Development Bank, World Bank, etc., which have 1% to 1.5% interest rates, but these private capital creditors have invested in Sri Lanka for 6% to 15% interest rates. So, if you look at the debt today, more than 50% debt actually belongs to these private creditors and there is some amount for the World Bank, Asian Development Bank, EBRD and others. The AIIB (Asia Infrastructure Investment Bank) also started investing in Sri Lanka. 

After 2008, the Chinese Belt and Road Initiative started building the Colombo port city in Sri Lanka, which seems to be the financial hub of the initiative. This also allows many Chinese private creditors to invest in Sri Lanka and by 2016-2017, these private creditors’ involvement in Sri Lanka increased a lot. Suddenly we saw, by 2020 September, Sri Lanka already surpassed the debt sustainability level, which was at the beginning of the current regime. This means that debt unsustainability issues have already arisen around the previous regime and other other regimes.

Therefore, when it comes to the debt crisis, I'm not going to blame the current regime or just the previous regime or the previous president. All the politicians who ruled the country for the last two decades are responsible. I say two decades, because around 1996, Sri Lanka was somewhat a sovereign and at least we had produced our own rice around 96, 97, 98 period. But, we have lost that. To some extent, I blame the country. In 1977, Sri Lanka introduced the open economic system and then neoliberal policies started adopting in the country. This allows many countries, including China and India, to dump a lot of goods from their countries and because of that, our production has gone down.

By 2020, when COVID affected the country, we suddenly saw that tourism stopped. Therefore, all dollars that came through the tourism industry significantly dropped. The second revenue for Sri Lanka was sending women and men to middle Eastern countries as migrant workers, and they also had difficulties. They were not able to send money to Sri Lanka, so this income also dropped. Production also dropped because of the lockdowns. These three main reasons dropped Sri Lanka’s economy. There were no adequate dollars to purchase things and that is the issue when it comes to losing debt sustainability in the country in mid-2020 or late 2020. 

Suddenly, we saw everything was going into a crisis, because without dollars, we cannot buy fuel such as liquid petroleum gasses, diesel, petrol, and coal. Not having energy sovereignty in the country led to many of the crises we are facing today. 

On top of that, the government made some initiatives at the very beginning stopping vehicle importation. They stopped importing farm oil from Malaysia and suddenly stopped purchasing or importing chemical fertilizer, without telling the truth to the people. They said that these importations and restrictions for chemical fertilizer are for moving Sri Lanka into organic farming, but unfortunately that's not the case. They didn't have money to buy the chemical for fertilizer. They lied to the people and to the whole world. Many of my friends have been asking, “You have been introducing very good organic agriculture policies” but this is not the case. 

They (the government) didn't have money to buy things. About more than a year ago, when the farmers started coming to the streets demanding chemical fertilizer, they found that the organic fertilizer, which we produce in the country using municipal waste, could not meet that demand and therefore they started importing nano nitrogen from India. The municipal solid waste converted into a so-called nitrogen organic fertilizer, came from China. 

When we found out there were very dangerous bacterias, like [inaudible] bacteria, the agriculture started demanding not to import these. The Centre for Environmental Justice, which is my organization, fights the legal action against this shipment. Finally, they were not able to unload this shipment and the ship was traveling around Sri Lanka for almost two months and finally went back, but the government had to pay for delay fees, which were about 6.7 million USD to the Chinese company.

So these kinds of measures were taken, but unfortunately these measures have many ad hoc problems. So every action they have taken, thinking that they will resolve issues, took us deeper into the disaster. 

Host: If we go back to fuel, for example, as you mentioned, there was a lot of debt taken on by Sri Lanka and that would've contributed to a lot of the inability to pay or service that debt. If we look back in June or July, there were massive fuel prices because Sri Lanka couldn't actually buy any fuel. They couldn't actually import anything. What actually happened in the past few months? What did the inability to buy fuel create in terms of mood on the streets and actions?

Hemantha Withanage: When the government didn't have enough dollars to pay for these energy shipments, such as the liquid natural gas, liquid petroleum gas, coal, diesel, and petrol, all the product providers refused to unload these shipments. Therefore, more than a year ago, the government changed the formula of LPG, which is cooking gas and initially 80% to 20% propane and butane. But then, they changed it to 50%-50%, which started explosions of gas cookers. This killed many people - I think more than 30 cases around and more than 700 incidents during that time. So that was the beginning of this energy crisis. 

But lately, they were not able to bring the LPG gas. The LPG gas queues started in the country and people have been waiting for weeks keeping their cylinders in front of the LPG station. Then, they started having power cuts. At that time, more energy was generated from fossil fuels since the water levels in the reservoirs were not good enough. Initially, there were 12 hour power cuts but the situation got better when the monsoon rains brought adequate water to the reservoirs. Even right now, our big demand is like 2,047 megawatts for today, but out of that about 1,437 megawatts are generated from renewable sources, including mega hydro. But today, only 609 megawatts are generated from fossil fuels. This was not the situation a few months back before the rain came. That time, they could not afford to buy coal and liquid natural gas. Also, there was no diesel. Some of the generators run by diesel power plants, so back then they had more power cuts, but right now experience less power cuts. These days, power cuts last one to two hours maximum.

The bigger issue was actually when the government was not able to pay for the shipments of diesel and petrol. That created long queues in front of all the petrol stations and really hit the people all the time. That was the time people decided to come to the streets, demanding that the government should provide them with adequate diesel and petrol.

Starting last week, the government has introduced a QR system. According to the QR system, there's a quota for everyone. There’s a little bit of improvement starting last week, but this doesn't mean that the government doesn't have money to buy diesel and petrol for the next year. That's the announcement. 

Because there's no money available, even though we have the QR system, and some of the diesel and petrol comes through the Indian credit line through the IOC, now the situation is a little better. However, I don't think it's going to last more than a few weeks. Even right now, we have queues for petrol and diesel across the country. 

The LPG situation is a little bit better because somehow they managed to get support from the World Bank and the gas company, they themselves start selling gas cylinders, which is something like 80,000 cylinders per day. I think they're meeting almost right now. But again, when this loan is over, we don't know what is going to happen.

Host: A lot of the fossil fuel that comes into Sri Lanka that helps the country move is obviously imported. How do you view this system of imported fuels? Do you think that this is sustainable in the long term? Or do you think that something needs to change or there needs to be some sort of reforms around where the energy is supplied from and who from? 

Hemantha Withanage: That’s a very good question. As a scientist, I have a science background and I'm also an environmental activist for more than three decades, since the 90s, we have been pushing for at least two things. One is about agriculture sustainability, food sovereignty, and also energy sovereignty. We have been pushing these at a time that Sri Lanka should depend and develop more and more local energy sources, which includes solar power and wind power. We have a lot of potential for wave power, although the government has not invested in this subject. I think across the world, the technology has some weaknesses, but Sri Lanka has a lot of potential for this one. Therefore, we say “don't push for coal power.” Unfortunately, the Ceylon electricity board engineers, who are more addicted to diesel and coal, continue to demand having Chinese coal power plants and Indian coal power plants built in Sri Lanka. At one point, even the Asian Development Bank did a study, and in this one they supported LNG, which is another fossil fuel, instead of promoting renewables.

I think bad policies led the country not to have energy sustainability because Sri Lanka, as an island nation, doesn't have oil. However, we have the sun, because we are in a tropical country. Almost 365 days, we have sunlight and wind power. But unfortunately these engineers who were trained, supported fossil fuels, so they did not give justice to this issue. 

In this case, I would blame the government for not having adequate capacity for renewable energy, but definitely at least the former President Rajapaksa, his election manifesto discussed prosperity. They agreed that Sri Lanka will increase its renewable energy percentage to 70% by 2030, which is also respecting our obligation to the nationally determined contribution and to the declaration.

But unfortunately, because the energy engineers did not support this idea, we had to go through this energy crisis right now. Work can learn a lot from this experience because countries definitely, according to the energy budgets, we have now by 2030, all the OECD countries need to achieve zero fossil fuels. All of us, including my small country, have to go for zero fossil fuels by 2050. But many of the countries are not going in this path, therefore climate change is happening and Sri Lanka will be an obvious victim of climate change because we are surrounded by the water, the ocean. Therefore, I think countries like Sri Lanka should have thought about energy sovereignty much earlier than now.

Host: Do you think that given the current, I guess what you would call a debt crisis in terms of where Sri Lanka is now, do you still think that those net zero targets are attainable for Sri Lanka as a country? Or do you think that it will take a bit more time and, and probably more sort of a bumpy ride to get there? 

Hemantha Withanage: Unfortunately, yes. That's the biggest problem. Now we are having the problem of an energy crisis. Although it is going to be voluntary, we have agreed to achieve the sustainable development goals by 2030 and energy achievements by 2030 through the NDC. None of these are going to be realized in Sri Lanka because of the current crisis and it'll delay a lot.

Right now, the current president said that he's going to put a work plan to become a developed country by 2048. But these are just papers. I mean, nobody has seen the policies or the proposals. I think what they are thinking as a developed country is a present day traditional developed country. By 2048 it'll not be a developed country. All those developed countries will have much more problems because of climate change, biodiversity crisis, air pollution and all these issues. I think that in 2048, if we’re going to call a developed country, that developed country will be very different to the developed countries in this decade. So we definitely need to understand that.

I think there's no such discussion happening in Sri Lanka. These are politicians putting with their few supporting academics probably. If we want to put a 2048 plan, which is the next 25 year plan, it needs to be a people's plan. It needs to be discussed with the civil society, local communities, and local people, and think about the issues we are going to face by the next three or four decades. I think not having such a plan will bring much more disaster into this island nation.

Host: What kind of role do you see in leadership right now, because it has changed since the recent fuel crisis started. What kind of role can you see this leadership playing in terms of how they engage, as you mentioned, in civil society, kind of determining where the country goes from now?

Hemantha Withanage: Actually, they are not engaging with civil society. They're not engaging with the people right now. It's the same set of politicians. They have changed their cabinet minister positions. But it's the same set of people. It's the same set of advice they are giving. For example, now they have appointed a few climate advisors to the President. 

The climate advisor is a politician and he doesn't have any clue about climate change. Even some of the ministries who spoke to me, for instance, the sports ministry is going to have a climate advisory committee and they're inviting me to come. Then I asked, who is the minister? The minister is one of the most corrupt and has done a lot of environmental disasters during the last and a half years. Now, people who created this kind of problem, people who thought nature is for making money for the politicians and for the rich people cannot resolve this problem.Their mindset is actually not allowing them to think differently in this kind of situation. 

So I don't expect that big change is going to happen, but this is going to be part of my role. This is going to be part of the role of the civil society, because the civil society has more understanding about the humanitarian crisis, food crisis, energy crisis, debt crisis, and illegitimate debt issues at the moment. I think we have to bring these kinds of ideologies, which we have learned by working with various civil society organizations across the world over the last three or four decades, and we are the people to bring that change. I don't expect that politicians, current politicians have any kind of different thinking to resolve this issue.

Unfortunately, the whole country, the majority of people think that going to the IMF (International Monetary Fund) is the solution. Majority of politicians think that going to the IMF is the solution. I would say that our solution is not with the International Monetary Fund, because what they’re going to do is to bail out all these private creditors. That loan, that money will add to our debt. 

In energy sustainability, food sustainability, and in general the sustainability of the country is the pathway we have to go. Otherwise, we would not have learned anything, because without thinking about sustainability or energy sovereignty and food sovereignty, etc., I don't think we are going to face this issue. If you learn from Zimbabwe, Argentina or Greece, we have a lot to learn. Those countries go to the IMF, but even after decades, their solutions are not there and their issues are not resolved. So we have to learn from those and bring that kind of dialogue within this society. 

I won't blame people because the people don't have much exposure to the international discussions about these. I think it is the job of civil society, academics in the country, or maybe the business people in the country to educate politicians and people to push for the solutions we need for this country.

Host: Do you think that the current ruling party in the government would be willing to initiate this dialogue and they would be open to change right now? Or do you think that it might stall?

Hemantha Withanage: Unfortunately, no. I don't see that the government is open to this discussion because at the moment they have been arresting people in the struggle. They have arrested some civil society. There are several human right violations continuing. I think it is the past practice.

They're going through the same kind of approaches. Instead of arresting them, they should have created a platform to understand what system change people have been talking about and where that system change can happen. How do we reduce or completely eradicate corruption in the country? How do we improve access to information? How do we improve legal enforcement? So these kinds of discussions need to happen. Unfortunately, it is not happening right now. It is not happening in the parliament. It is not happening in society. It's not even happening at the media level.

I think these isolated ideologies about how we want to build a more sovereign nation or a more sustainable country has yet to happen in Sri Lanka. 

Host: Before we sign off, is there anywhere that you would like to point listeners to either follow your work or your organization's work or on social media? Or is there a website that they can go to?

Hemantha Withanage: At this moment, we really need people-to-people support. In the last few months I have traveled to a number of other countries and I realized that people have sympathy with the people of Sri Lanka, more than the governments in those countries. I think the people in those countries can help rebuild this nation. I think Sri Lanka was one of the best tourist destinations and some of the Sri Lankan products are worldwide. I have seen Sri Lanka tea and ceylon spices worldwide and I think we can still build the name.

People-to-people’s love can bring much more prosperity to my small island nation, more than begging governments, begging IMF or begging private creditors who have predatory interest rates and all. That's not going to be the solution for my country. I want to ask people around the world to support my country and think about the people in this small nation. That is where you can build a more sovereign and sustainable Sri Lanka in the future. 

Host: Where could they follow that work from people that are outside Sri Lanka? Where would you recommend that they go follow on social media? Or visit any website?

Hemantha Withanage: I think the best is through social media. Right now, there’s not much local discussion happening. But definitely in the coming months, we are going to put some articles and in social media about what our solutions are going to be, what debt cancellation means to us, what illegitimate debt cancellation means to us, and how to support local communities. Some of the civil society organizations have already initiated some humanitarian support to 9 million people in the country. Out of 22 million in Sri Lanka, already 9 to 10 million people are suffering from a food crisis. If you are vigilant, you will definitely find some ways to help the people of Sri Lanka. I would say social media is the best in this case.