Sri Lanka’s Ministry of Co-operative and Internal Trade has announced it will set the price of rice from midnight today, reported Ceylon Today.
The rice harvest is expected to be hit hard by the current drought and farmers have been asked to refrain from growing the water-intensive crop, said LBO.
"The drought is worrying us to some extent," Central Bank Governor Nivard Cabraal said.
"In the agricultural side we have to make sure that there is no unnecessary spike in prices. At the same time we can have an impact where generation of electricity generation is concerned."
In Sri Lanka rice is given import protection to “fatten farming lobby profits”, LBO said, adding that the prices, which are already higher than in much of the world, could go up even higher due to the drought.
Paddy harvest drops, rice prices rise - The Sunday Times (23 Feb 2014)
Cabraal said the impact on the electricity market due to the drought is lessened as a second coal power plant at Norochcholai was now generating 300MW of electricity.
"Norochcholai is now generating 600MW of electricity. As a result the stress that the drought would put on electricity is much less now," he said.
According to the website, state-run Ceylon Electricity Board has lost nearly US$200mn over the past quarter.
Sri Lanka was hit by a balance of payments crisis in 2011 due to large volumes of credit taken from the Central Bank by state energy firms, in order to subsidise their customers, forcing a depreciation of the rupee and high inflation.