CEB reform acid test for new administration

The unviable business model of the utility monopoly, the Ceylon Electricity Board has once again become a serious discussion point with its employees demanding the management to distribute bonuses before 10 December. In a letter to its Chairman, the CEB workers union has emphasised that while employees were denied bonuses in recent years due to reported losses, the board’s current profitability warrants sharing the financial benefits with its workforce. 

Cabinet Spokesman Dr. Nalinda Jayatissa last week assured that the bonuses to the CEB employees will not hinder the relief promised to the electricity users. Meanwhile the CEB management and the Public Utilities Commission of Sri Lanka (PUCSL) are in disagreement over proposed tariff revisions on electricity. 

All these point out to the chaos that is created when a public utility is run as a monopoly by the State with little choice or space for competition. This has resulted in all sides of the equation suffering, with the consumers paying some of the highest tariffs for electricity in the region while the CEB has continuously bled the Treasury with its losses. 

State Owned Enterprises, especially the loss making giants such as the CEB played a fundamental part in the economic collapse of 2022. As a result of these SOEs not undergoing reform, the Government and by extension the people have faced huge fiscal deficits. From 2006-2021, the accumulated losses of SOEs were Rs. 1.5 trillion and the debt owed by these enterprises was Rs. 1.8 trillion in 2021.

Even getting up-to-date accurate information on the state of SOEs is not as straightforward as one would like. Of the 400-odd entities, regular information was only available for 55. Even obtaining a complete list of entities has proved to be a challenge. Financials are routinely late and only a minority obtain ‘clean’ audit reports. 

There is no way forward for these State sector dinosaurs which have been politicised and corrupted through the years, other than through robust reform which should include either full or partial privatisation. The CEB which leads these SOEs have hardly been able to implement a power generation master plan and have failed to switch towards energy efficient alternative sources with a minimum cost per unit. Its dollar debts which are backed by the Treasury have also become an enormous burden on the national economy. For many years the CEB has shown little transparency in power generation and transmission. Often cronies have been offered lucrative deals for private sector power generation. There have been numerous unsolicited proposals that were accepted by the Cabinet which have increased national debt.

Despite the need for robust reform, recently the CEB announced that privatisation is off the table as part of these reforms. Sri Lanka’s State-Owned Enterprises, including the CEB are a serious burden on public finances. It is impossible to keep these loss-making enterprises afloat. The restructuring of the CEB, if done properly in a transparent manner, will set a precedent for many other such loss-making SOEs which need reform immediately. It is imperative that the Government get this process right and it should look at all options rather than ruling out bringing in the private sector. The time for a pragmatic and realistic approach to SOE reform is the need of the hour. If the Government is to be saddled by ideological considerations it will surely regret this lost opportunity in the years to come.