Case for CEB reforms is self-evident

Last week Parliament passed legislation that removed competitive bidding for energy projects. Interestingly the same week the Chairman of the Ceylon Electricity Board (CEB) made a controversial statement that he was told by President Gotabaya Rajapaksa that Prime Minister Narendra Modi of India had insisted a 500-megawatt wind power project be directly given to India’s Adani group. CEB Chairman M.M.C. Ferdinando the very next day withdrew his statement. 

The country was also looking at the possibility of a trade union action by the CEB unions which warned the Government of an indefinite strike in protest of the new legislation, and against the Government granting the Adani Group exclusive rights to renewable energy projects without any competitive bidding process.

All these demonstrate the dire necessity for reform of the lossmaking energy monopoly run by the State. The CEB and the Ceylon Petroleum Corporation (CPC) have come to symbolise State sector monoliths that have not only failed but have dragged the whole country down with their unsustainable business models. For years, State-run monopolies in the electricity generation and distribution sectors have curtailed competition, innovation, efficiency, and profitability. It is long past the time to address these anomalies and take a serious look at reforming the CEB, with greater participation from the private sector. However, such private sector participation should not be in the form of lop-sided power purchase agreements entered into by the Government based on political patronage and influence.

This kind of eyewash in the place of credible reform in the power sector will only make Sri Lanka’s power problems worse and further burden the State with financial commitments it cannot bear. Agreements reached with private entities must be transparent, and must not be shadowed by corruption and deal-making. 

In recent months former Finance Minister Basil Rajapaksa pushed through the Cabinet a power purchase agreement for the Yugadanavi power plant in Kerawalapitiya with a US-based company. The recent revelation by the CEB Chairman that the Adani group had entered into a ‘government to government’ agreement to establish a 500 megawatt renewable project in Mannar is at the outset a positive development which would ease the burden on the CEB. Yet even good policies can be implemented badly. 

Both these projects lack transparency and therefore open them to criticism and controversy. The Yugadanavi agreement entered into by Basil Rajapaksa was challenged in the Supreme Court by members of his own Cabinet who claimed that they were in the dark about the agreement ratified by the Cabinet itself. The Adani agreement has been criticised for being an unsolicited proposal. Despite his later withdrawal of his statement before the Committee on Public Enterprises of Parliament, CEB Chairman Ferdinando gave specific dates and details on how he was instructed by President Rajapaksa to grant this project to the Indian company due to political pressure. Even when there is private sector involvement in energy generation, vested interests and corruption has marred the playing field and reduced the benefits to the State and the people. The ‘diesel mafia’ has often prevented establishing more cost-effective, sustainable generation options and burdened the CEB to purchase more expensive electricity generated through fossil fuels. It should be clear by now that the key to an efficient energy sector is in competition with transparent regulation offered by the State. The investments that need to be made in the renewable energy sector, be it in wind, solar, hydro, dendro or others, need capital infused from the private sector, which cannot be afforded by the State, especially now due to the economic meltdown. Bringing in the private sector, including international investors, through transparent processes can address many of the deficiencies that have crippled the CEB and as a result the country. Sri Lanka cannot afford to delay reforms in this crucial sector.