Tariff increase requested by public boards and enterprises

The inefficiency and corruption in State organisations has become such a burden to the Treasury and the people that it seems this state of affairs will continue by way of taxing the masses forever.

At a prime time news of 16 February, I watched how the Minister of NWSDB was comparing the price of a litre of bottled water to the litre of water supplied by the Board and justifying the increase in water tariff in the future. He does not realise that bottled cannot be compared with that supplied by the Board where the production of water is in large scale and the unit cost per litre should be lower and consequently the tariff should be lower. Bottled water entails packing costs and consumers need not use water filters to consume. 

Another justification the Board insists is funds required for capital projects. Has the Board drawn up a project cash flow and arrived at how much funds are required for the project to be feasible? What is its debt ratio at present? What is the throughput cost to the Board and what percentage margin is left to cover current overheads? Cannot the overhead cost be reduced and only costs that add value be incurred? What the Board requires before the decision to increase tariff is to carry out a total cost management exercise and justify there is value addition in all its costs incurred.

Most public utilities like CEB, CPC, NWSDB, and SriLankan Airlines should do first is to carry out total cost management exercise and justify before requesting tariff increases. The breakeven level should be ascertained. In countries like India, the Confederation of India Industries (CII) has been formed to offer professional advice to industries for cost reduction exercise. Therefore local professional bodies, like the Certified Management Accountant Institute and other professional institutes, should get together and form a central consultancy body with the support of the Government to advice and introduce cost management exercise in public utilities. Wastage could then be reduced and only acceptable costs that add value be incurred.

Let these public utilities publish their audited annual accounts in the newspapers and be transparent so that public can acknowledge their justification for a tariff increase if needed.

Today the Government is faced with double economic problem – drought causing water shortage and on the other hand power depletion. 

CEB

Ceylon Electricity Board (CEB) is singing its same old song – water level decreasing and thermal power generation to resort to. I think even with another coal power plant or LNG plant, they will still go on singing the same song.

CEB has to be reformed immediately without delay. It is the generation sector that needs be reformed with Private-Public Partnership. It is this sector that costs the Board high expenditure. Under this scheme if shares of 49% are issued and this sector made a power generation authority, I feel that there will be large inflow of dollars into the country through purchase of shares by huge international plant manufacturers and this will lead to a great extent in solving our reserve and deficit problem of the country and people need not be taxed to cover inefficiencies.

Further, new generation technology can also be brought in. What has happened to the reform study of 2005 under which remuneration of CEB employees was raised to high levels (more than the private sector) in advance before implementation during the ministership of the present Speaker? Presently even with the Least Cost Generation Plan of CEB, I am sceptical that CEB will ever stop singing its thermal generation song during drought times. It appears there is a thermal mafia in the Board.

Is CEB overstaffed? Do the people know how many retired CEB personnel are presently re-employed (in addition to their pension) into the ministry, power and coal subsidies unofficially? Not all employees get this opportunity after retirement, except those who are in the good books of the mafia.

SriLankan Airlines

With regard to Sri Lankan Airlines, we should not lose confidence in running this organisation profitably. Debts have to be restructured and here again under Private-Public Partnership should be the future strategy.

The organisation should continue as a going concern as a cost effective concern. Effective budgetary and cash flow management should prevail. If throughput costs cannot be covered during this time of world reduced oil prices, I don’t think we will ever get another opportunity to turn around this organisation.  There may be a necessity to resort to unpopular measures like giving a golden hand shake and curtail staff or move them to other Government enterprises where  staff vacancies exist.

CPC

With regard to the CPC, it is difficult to understand why this organisation cannot be managed and run profitably, as it only entails buying and selling its product strategy and being a large monopoly. Has the loss resulting from hedging being swept under the carpet? Have the culprits being inquired into and punished?

It is understood that the Government is now contemplating forming a ‘Super Committee’ above these public utilities to restructure them. This will only lead to further complications and confusions and worsening the already existing operations and increase bureaucracy.

How did former Minister late Felix Dias Bandaranayake and late President J.R. have the courage to covert the loss-making Telecommunications Department into a profitable authority (Sri Lanka Telecom) under Public-Private Partnership?

It only requires courage and commitment. Are the present leaders ready to take the challenge, leaving protestors to go on barking until they stop barking and see for themselves the reality of a profitable venture?

Concerned Citizen