Home / / Electrifying losses

Electrifying losses

Comments / 965 Views / Saturday, 21 April 2012 00:48

The release of the annual Central Bank report is a time for many to take a second look at the economy, particularly the performance of State-Owned Enterprises.

It was reported that the Ceylon Petroleum Corporation (CPC) and the Ceylon Electricity Board (CEB) alone have made a combined loss of Rs. 119.5 billion in 2011 on rising global oil prices when the two institutions combined were supposed to breakeven according to an agreement with the IMF.
Last year, the CPC made a loss of Rs. 94 billion while the CEB loss was Rs. 25.5 billion. Despite concerns raised over the accuracy of the data and its context by various parties, these numbers are still cause for massive concern.
In 2010, the combined loss amounted to Rs. 22.2 billion with the CEB recording a profit of Rs. 4.8 billion and the CPC reporting a Rs. 27 billion loss. The CPC incurred heavy debts in 2011 with State-Owned Enterprises, including the CEB, not able to pay the CPC.
CPC’s net borrowings from the banking system for working capital requirements increased by Rs. 53.3 billion during the year. Treasury bonds amounting to Rs. 55 billion were issued by the Government in January 2012 to settle accumulated outstanding dues to CPC from the CEB and other State-Owned Enterprises, the Central Bank noted in its 2011 Annual Report.
The financial position of CEB weakened during the year mainly due to heavy reliance on thermal power for electricity generation. According to unaudited provisional financial data, CEB recorded an operating loss of Rs. 25.5 billion in 2011 compared to a profit of Rs.4.8 billion reported in 2010. The higher dependence on thermal power due to dry weather conditions that prevailed during the second half of 2011 was the main reason for the deterioration in the financial position of CEB.
The CEB’s fuel bill increased by 54 per cent to Rs. 25 billion in 2011. On average, CEB incurred Rs. 6.77 to generate a unit of electricity in 2011. The average purchase price of power per unit from the private sector amounted to Rs. 17.24 in 2011.
Accordingly, the average cost of electricity generation increased to Rs. 16.21 per unit while the average tariff of a unit was at Rs. 13.22 in 2011. CEB’s short-term borrowings from banks and other outstanding liabilities to CPC and to Independent Power Producers (IPPs) amounted to Rs. 121 billion by end 2011.
Therefore, it is rather amusing that the Power and Energy Ministry releases statements to the media claiming that Rs. 22.5 billion was given as “concessions” to the people when the truth of the matter is that this is tax money paid by the people in the first place.
Studies of Sri Lanka’s long-ailing SOEs have shown that as much as 2% of Gross Domestic Product (GDP) is lost annually, but there are almost no efforts to roll back these expenses. Whether it is Mihin Lanka or the Water Board, a large number of public enterprises are allowed to roll into larger and larger debt year after year.
Some of these losses are inevitable and necessary to provide people with a better standard of life, but there are also many instances when bad management and wastage is the culprit. A fact that the Committee on Public Enterprises or COPE as it is better known has emphasised repeatedly – to deaf ears.

Share This Article


Today's Columnists

Budget 2016 and the ‘light-touch’ education policy changes therein

25 November 2015

  While the Government provides the infrastructure, the potential to transform education is in the hands of the National Institute of Education which is responsible for curricula and teacher training and development. The spotlight rea...

The Top 15 from the market oriented Budget 2016, challenge is execution!

24 November 2015

Further to the Economic Policy statement made by the Prime Minister in early November, which was essentially an external market oriented export-led policy statement, in my view the Budget 2016 further gave details to the overall strategy of brand ...

Vapours of cleverness

24 November 2015

It was a calculatedly choreographed media event. It was a dismal reminder that the Maithri-Ranil coalition prefers the opaque to that of transparency in governance.   President Maithripala Sirisena with Prime Minister Ranil Wickremesinghe v...

What makes a great leader?

24 November 2015

The emotional and social intelligence competencies of highly effective leaders Want to be a successful leader?  Want to be a better leader?  It helps to know what it takes. Of course, there are lots of books and opinions one can ...

Columnists More