Courageously go forth with CEB reforms

Recently a Cabinet-Appointed Committee on Power Sector Reform recommended the division of the Ceylon Electricity Board into 14 companies which are to take over the businesses of generation, transmission, distribution, and sale of electricity.

The restructuring is expected to attract significant investments into the energy sector and replace the current monopoly held by the CEB. As with many previous attempts at restructuring debt-riddled public enterprises, there is no doubt there would be significant resistance from interested parties. However, experience in the last 30 years has proven that reforming loss-making public-sector enterprises, despite their unpopularity at first, yields significant results in the long term. 

A case in point is the liberalisation of the telecommunication sector. Once a State sector monopoly, it has now emerged to become a competitive sector with several players offering excellent services to the customers. From being a single State sector institution that required political patronage to obtain a telephone to today’s vibrant mobile and fixed line services provided at competitive rates could not have been a reality if difficult decisions were not made in the 1990s. At that time there was significant resistance to privatisation, and numerous arguments including potential threats to national security were raised. Despite this resistance the results speak for themselves and until the recent economic downturn, the telecom sector was one the most dynamic and productive sectors within the economy.

The liberalisation of the CEB will be a far more difficult task. There are numerous individuals and entities who are to lose out through a transparent and competitive liberalisation process. The numerous vested interests, be it in trade unions or private sector generators who are earning extraordinary profits from the current system are bound to resist any attempts at restructuring the CEB.

However, the continuation of the current model for the monopoly is not viable. Power and Energy Minister Kanchana Wijesekera recently stated that the CEB is likely to make a loss of Rs. 152 billion in the next four months, despite the electricity tariff hike implemented in August. “During the first eight months of the year, the CEB has incurred a loss of over Rs. 108.67 billion,” he told Parliament. The Minister is optimistic that an additional income of Rs. 15 billion could be generated by the CEB following the upward electricity tariff revision, which was implemented in August.

There is no way forward for this State sector dinosaur which has been politicised and corrupted through the years. It has hardly been able to implement a power generation master plan and has 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.

Sri Lanka’s State-Owned Enterprises, including the CEB are a serious burden on public finances. With the current economic crisis, 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 without the usual corruption and deal-making that can destroy confidence in these reforms.