Get real on the energy crisis

Friday, 18 February 2022 00:00 -     - {{hitsCtrl.values.hits}}

In a week that witnessed a ‘white van’ abduction of an activist and an attack on the residence of a senior journalist, there was also some rather amusing news as well. 

One such news was the announcement by Environment Minister Mahinda Amaraweera that the Cabinet is considering proposing to its ministers to cycle to work at least once a month supposedly to encourage the public to follow suit. An equally amusing news item was that two cabinet ministers had gone to the Colombo port to receive what normally would have been a routine arrival of an oil tanker. Both these news items are products of our time. They are reflective of the tragic state of the economy and in particular the precarious state of the energy sector. Both these stories are deeply farcical yet the realities they reflect are far more tragic.

The energy sector in Sri Lanka is facing an unprecedented crisis. For the first time in living memory, the country is looking at the real possibility of running out of fuel to generate electricity and the continuous operation of public and private transport. Even though the immediate reason for this crisis is the incompetent handling of the country’s economy by the Central Bank and the Ministry of Finance, the current predicament in the energy sector is due to years of mismanagement and corruption by successive administrations.

The Ceylon Electricity Board (CEB) and the Ceylon Petroleum Corporation (CPC) have been lumbering State sector dinosaurs resistant to reforms. Despite having a clear monopoly in the power sector, the CEB has been running at a loss for years. The accumulated losses of the CEB for the past 10 years are in the range of Rs. 300 billion. The CPC has not done any better with accumulated losses in the range of Rs. 250 billion and in 2021 alone accumulating Rs. 707.5 billion as debt to State banks or about 4.2% of projected gross domestic product for that year. Yet, its sole competitor the Lanka Indian Oil Corporation (LIOC) is making a profit selling fuel at the same price as stipulated by the Government. 

Both these institutions have been used by successive governments to further their political objectives and as a means of providing jobs for their party members and relatives. Purchasing of power from private sector producers and purchasing of crude, coal, oil, lubricants, etc. in the international market through numerous private entities have become a source of massive corruption with very little transparency. As a result of this corruption and mismanagement, the public have had to incur colossal losses. For example, despite having a State sector monopoly and supposedly subsidised power tariffs, Sri Lankan consumers pay some of the highest rates in Asia for electricity. The subsidies for oil are paid by the taxpayers while the losses of the CPC and the CEB are also absorbed by the taxpayers.

This unsustainable mismanagement is well-illustrated by this week’s ‘news’ of Energy Minister Udaya Gammanpila and Minister of Ports Rohitha Abeygunawardena ceremonially welcoming a tanker to the Colombo port with 40,000 metric tons of oil. This one shipment is supposed to ward off power cuts for a few more weeks and keep the vehicles on the road for a few more. Such lame photo opportunities or political gimmicks like cabinet ministers ‘sacrificing’ a day’s ride in their very expensive and gas guzzling vehicles is not going to address the dire crises facing the energy sector.

The present Government has an overwhelming majority in parliament to get important legislation through. It can use this opportunity to address the reforms that are desperately required in State enterprises such as the CEB and the CPC. The time has long passed for tinkering with these guzzlers of public funds. Rather than enact comical dramas it is time that this Government got real with the crisis at hand in the energy sector.