CEB reform in question: Strategic shift or structural shuffle?

Restructuring can destroy value when structural problems are misdiagnosed. Downsizing without parallel gains in productivity, technology, or operational efficiency can weaken institutional capacity

The Ceylon Electricity Board (CEB) is once again undergoing restructuring—this time with the stated objective of improving cost efficiency and delivering long-promised benefits to Sri Lankan taxpayers and electricity consumers. The proposed reforms center on the functional unbundling of the utility into generation, transmission, distribution, system operations, and asset management.

At one level, this marks a long-awaited shift. For years, the CEB has been portrayed as a financially “bleeding” state-owned enterprise—inefficient, overburdened, and increasingly misaligned with both consumer expectations and modern energy market realities. Public frustration has made reforms not only desirable, but inevitable.

Yet beneath this momentum lies a more uncomfortable question: is this truly structural reform, or merely administrative reorganisation?

Role of labour

Because the deeper challenges facing Sri Lanka’s electricity sector do not originate solely within the CEB. They are rooted in a broader economic and institutional landscape—tariff-setting mechanisms, heavy reliance on imported fuel, currency volatility, and rigidities in labour and decision-making. The role of labour illustrates this complexity. ‘Organised labour’ has long been an integral part of the sector’s institutional fabric, safeguarding worker welfare and ensuring continuity of service. However, it also operates within a wider political economy, where trade unions are often influenced by vested interests in the absence of a consistent national energy policy or long-term strategic direction.

These forces, embedded in the political economy of pricing, ultimately shape the sector’s financial and operational viability. Without addressing them, internal restructuring risks becoming little more than a reshuffling of functions rather than a resolution of fundamentals.

Historically, reform efforts have a tendency to to focus on workforce reduction—an approach that has repeatedly failed to deliver sustainable outcomes. The real issue lies not in the size of the workforce, but in the governance framework within which it operates. Without addressing these institutional subtleties, restructuring risks becoming an administrative exercise rather than a genuine transformation.

When implemented within a coherent regulatory framework, unbundling can enhance transparency, accountability, and even competition. But without strong coordination mechanisms, it can lead to fragmentation, overlapping responsibilities, and regulatory ambiguity. The result is often higher costs rather than improved efficiency

Inside-out trajectory

Effective restructuring, particularly in sectors like electricity, requires what may be described as an “outside-in” approach. Strategy must be anchored in external realities—market conditions, cost structures, and policy constraints—before being translated into internal organisational change. The “inside-out” approach, by contrast, starts with existing assets and administrative structures, often perpetuating inefficiencies rather than correcting them.

Sri Lanka’s electricity sector has largely evolved along this ‘inside-out trajectory’. The result is a system that reflects ‘legacy structures’ more than present-day demand or future energy needs—a classic case of ‘strategic drift’.

Corporate restructuring, in principle, is intended to improve efficiency, realign strategy, and strengthen financial sustainability. Often, it is triggered by what management theorists describe as a “success trap,” where previously effective strategies are prolonged even as external conditions change. In such situations, it is not internal initiative but external pressure that compels adaptation.

Global energy companies offer instructive examples. Firms such as Ørsted, E.ON, and Schneider Electric have successfully repositioned themselves by aligning with broader global frameworks, including sustainability and energy transition goals. Their transformations reflect not just internal reorganisation, but a fundamental shift in strategic direction—an application of what economist Joseph Schumpeter famously termed “creative destruction,” where outdated models are replaced by more competitive and sustainable ones.

Core challenges 

This raises a critical question for Sri Lanka: does the functional unbundling of the CEB address the sector’s core challenges, or does it risk overlooking them?

The answer becomes more complex when viewed against evolving patterns of electricity demand. Over the past decade, Sri Lanka has undergone significant structural change. The rise of apartment living and high-rise residential complexes, the expansion of commercial zones, and the growth of manufacturing, retail chains, and leisure industries have fundamentally altered consumption patterns. Electricity demand is no longer defined by basic access, but by intensity, reliability, and quality.

This shift is reflected in rising per capita consumption, driven by increased appliance ownership and the rapid spread of digital technologies—from smartphones to smart televisions. While Sri Lanka has achieved near-universal electrification, with over 99% of households connected to the grid, the challenge today is no longer access, but adaptability. Yet the sector remains anchored to a legacy model shaped by past priorities. This disconnect between evolving demand and static institutional structures reinforces the risk of strategic drift.

It is within this context that the dangers of “re-destruction” emerge.

Restructuring can destroy value when structural problems are misdiagnosed. Organisational charts may change, but if governance frameworks, incentive systems, and market realities remain unaddressed, the underlying inefficiencies persist. In many cases, reforms focus narrowly on cost-cutting to demonstrate short-term financial improvement, often at the expense of long-term sustainability.

Downsizing without parallel gains in productivity, technology, or operational efficiency can weaken institutional capacity. The loss of experienced personnel erodes institutional memory, while operational effectiveness declines. What appears as efficiency on paper may, in reality, be a reduction in capability.

Moreover, restructuring efforts are sometimes driven less by internal necessity than by external pressure—from multilateral institutions or political constituencies. In such cases, reforms risk becoming cosmetic, designed to signal compliance rather than deliver substantive change.

The unbundling of large state monopolies, including in sectors such as electricity and railways, illustrates this risk. When implemented within a coherent regulatory framework, unbundling can enhance transparency, accountability, and even competition. But without strong coordination mechanisms, it can lead to fragmentation, overlapping responsibilities, and regulatory ambiguity. The result is often higher costs rather than improved efficiency.

In such circumstances, restructuring does not eliminate inefficiency—it redistributes and, at times, amplifies it. What begins as reform risks ending as “re-destruction,” where well-intentioned initiatives deepen rather than resolving structural weaknesses.

The challenge for Sri Lanka, therefore, is not simply to restructure the CEB, but to rethink the system within which it operates. Without that broader shift, reform may change the form—but not the function—of inefficiency.

The writer could be reached at [email protected]