The Ceylon Electricity Board, the State-owned utility monopoly, announced that it will be purchasing 200 MW of emergency power from the private sector. It is to do so on approval granted by the Public Utilities Commission of Sri Lanka (PUCSL) and the Cabinet of Ministers.
The move is expected to be costly, both to the subsidised consumers and the loss-making State-Owned Enterprise.
While the CEB usually buys emergency power for short-term like 3-6 months, the Government has decided to obtain 200 MW of emergency power on medium-term basis which would add to the CEB’s losses. According to the proposal by the CEB, a unit of power is scheduled to be purchased from ACE Power Embilipitiya for Rs. 20.93, from Asia Power for Rs. 21.25 and from ACE Power Matara for Rs. 21.40. Despite the enormous amounts of money spent on the CEB it has not only been loss making but failed to ensure uninterrupted energy supply to consumers.
The restructuring of the CEB has been a long-standing need, especially in the wake of the economic crisis precipitated among other factors by the overspending and loss making of the State-Owned Enterprises. In 2022 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 of 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.
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.