CEB projects Rs.94bn loss this year

The Ceylon Electricity Board (CEB) has projected an operational loss of Rs.94 billion for the year 2013, which should be ultimately financed by the country’s Treasury, a Colombo-based think tank noted.

According to the Pathfinder Foundation, the cost estimate for the year 2013 stands at Rs.268 billion, against a revenue estimate of Rs.174 billion, projecting an operational loss of Rs.94 billion.

Apart from the operational loss of such magnitude, the Treasury is supposed to provide the CEB with Rs.30 billion in 2013 as a subsidy for project loan repayment. Therefore, as the think tank pointed out, the total subsidy for the CEB in 2013 is likely to hover around Rs.124 billion.

“This colossal loss is to be subsidized by the Treasury through taxes extracted from all citizens, including the poorest of the poor,” Pathfinder noted.

It further stressed that the loss that would be subsidized by the Treasury is enough to increase the current Samurdhi payments of Rs.1.5 billion by eight times, double the education budget of Rs.62 billion, increase the health budget of Rs.93 billion by 30 percent and build five more new airports like Mattala.

According to analysts, the unsustainable losses incurred by the CEB and CPC are primarily due to the non-pass through of the international prices of oil to consumer and the highly inefficient institutional structures of the respective organisations.

The normal practice that has been there is that the subsidy arising from this to be transferred to the books of t he two state banks in order to keep these losses away from the government’s balance sheet.

“Continued adjustment of fuel and electricity prices to reflect the international price of oil will address a major part of the problem. However, there are also structural issues which continue to hamper the operational efficiency of these two state-owned enterprises (SOEs),” Pathfinder said.

It also highlighted the need for a more open and liberalized approach to the country’s power sector to enhance the efficiency by way of bringing in competition.

The International Monetary Fund (IMF), with which Sri Lanka completed US$ 2.6 billion Standby Arrangement (SBA), had also urged the authorities to restructure the CEB and CPC.

Even during the latest press briefing by the IMF, held to announce the failure of negotiations between the government and the IMF for an extended facility, the IMF delegation head John Nelmes underlined the need to restructure the loss-making SOEs to mitigate fiscal pressure.