President Ranil Wickremesinghe on Monday told parliament while presenting his interim budget that a separate agency will be set up to restructure state enterprises which are eating up people’s taxes

The government is going to slice the workforce in these loss-making SOEs for two reasons – to cut down the cost and to implement what it has agreed with the IMF

The government’s move to restructure state-owned enterprises (SOEs) such as SriLankan Airlines, Ceylon Electricity Board (CEB) and Ceylon Petroleum Corporation (CPC) has irked the trade unions in those institutions.

Whatever the reasons the authorities cite for the move may be, it is clear that this time the push for the move has come from the International Monetary Fund (IMF) from which the government has sought assistance to come out of the current socioeconomic mess. 

President Ranil Wickremesinghe on Monday told parliament while presenting his interim budget that a separate agency will be set up to restructure state enterprises which are eating up people’s taxes. Earlier on August 1, the Cabinet approved a proposal by Power and Energy Minister Kanchana Wijesekera to commence the restructuring of CEB and CPC after which a committee was appointed to propose a restructuring plan.  

Some of the proposals in the interim budget, especially the increase of VAT from 12 per cent to 15 per cent would definitely add to the ordeals of the people especially the low-income families, as the proposal would increase the prices of essentials. Despite Prime Minister Dinesh Gunawardena having assured in Parliament on Wednesday that VAT increase does not apply to the essentials, it would ultimately be the ordinary people at the receiving end when the tax proposals begin to work. 

A recent study by World Food Programme (WFP) had found that 73 per cent of participating households in Sri Lanka had reduced their diet and food intake, due to the high inflation. UNICEF Regional Director for South Asia, George Laryea-Adjei said in a statement on August 26, “Families (in Sri Lanka) are skipping regular meals as staple foods become unaffordable. Children are going to bed hungry, unsure of where their next meal will come from.”  He said “staple foods have become so unaffordable in crisis hit Sri Lanka that severe malnutrition is the highest in the region. The UN said in June that at least 17 per cent of children in Sri Lanka are suffering from chronic wasting, a disease that carries the highest risk of death.  

This is the result of a crisis created by the present and past governments. However, it is the people who have to pay the price for the corruption and mismanagement of the economy by the political leaders and the officialdom. Reeling under a huge foreign exchange crisis, the government ultimately sought assistance from the IMF in mid-March and the international lender accordingly expects structural reforms to be carried out by the government. It is in line with these agreements that the largest state-owned enterprises are going to be restructured. In practical sense, it means a considerable number of shares of these entities will be offered to the private sector and a sizable number of employees will be retrenched. 

The groups including the trade unions and the leftist political parties that call this move “privatisation” are up in arms against it claiming that privatisation will negate labour rights. The authorities on the other hand argue that the only remedy in respect of loss-making state-owned enterprises is to involve the private sector in running them. Authorities do not deny that the rights of the workers would shrink under private sector managements, but they do not care about it. 

Similarly, trade unions do not deny the prevalence of large-scale corruption, wastage and mismanagement in these institutions as well as the fact that people have to bear the brunt of all these, but they too do not care about it. They argue that it is the corrupt officials who have to be responsible for the losses incurred by the state-owned institutions and not the fact that they are under government control. The problem is, whoever is responsible and whatever the reason may be, corruption and mismanagement have been continuing for decades.  

An institution being a private entity does not mean that it always runs at a profit nor does a state-run entity mean to run at a loss always. However, the prospects of a private institution making profits are higher than the case with a state institution, as the profit is the fundamental objective and thereby the obsession of the head of a private firm, while it is just an unbinding duty for a head of a state entity.  Besides, privatisation of state entities has neither always been rewarding nor unrewarding in Sri Lanka. 

Corruption has become an inseparable component in these institutions. Power and Energy Minister Kanchana Wijesekera had expressed his concerns several times over the hurdles within the CEB to proceed with the renewable energy projects. Media also has been accusing a powerful group of officials for this and a tendency within the CEB for emergency purchases of electricity from the private sector. 

Minister Wijesekera ironically lodged a complaint with the Criminal Investigation Department (CID) on August 18 to investigate the activities of two institutions under his watch, the Ceylon Petroleum Cooperation (CPC) and Ceylon Petrol Storage Terminals (CPSTL). He had requested to investigate into the fuel procurement, evaluation of proposals, non-placement of orders, selection of suppliers, delays in payments, distribution irregularities and also the allegations made by individuals within CPC and the CPSTL. The statement in July by the Chairman of the Public Utilities Commission of Sri Lanka (PUCSL) Janaka Rathnayake that the CPC shows a higher purchasing price than the actual purchasing price and fuel prices can be reduced by Rs. 200 is still standing without being challenged. 

Corruption in these institutions is prevalent not only at the highest level. Media reported in March that although the operations at the Sapugaskanda oil refinery had dropped to 50% of the capacity of the facility, there had been no decrease in the amount paid as overtime pay. In 2019, during Mahinda Amaraweera’s tenure as the Power and Energy Minister, it was reported that CPC’s monthly overtime payments had run into an amount as high as Rs. 1.9 billion. Even JVP Parliamentarian Vijitha Herath while speaking in Parliament recently on the excessive workforce in these institutions blamed the successive ministers for having filled them with people from their constituencies. 

The government is going to slice the workforce in these loss-making SOEs for two reasons – to cut down the cost and to implement what it has agreed with the IMF. The government may be cognizant of the political repercussions of the retrenchment, but it has no options, as the financial assistance of the IMF is bound to its conditions and it is the only way out of the economic crisis the country has currently been engulfed in.

However, the government’s only concern may be the reaction of the powerful trade unions. The authorities would not have even a faint thought of the humanitarian aspect of retrenchment but would have thought about counterbalancing the political repercussions with compensation payments. 

Trade unions and the leftist political parties are now between the devil and the deep blue sea. They have failed to take the challenge thrown by the government to present their alternative solution to the economic downturn against the government’s solution – the IMF programme. They are also not in a position to deny the facts about excessive workforces in these institutions and the corruption on the part of employees such as unsubstantiated overtime payments. On the other hand, if they accepted this situation and thereby agreed to the IMF conditions on these institutions, they would have to face the wrath of their own membership.