SOE reforms don’t only mean price hikes

• Govt. appears not ready to address issues of overstaffing, politicisation, corruption and wastage inherent to these organisations  

The authorities are now mulling another upward revision in water tariffs, weeks after they insisted that another round of electricity tariff hike was required to provide uninterrupted power next year.

This shows that the Sri Lankan policymakers and bureaucrats have completely misunderstood what the broader state-owned enterprise (SOE) reforms mean. 

The government jacked up fuel prices and electricity and water tariffs a few months ago, citing that the years-long underpricing caused the utilities to accumulate billions of rupees of losses, causing a deep fiscal hole in the public finances every year. 

The country’s Water Minister Sanath Nishantha calling for another tariff hike said the National Water Supply and Drainage Board (NWSDB) was incurring losses for every unit of water it sells. 

He pointed out that the NWSDB was still selling a unit of water for two cents a litre while it costs them 3.5 cents and the officials were studying by how much and from when the next price revision could be implemented.  

This approach shows that the government has resorted to the easiest way to fix the SOE issues i.e., raising prices or tariffs until all the losses are erased.  However, it appears that the government is not ready to address the issues of overstaffing, politicisation, endemic corruption and wastage inherent to these organisations. Unless these issues are addressed, reforming the SOEs in Sri Lanka makes little sense. 

One way of implementing the required reforms would be through liberalisation of some of these sectors and allowing competition. How effective the proposed unbundling of the Ceylon Electricity Board would be, will provide adequate clues to the authorities to introduce similar or better mechanisms to make other utilities efficient.

Attempts to carry out reforms only through tariff hikes, without fixing the ailments, which have long plagued these SOEs, would only compound waste and corruption and won’t provide them with durable fixes.