Treasury requested to suspend fiscal support to key SOEs

• Recommendation comes as first step towards restructuring SOEs on priority basis 
• Made with relevance to 5 out of 527 SOEs—CEB, CPC, SriLankan Airlines, SLTB and NWSDB 
• Their immediate restructuring urged to end current external and macro-economic instability
• These 5 SOEs have accumulated losses worth Rs.468bn in the five years from 2015 to 2020

The Treasury has been requested by a committee set up to look into State Owned Enterprises (SOEs), including key utilities such as power, energy and water, to suspend State assistance, potentially opening the path to end the reliance on tax payer funded money to sustain those firms which have become a bane on the country and its people. 

According to a report cited by Charts.lk, a statistical platform showcasing crucial economic and social developments in the country, the State Owned Enterprise Restructuring Board has proposed the government to discontinue State assistance to SOEs. 

The recommendation is made relevant to five out of 527 SOEs including Ceylon Electricity Board (CEB), SriLankan Airlines, Ceylon Petroleum Corporation (CPC), Sri Lanka Transport Board (SLTB) and National Water Supply and Drainage Board (NWSDB).

These SOEs have been selected by the Board as their restructuring is urgently required to end the external and macro-economic instability in the Sri Lankan economy. 

They have been the largest loss makers and thus far for decades have drained public funding to hide their massive inefficiencies at every level dragging the entire nation down.

Their highly unionised workforce, specially in the case of the CEB, has shown resistance to reform at every instance, continuing to run the organisation almost like a cartel. 

As a result, the level of service quality has continuously deteriorated despite adding more people into the workforce mostly as political appointees. Also, they have vehemently resisted progressive thinking and inclusion of new technology into operations.  

Some pro-market economy advocates argue that lawmakers should bring in legislations, which give power to parliament to dismantle some of these SOEs and bring progressive reforms to block them from seeking Treasury support. 

According to Charts.lk, the five SOEs on a cumulative basis have accumulated losses worth Rs.468 billion in the five years from 2015 to 2020. 

Despite the Board’s recommendation to suspend Treasury support to embark on market-oriented reforms, it remains uncertain to what extent the policymakers would implement the recommendation.

Despite the rhetoric, policymakers aren’t very serious about such reforms as SOEs come in handy during election times to promise jobs to their supporters and cronies.

An International Monetary Fund (IMF) backed programme, which the current administration is dilly-dallying on for obvious reasons could potentially clear the path towards market friendly reforms.

At a discussion held earlier this month on the subject of, ‘The Urgency of SOE Reforms’, conducted by the free market economy advocacy group, Advocata Institute, urgent reforms were urged in these ailing SOEs to send a symbolic message to the rest of the world that the country remains committed about introducing some serious reforms in meeting the upcoming foreign currency debt commitments. 

“I am not advocating against disposing such assets,” said LIRNASIA Founding Chair and Advocata Institute Advisor Professor Rohan Samrajiva, reiterating his stance on privatizing SriLankan Airlines which incurred a loss of Rs.47 billion in 2020.