Key SOEs record Rs.26bn loss in 2018

By Nishel Fernando
Sri Lanka’s largest 54 State-owned Enterprises (SOEs) recorded a combined loss of Rs.26 billion in 2018 compared to a profit of Rs.59 billion in 2017, mainly due to record losses at Ceylon Petroleum Corporation (CPC).
“As per statistics for last year, the total revenue generated by 54 SOEs amounted to Rs.1, 916. 02 billion, of which 37 SOEs, recorded a net profit amounting to Rs.130.66 billion while 16 reported net losses amounting to Rs.156.73 billion in 2018. Overall losses of key SOEs for 2018 have reached Rs.26 billion,” Finance Ministry Secretary Dr. R.H.S. Samaratunga revealed this Monday in Colombo. 
In 2018, CPC’s net loss widened to Rs.104 billion owing to an exchange rate variation of Rs.82.7 billion. The CPC earned Rs.3.3 billion in net profits in 2017. 
Treasury officials said the fuel pricing formula introduced last year had not covered the full cost of CPC, adversely affecting its financial position.
 “The CPC has brought down prices unnecessarily during the 51-day political impasse last year. Therefore, we have to regroup now. However, with an exception of one or two CPC products, prices of most products are equivalent to world market prices,” a Treasury official told Mirror Business. 
The CPC’s outstanding debts to banks also rose to Rs.562 billion in 2018, which is an increase of Rs.224 billion from 2017.
Meanwhile, despite reducing its losses from 2017, the Ceylon Electricity Board (CEB) recorded a net loss of Rs.29 billion last year while the National Water Supply and Drainage Board (NWSDB) recorded a loss of Rs.568 million compared to Rs.738 million profits in 2017. 
A Treasury official said the pricing structure of CEB and NWSDB needs to be changed to reflect the costs.
“The Water Board hasn’t changed its tariffs since 2013, and the CEB hasn’t changed their tariff for a while,” he noted.
Further, he pointed out that continuous delays in the implementation of CEB’s Long Term Generation Expansion Plan 2018-2037 has also contributed towards increasing CEB costs, having to purchase emergency power from private sector at a higher cost during drought periods.

In 2018, Bank of Ceylon, Employee’s Trust Fund Board and People’s Bank emerged as the top profit-making SOEs by earning Rs.31 billion, Rs.28 billion and Rs.24 billion in profits respectively. 
The transfers from the national budget to SOEs nearly doubled to Rs.73 billion in 2018, of which Rs.58.5 billion was recurrent expenditures. 
“It’s true that some of these SOEs play a key role in delivering services to the public. However, due to massive losses incurred by some SOEs in segments like  energy, air transport, commerce trade and media, the Treasury has to bear the financial burden every year. 
“We have to divert the funds utilized to maintain these loss-making SOEs to public welfare. However, moving forward, the government will not be able to continuously bear this financial burden,” Finance Minister Samaraweera said. 
In 2018, the contribution of SOEs to the national economy by way of non-tax revenue (levies and dividends) also declined to Rs.41.82 billion compared to Rs.53.9 billion in 2017.
While noting that privatisation alone is not the ultimate strategy to reform SOEs, Dr.Samaratunga emphasised that the Statements of Corporate Intent programme launched for SOEs is a crucial and urgent requirement in terms of maintaining a balanced fiscal sector account in the medium-term.
According to him, in 2018, the top 54 SOEs contributed 13.3 percent to GDP while all the SOEs generated 235,000 employment opportunities which is equivalent to approximately 18 of public sector employment.