More vigilance is needed to maintain cost-recovery pricing from CPC and CEB: IMF

The International Monetary Fund (IMF) asserted that more vigilance is needed to maintain cost-recovery pricing and manage fiscal risks from Ceylon Petroleum Corporation (CPC) and Ceylon Electricity Board (CEB). 

A large downward revision of electricity tariffs (21.9 percent on average) on March 5 should maintain cost recovery on a forward-looking basis, given the projections of hydropower usage, favourable exchange rate and interest rate developments, the IMF said in its report on Sri Lanka released last week. 

It noted that any unforeseen deterioration in the assumptions would be corrected by an increase in tariffs. 
“Despite some improvement, the full operationalisation of the BSTA (Bulk Supply Transaction Account), which should allow the use of buffers between quarterly tariff revisions, has been delayed due to the lack of formal power purchase and sales agreements with generation and distribution companies,” the IMF said. 

The authorities will proceed with signed memoranda of understanding and adopt a formal rule requiring the regulator to use the BSTA, to determine the cost-recovery tariff and government transfers by end-June 2024.