Debt-ridden CEB and need for restructuring - EDITORIAL

The Ceylon Electricity Board (CEB) is one of our country’s largest state-owned enterprises (SOE) and enjoys near monopoly status in power generation. It is also one of the biggest loss-making SOEs in the country. 
In this era of financial crisis, with the nation is indebted to foreign financial bodies the tune of over US$ 35 billion, maintaining this huge loss-making monopoly is proving to be a huge drag on the country’s economy. During the period 2010 – 2019, according to the CEB’s own figures, the organization has accumulated a loss of over Rs.246 billion!
According to Minister of Power and Energy Kanchana Wijesekera, the CEB has incurred a further loss of over Rs.62 billion in the first quarter of 2022.
The CEB’s losses occur mainly as a result of charging consumers electricity at prices lower than that of power generation. At the same time the cost of power generation itself has risen sharply.

Irregularities in payment to staff from time to time, with the approval of the Board of Directors contrary to the provisions of the Management Services Circular as pointed out in reports of the Committee on Public Enterprises (COPE) continue to add to the losses made by the organization. Added to this, is the problem of over-staffing via political appointments, which add to the burden.

A leading newspaper on June 23 this year revealed that the CEB also makes payment for ridiculous allowances such as for example, in addition to ‘reading the meter’, there is also an allowance for ‘reading the meter correctly’! 
With the country’s economy virtually bankrupt, it can no longer afford to sustain loss-making enterprises. Even, in the event of government wishing to continue subsiding all of its loss-making SOEs, terms and conditions imposed by International Monetary Fund (IMF) for the receipt of a debt restructuring facility which the government has applied for effectively prevent government subsidies.

It was also revealed that the Ceylon Electricity Board had paid Rs.4.8 billion (PAYE/APIT) in taxes from its fund without deducting from the salaries of its employees till 2020. With increasing debts, an inability to continue meeting burgeoning expenditure over income and faced with financial ‘irregularities’, government has been left with no option, but to divest itself of continuing to support loss-making state enterprises.
In this light, the government has been literally forced to announce that it is looking at breaking up the giant monolith of the CEB into at least 14 different entities.

Not unexpectedly, the workers and trade unions alike are protesting any effort at restructuring of the CEB, fearing pay cuts, job losses and tighter financial control in the future. Trade unions also claim, the power sector is a strategic section of the economy and cannot be left in the hands of a ‘rapacious’ private sector bent on accumulating private profit at all costs. 
In most countries the world over, however, power generation is in fact managed by private entities. In the US for example, private sector utilities provide the bulk of electricity generation, transmission, and distribution in that country. However, the federal government also owns a share of the nation’s electricity infrastructure.
Energy companies in the UK were nationalized in 1948, but Prime Minister Margaret Thatcher reversed the situation, privatizing gas supplies in 1986 and electricity in 1990.
In the 1980s, China suffered from severe power shortages, as state investment alone could not meet the soaring demand for electricity. The government later removed its regulatory barriers and restructured feed-in-tariff schemes to allow and attract private and foreign direct investments.

In our own country, Telecommunication - also a ‘strategic sector of the economy’- was privatized in in 1991. Sri Lanka Telecom became a Corporation and in 1997, the company was privatized with the collaboration of Nippon Telegraph and Telephone Corporation (NTT). It is now listed in the Colombo Stock Exchange.
The telecom sector has developed by leaps and bounds and communication facilities are today at the fingertips of anyone who requires the service. The long waiting lists of customers awaiting telecom facilities of yester-year are now a distant nightmare.
While we need not fear privatization per se, unbridled privatization could lead to monopoly and needs regulation to prevent abuse of power. Therefore, there is a definite need for government to regulate the new restructured bodies.