Restructuring the way ahead for CEB, CPC

The Ceylon Electricity Board (CEB) as well as the Ceylon Petroleum Corporation (CPC) are very much in the news, thanks to the controversy surrounding their future. The two-State owned behemoths are reeling in debt, overstaffed and stagnant. Experts have recommended that they be restructured to avert possible insolvency.

As they say, this is the rub. The unions are vehemently against any form of privatisation, though some of them reluctantly agree that some form of re-organisation would be inevitable. The unions share the common fear of retrenchment, as private owners do not want extra staff on their payroll.

The authorities have allayed such fears and vowed that restructuring would be based on Government ownership. In whatever form, a huge amount of funds would be needed to pay their debts alone.

There could still be a way out of this complex situation, as the Asian Development Bank (ADB) has pledged US$ 89 million to pay off the CEB debts which would in turn make it a profitable institution.

Minister of Finance and Planning Dr. Sarath Amunugama disclosed last week that the CEB owes the People's Bank and the National Savings Bank Rs. 89 billion. Due to these loans the two State banks are faced with major problems. As Minister Amunugama has explained, the way out of this is to accept the ADB loan to be settled in 40 years with a grace period of 10 years.

Sri Lankan consumers, both private and commercial, are burdened with high power bills as the unit cost of electricity here is among the highest in Asia. Many reasons could be attributed to this status quo - the lack of investment in new power generation projects, the high recurrent expenditure of the CEB (salaries, overtime etc) and bureaucratic inefficiency.

Restructuring, perhaps with the infusion of new managerial elements, should enable the CEB to go ahead with several power projects which have been inordinately delayed. The repayment of debt and the construction of new power plants will bring down the unit cost of electricity.

The same scenario more or less applies to the CPC, which also has the added burden of purchasing crude oil at very high prices.

It is clear that subsidies have to be removed altogether at some point to reduce the burden on Government coffers. There is also nothing wrong in introducing a third player to the market.

However, petroleum prices are still centrally controlled in Sri Lanka and there is no difference in prices at the filling stations owned by the CPC and the Indian Oil Company (IOC). Only the services on offer differ. Real competition between three operators would pave the way for different prices, even if marginal, and a better deal for the consumer.

The proper management of State-owned enterprises will be vital as Sri Lanka seeks to achieve an economic growth rate of around eight per cent. Such growth prospects will be impeded if State enterprises continue to depend on the Treasury. Making them financially viable and independent is an urgent necessity.