World Bank aid and call for privatizing state enterprises
Posted on October 14th, 2015

G. A. D. Sirimal (SLAS) Former Assistant Secretary, Ministry for Power & Energy-Courtesy Island

It is reported, the World Bank [WB] has promised aid for Sri Lanka to help the new government in its development programmes. The same conditions will be laid down by WB as it did way back in1980s during J. R. Jayewardene regime. It is understandable why the World Bank or any other lending agency, local or foreign, wants to ensure that the borrower is financially stable to repay the loan and as the Ceylon Electricity Board [CEB ] and the Ceylon Petroleum Corporation needed colossal sums. Special interest was shown by WB as these two organizations were a burden on the Treasury and the economy of the country as a whole.

The main causes of mismanagement were political interferences and recruitment of politicians’ henchmen. When I served in the Ministry for Power and Energy, CEB, CPC and the Colombo Gas Company were under the administrative control of that ministry which recommended privatization of Colombo Gas Company.

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The CEB faced severe liquidity problems as the local authorities who were the licensees to distribute electricity did not pay the CEB when R. Premadasa was Minister for Local Government and Housing as revenue from power was utilized for other work in local government areas. To solve this severe financial crisis in the CEB a high powered committee was appointed by President Jayewardene, chaired by Prof. K. K. Y. W. Perera, Secretary to the Ministry of Power and Energy and members being M. Somasunderam of the Treasury, Abeyratne, Secretary Ministry for Local Government and Housing, S. H. Subasinghe, General Manager CEB and yours truly acted as the Secretary in the absence of G. B. N. Fernando, Deputy General Manger, CEB. Several options were considered. One was to disconnect the supply to local government institutions.

Such action would have been tantamount to penalizing ordinary consumers who would have paid their bills. The next was to bring the distribution and supply under CEB. That measure was unthinkable as the CEB was already overburdened. The other was to set up a private company to take over the distribution and supply. Having considered these options, the committee recommended formation of a private company with CEB, Treasury and Local Authorities as share holders.

This was accepted and a Bill was presented in parliament. As the first step a private company by the name of Lanka Electric Company [Pvt] Co. LECO] was set up to cover a certain area, with the intension of forming such private companies in all provinces after studying the performance of the newly formed company – LECO Personally, as a consumer served by LECO at Boralesgamuwa and now a temporary resident at Ratmalana till my house is renovated, I see the difference. Apart from this company serving the consumers satisfactorily, it has also made profits. As LECO is a private company, it is answerable only to its shareholders, the CEB, Local Authority and Treasury and not the government and does or should not come under questioning by Committee on Public Enterprises. It should be mentioned, credit for its successful operation, goes to its first Chairman, H. Subasinghe and his hand-picked staff to bring this company to this level of efficiency and keeping politicians at bay. If such companies are set up in all provinces as envisaged any international lending agency such as WB, ADB, IMF would not have called for privatizing the CEB.

It should be clearly understood that LECO or other private companies to be set up to distribution and supply of electricity are licensee and the revision of tariff will continue to be done by the Public Utilities Commission in consultation with CEB.

It is hoped that the government will convince the WB and other lending agencies of the financial stability of CEB which they are concerned about and also consider setting up private companies in Provinces, thus easing the work load of the CEB further, so that it could concentrate on generation and transmission and solve problems like frequent, breakdowns, failures, etc.

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