Sectoral Oversight Committee exposes CEB costing trick to make huge profits

By Rathindra Kuruwita

The Ceylon Electricity Board (CEB) has significantly overestimated the cost of electricity production and transmission for 2024 and this is reflected in their estimated cost of production, says MP Gamini Waleboda, head of the Sectoral Oversight Committee on Alleviating the Impact of the Economic Crisis.

The overestimation is around Rs 140 billion, Waleboda has said, adding that the CEB has recently presented the estimated costs for 2024 to the Public Utilities Commission of Sri Lanka (PUCSL).

“When we look at the cost of production, we see that it has been overestimated by about Rs 80 billion,” he said.

MP Waleboda said that the CEB had also increased the estimated cost of transmission. Over 98 percent of households were connected to the national grid, he said.

“If you look at the cost of transmission in the recent past, it has hovered between 55 and 67 billion rupees. The cost of Rs 67 billion was when we were dramatically expanding the coverage. Now, the network is mature. This year the CEB says the cost of transmission is Rs 132 billion rupees,” he said.

MP Waleboda said that CEB had also significantly overestimated the cost of financing. The CEB’s calculation ran counter to the principles of accounting, he said.

“They have calculated the interest rate using the rates that were prevalent at the height of the economic crisis. This has to decrease. The CEB has also calculated depreciation of assets that have been fully depreciated. This is imaginary expenditure. There are many instances of double counting. The CEB has no proper cost accounting mechanism and therefore officials and policy makers parrot out numbers that someone comes up with,” MP Waleboda said.

Waleboda said the minister of power and energy, Kanchana Wijesekera and senior CEB officials had taken the recommendations of the Sectoral Oversight Committee on Alleviating the Impact of the Economic Crisis as a personal affront.

“We are actually trying to help him because the minister needs correct data to make the right decisions. The overestimation is around Rs 140 billion. In 2023, the CEB made a profit of over Rs 50 billion. It made a monthly profit of about Rs 15 billion rupees in January and February 2024.”

Waleboda said the CEB and the Ceylon Petroleum Corporation (CPC) were now profit-making enterprises. However, they were making profits at the expense of macroeconomic sustainability. The two institutions have gone beyond the breakeven point and are now making tens of billions of rupees in profit, the MP said.

“However, the social and macro-economic impact have been adverse. The education of millions of children is adversely affected when a million households are taken off the grid. The manufacturing and agricultural sectors are suffering because of high power and energy costs. To make the CEB profitable, we have undermined our macroeconomic stability, economic expansion, and social wellbeing,” he said, noting that the government must take a holistic view of the economy. The CEB is a part of a wider system and if everything else collapses, the CEB can only last for a short period, he said.

The Sectoral Oversight Committee on Alleviating the Impact of the Economic Crisis had met representatives of organisations that earned foreign currency and all manufacturers that produced for the domestic market, he said.

“We are not asking the CEB to continue supplying electricity below cost. We are asking the government to help our manufacturers and the poorest segments. If we ignore the tragedy that unfolds among the lowest strata of society, we will only be asking for a massive social crisis in the coming years,” Waleboda said.

The MP said the Central Bank (CBSL) could do a lot more to help the economy. The CBSL was implementing IMF policies, and losing its grip on the financial sector, Waleboda said.

“Financial institutions are paying a single digit interest for savings, but the interest rates for borrowing are in double digits, over 16 percent in many cases. The banks are making tremendous profits. The CBSL has reduced policy rates several times, but the banks have not passed the benefit on to borrowers. Not even state banks are reducing their loan interests,” he said.

However, the CBSL had played a pivotal role in controlling and reducing inflation which was around 70% in late 2022, Waleboda said.

“There is a lot of talk on making the CBSL independent. This should not mean it should carry out the IMF or ADB programme or act according to the whims of the few people on the monetary board. The CBSL must come up with a monetary policy that is sustainable in the long term and leads to economic development,” MP Weleboda said, noting that according to their calculations millions of US dollars that should be brought back to Sri Lanka are parked in foreign countries by exporters. “The country loses at least 1.2 billion dollars a year because of this, and this is around the income generated by the IT industry”, he said, “There should be an institution to keep a tab on these things.”