EDITORIAL – CEB losses: Preaching to the converted
View(s):A newspaper headline on Friday which reported the prospect of the Ceylon Electricity Board (CEB) seeking a 124 billion-rupee handout from the Treasury must have shocked many policymakers, economists and Colombo-based civil society activists.
At a time when the Treasury is struggling for funds, putting the brakes on many requests from state institutions (incurring, in the process, the wrath of ministers like Wimal Weerawansa), and urging state bodies to find their own resources (case in point is the Sri Lanka Transport Board, see story on page 8), the country can ill-afford to resort to more taxes to fund inefficiencies in state firms.
The CEB and the Ceylon Petroleum Corporation (CPC) are bleeding the people and the country. But it’s not a new phenomenon either. Since early 2000, the authorities have been trying to reduce losses at these two institutions under reforms proposed by ADB and Japanese Bank for International Cooperation (JBIC) . But opposition from trade unions and other groups in reforming these organizations have stalled these efforts.
The Pathfinder Foundation has estimated a Rs. 94 billion loss at the CEB in 2013. This is as a result of the CEB’s estimated cost for the year being Rs. 268 billion, whilst revenue will be only Rs. 174 billion. “This colossal loss is to be subsidised by the Treasury through taxes extracted from all citizens including the poorest of the poor,” the independent think tank said, urging reforms at both CEB and CPC.
Phenomenal losses at these two institutions, is an old issue. The only change is that the size of the loss is increasing though if one is to include inflation and the value of the Rupee, the figures would almost be the same in value terms. For example, Milinda Moragoda, Sri Lanka’s Minister of Economic Reforms, Science and Technology in a January 6, 2002 interview with this newspaper said that the CPC losses totalled Rs. 20 billion (at the time). “As far as the CPC is concerned, it would take three years to recover the losses even with the current restructuring of the corporation and the pricing mechanism,” he was quoted as saying.
Four years later (in 2006) a long awaited CEB reforms bill was prepared to be presented to parliament but didn’t see the light of day.
To digress a bit, any monopoly operator in the private sector will make mints of money and also offer the public a cost- effective service.
Not so in the case of the CEB or the CPC. Both are giant monopolies (in the case of the CPC until Lanka IOC came into the picture) and can sell all they produce with demand rising all the time. But they still suffer from huge losses. Here are two public utility services which can make money on the economies of scale but unfortunately politicisation, victimisation and everything that goes with bad governance plagues these institutions.
In the first para of this commentary, the words “…would have shocked many policymakers, economists and Colombo-based civil society activists” were deliberately used.
For, statistics like these are only shocking to a Colombo-centric community. It means nothing to the rural community, the people in the village. As pointed out losses due to inefficiencies, fraud and mismanagement have been mounting at these institutions but that hasn’t brought down governments or raised a hornets’ nest in the village.
If ever, it has enhanced the reputation of governments to be selling fuel and power at subsidised rates in a lopsided manner. That is through ‘cheap’ fuel and power on one side and on the other hand increasing taxes on goods to subsidize these rates.
The fact that mismanagement, fraud or corruption in the public sector doesn’t make a dent in the rural countryside was also part of the discussion that emerged at a recent Colombo panel discussion on corruption. It was pointed out that that raising issues of corruption, the root cause and the need to stop it is like preaching to the converted. Participants urged that such discourses should take place outside Colombo, targeting a more ordinary, down-to-earth audience.
This is absolutely true. The economic debate, crisis in governance and accountability and corrupt deals are non issues in the village economy. The village economy revolves around subsidies for crops like rice, vegetables, tea or rubber (smallholders mainly in the last two categories) and fertilizer subsidies. Migrant remittance is also an important issue. The discourse on corruption and mismanagement is mainly confined to the English-speaking population and not the vernacular media. Sinhala and Tamil newspapers hardly discuss or debate these issues in an analytical way.
The popular polls by the Business Times and its partner, the Research Consultancy Bureau (RCB) over the past two years have also reflected this trend: what matters to a Colombo audience is a non issue to the village. In fact corruption is not an issue and is a given, and well acknowledged in the village. There is no issue in the village when politicians make money for their families as it’s seen as an acceptable norm and reward for the work these politicians have done.
At the crisis-filled CEB and the CPC, the subsidies are most likely to continue as in the past. Nothing is likely to change.
Change will come only when people in the periphery realise that they are paying more for goods purely to subsidise another sector of government, and that they are being duped, fleeced.
Until then, analysts, economists and civil society activists will shout themselves hoarse until the cows come home but nothing will change.
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