Midnight gazettes
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Budgets…budgets…budgets! Are people interested in budgets anymore apart from businesses looking for incentives and tax revisions or worried about rising taxes?Since 1970, more than 50 budgets have been presented annually and it was Dr. N.M. Perera, then Finance Minister (in the 1970s) who broke tradition by introducing the dreaded ‘midnight’ gazettes that announced tax hikes and price increases of commodities – particularly cigarettes and alcohol. Until then, it was the budget that introduced such price hikes.
The budget thus became a more staid presentation of government policies and future development, long-term tax revisions and expenditure and to this day remains that.
This was the topic ‘Shifty’ Silva, the always-inquisitive IT expert, chose to discuss during a Thursday morning call. It was a while since I had spoken to him.
“Hello….hello,” he said, adding that the budget on Monday, November 14, would be uninteresting, as usual, for the man on the street.
“Maybe…..maybe not. I am interested in seeing what the authorities would pronounce in restructuring state-owned enterprises (SOEs),” I said.
“But what has that got to do with the average consumer?” he asked.
“Most of these institutions are prime centres of government jobs and if they try to cut their losses, jobs would be lost,” I replied.
“Well, we have to wait and see whether the budget will spell doom for these loss-making entities,” he said.
Just as we ended our conversation, my attention was drawn by the margosa tree conversation. “Aya-weya heta-ne – sanduda. Apita prathilaba thiyewida (The budget is tomorrow – Monday. Will it benefit us)?” asked Serapina.
“Nae. Okkama mila wediwenne nethnam paribogika mila wenas wenne aya-weyata pitin-ne (All the price increases or changes in consumer prices are now outside the budget),” said Kussi Amma Sera, who has experienced more budgets than her two friends.
“Ow. Hema-dama mila wedi wenawane. Samaharawita adu wenawa eth eh indala hitala ne. Apita aya-weyen kisideyak nae (Yes. Daily, prices are increasing. Sometimes they decrease but only on rare occasions. The budget has nothing for us),” lamented Mabel Rasthiyadu.
Whether the budget will discuss the state of play of SOEs remains to be seen but these mostly-struggling state institutions, reservoirs for government jobs by ruling party politicians – the public believes that if they vote for a particular politician they are assured of a government job – is a predicament for many governments and with every change of administration, the crisis worsens.
The shocking news is that while the authorities have accounts and other details including assets of 52 institutions strategically important for the economy, little data is available (particularly accounts and net assets) of another 400-odd SOEs.
The important ones are those operating in power, energy, finance and insurance, water, aviation, health and education, among others. These include the Bank of Ceylon, People’s Bank, Sri Lanka Insurance Corporation Ltd, Ceylon Electricity Board (CEB), Ceylon Petroleum Corporation (CPC), Sri Lanka Ports Authority, SriLankan Airlines, Sri Lanka Transport Board and State Pharmaceuticals Corporation.
At present, 287 SOEs are being monitored by the Finance Ministry’s Department of Public Enterprises (PED) and the rest come under the purview of the Department of National Budget (NBD).
Only 15 per cent of all the SOEs have up-to-date financial information. According to Treasury data, cumulative losses of the strategically-important 52 SOEs from 2006-2021 were Rs. 1.5 trillion.
These institutions may be sitting on land and other assets worth billions of rupees but in the absence of a proper audit (which we believe should be an immediate requirement) by the Government, no one really knows their exact value and wealth.
Recently it was reported that the state-owned Rupavahini Corporation, which is bleeding money, was planning to lease part of its land to a state university to settle long-standing debt. Leasing out land of unviable state enterprises may be one way to cut losses but this is likely to be blocked by trade unions.
SriLankan Airlines’ cumulative liabilities (including accumulated losses) were Rs. 440 billion up to the financial year 2020/2021. However, the airline has reported operating profits for the first half of 2022 and reportedly its best 6-month period in many years, according to its CEO. Thus, this may be the best time to find a partner airline after its unceremonial exit with Emirates some years ago, for political reasons which were rather unwise.
During the first four months of 2022, the 52 SOEs reported a significant loss of Rs. 859 billion, sharply up from a loss of Rs. 13 billion in the corresponding period in 2021. More and more these institutions turn red, the more difficult it would be to salvage them. The end result would be the public paying through taxes for their daily upkeep.
It was revealed in September 2022, that there was a plan to implement a special scheme to resurrect these institutions via restructuring or privatisation but no details are still available of this plan. There were also plans to liquidate 10 of the SOEs, details of which are yet to be announced.
The 10 bankrupt SOEs earmarked for liquidation are the
Sri Lanka Rubber Manufacturing and Export Corporation, Janatha Fertiliser Enterprises Ltd, Lanka Salusala Ltd, State Trading Corporation, Lanka Fabric Ltd, North Sea Ltd, Ceylon Ceramic Corporation, Lanka Cement Company and Lakdiva Engineering Co. Ltd, according to the Treasury.
The buzz words “public-private partnership” is the route the government intends to take to restructure these institutions but again with likely opposition from trade unions, the longer it takes the task becomes harder to fulfil.
The extent to which public funds were being swallowed up by these bankrupt institutions was explained recently by JVP leader Anura Kumara Dissanayake. “Out of every Rs. 100 coming into the Treasury, Rs. 58 is spent on salaries and pensions of state sector employees,” he was quoted as saying.
“The real purpose of state sector agencies is to support the country’s economy. Once the economy is developed, then job opportunities will invariably be created,” he added.
Besides these issues, the Ceylon Chamber of Commerce this week proposed state sector reforms and in the process recommended ways of appointing and removing secretaries to ministries. But what about ways and means of removing ministers who are incompetent or corrupt?
As I wound up my column, Kussi Amma Sera brought in my second mug of tea and wanted to engage in conversation. But I waved her off, saying I was busy as I reflected on the need for a deeper audit of state institutions and their assets which would come up with some surprising facts and go a long way in reviving these bleeding institutions.
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