Comment - CEB reforms most welcome

The implications of World Trade Organisation (WTO) trade agreements are highly controversial. The President of the CEB Engineers Union Ananda Piyatilaka recently delivered a lecture on "Implication of the General Agreement on Trade in Service (GATS) on Sri Lanka's electricity sector.

Though we have our reservations on the implications of GATS ruling in the sector, as ordinary customers of the CEB we feel that there might be a change that is good. We long to see any change whether it is proposed by the WTO, World Bank or IMF or any other proposal to sell or lease it because we know that nothing would worsen the present CEB service.

This is the general feeling of electricity consumers in the country whether they are industrial or domestic. A day before Piyatilaka's lecture a lady at the CEB Electrical Superintendent's (ES) office in Dippitiya, Aranayake in the Kegalle district said she had trekked to the office for eight days to restore the electricity supply as the house had been without electricity for over 12 days.

People and shop owners in Warakapola town recently complained to the Thulhiriya ES office that there were frequent voltage fluctuations causing damage to their electrical appliances and they were unable to carry out their business in the town.

The ES did not entertain the complaint and did not even bother to check the supply maintaining that there was no problem in the supply. Following protests by the residents he conceded that there was a fault in the transformer and that he needed time to replace it. The CEB service is similar all over while it is worse in rural areas.

Only the CEB engineers union and other CEB trade unions say that the service is superb. The bottom line of Piyatilaka's argument is that there is a threat to introduce the long awaited electricity reforms again. The proposals are not implemented due to trade unions' protests.

Piyatilaka's argument on the negative consequences of GATS for developing countries carries weight and is widely discussed at many levels. However, Piyatilaka's target was the electricity reforms, which the unions fear will emerge under GATS or any other name.

What are the reforms that the trade unions oppose? According to Piyatilake "operating the sector entities on a commercial basis and introducing competition among them". This would enable the electricity service to come under the GATS purview, he argued.

CEB trade unions justify the inefficiency in the service. The huge customer base of 3.4 million being the main reason among them. Over 70% of the cost of the CEB is generation costs and the loss due to the inefficiency is a misconception. Due to the scale of the business there is a deterioration in the service, they said.

The argument for CEB reforms is also the same. The management structure of the CEB established way back in 1969 to cater to a small number of consumers is unable to provide a decent service to 75% of the households in the country today.

The high generation costs is a result of the prevailing managerial inefficiency in the CEB. The CEB has not chosen a correct generation mix to meet the increasing demand.

This is the responsibility of politicians as well as the CEB authorities. The structure of the CEB should have been changed a long ago to address some issues faced by the institution and the consumers in the country. However, the unions seem to be correct and all the issues confronted are not due to the management structure of the utility. Inherent disease of all government institutions is common to the CEB as well.

Political interference, lack of prudent policies, bureaucracy and corruption are rampant. However, the proposed reforms such as operating the sector entities on a commercial basis and introducing competition would solve most of these issues as well.

Today the Sri Lankan economy faces a serious crisis due to the unresolved issues in the electricity sector. The inadequate generation capacity is the biggest issue and the whole economy is dependent today on monsoon rains.

The Unions say that the CEB's long term generation expansion plan, was the solution but said successive governments had failed to implement it in time.

This may be a factual argument. If the electricity sector was open to competition at the proper time the issue would have been solved perhaps many years ago. The power sector needs a huge investment and the government is not in a position to allocate it. As the utility is a profitable business, attracting private investment is not a difficult task. Today the CEB purchases electricity at higher rates from private operators and these figures are public secrets.

Free competition in the utility sectors has proved to be a success in Sri Lanka. Today, while all prices of goods and service are increasing the telephone charges are being reduced. Similarly with the latest technology the service is improving.

There is healthy competition in the telecom sector. At the time we opened the sector the trade unions and critiques said that the government was losing handsome profits. However, we know only too well the quality of the SLT service when it was a government monopoly.

The Queen Elizabeth Quay in the Colombo Port is another example. Now competition has improved overall productivity and efficiency in the port and government revenue is increasing with more transshipment business.

It is true that free competition creates some externalities. In some crucial sectors such as water it is difficult to open it to the private sector. It is the government's responsibility to address them. However, Piyatilaka said the electricity and telecommunication sectors are different and this 'miracle' in the telecom sector may not take place after the power sector is open for competition. The same myths prevailed when the telecom sector was opened for private investment.

The CEB managerial crisis has many dimensions and trade unions agendas are personal and short-sighted. As some CEB unions said, there is an engineers' mafia in the CEB that oppose any restructuring or reform. This is also true and top officials and regional officials (most of them engineers) have other business in the CEB. Maintenance contracts and construction of new power lines is another business for them.

Once a certain sector of CEB engineers said that the engineers' mafia in the CEB is so strong that it is difficult to even appoint a qualified accountant as General Manager Finance. All the top positions in the CEB are held by engineers, technical or otherwise, they said. The present CEB structure may be a good breeding ground for corrupt CEB employees, but certainly not for electricity consumers nor the country's economy.