November 06, Colombo (LNW): The Advocata Institute, an independent think tank, has called for urgent reforms in Sri Lanka’s State-Owned Enterprises (SOEs) to tackle ongoing corruption and inefficiencies. 

This call comes amid rumors that the Ceylon Electricity Board (CEB) might continue bypassing competitive bidding for fuel purchases, which has sparked concern on social media. 

While these rumors have not been confirmed, they shine a light on the persistent financial challenges plaguing SOEs, including growing debt and mismanagement, which have long affected the country’s economy.

According to Advocata, the lack of competitive procurement processes has led to inflated costs in essential sectors. 

For example, the CEB purchases naphtha from the Ceylon Petroleum Corporation (CPC) at prices higher than global market rates, raising electricity production costs and resulting in higher tariffs for consumers. 

In addition, inefficiencies at CEB delay payments to CPC, which contributes to mounting debt that is often covered by the government or state banks.

A similar issue affects SriLankan Airlines (SLA), which faces overcharging for jet fuel by CPC. This has worsened the airline’s financial losses, which the government has had to offset with significant equity injections, including Rs. 102.5 billion in 2023.

 Both cases highlight a broader issue of “circular debt,” where inefficient practices in SOEs lead to rising debt, which is ultimately shouldered by taxpayers.

The Advocata Institute argues that these inefficiencies and the lack of competitive bidding are draining public finances and harming consumers. SOEs like CEB and CPC contribute to a cycle of rising debt, higher tariffs, and poor services, all of which exacerbate the government’s budget deficit. 

The Institute highlights that the absence of competitive procurement processes allows corruption to flourish, inflating costs and reducing the quality of services.

Establishing a transparent, competitive bidding system could help break this cycle, reduce corruption, and enhance efficiency in SOEs.

This need for reform is also supported by the International Monetary Fund’s Governance Diagnostic Assessment, which connects non-competitive procurement with corruption in SOEs.

While the government has attempted some reforms, such as the unbundling of CEB through the Electricity Bill approved in June 2024, progress has been slow. The recent decision to halt the privatization of SriLankan Airlines has also raised doubts about the government’s commitment to comprehensive SOE reform.

However, there is some hope for change. President Anura Kumara Dissanayake recently met with the National Procurement Commission (NPC) to discuss the importance of implementing procurement laws. 

If these discussions lead to concrete reforms, the introduction of competitive bidding could help address the long-standing inefficiencies and corruption that have hindered Sri Lanka’s SOEs.

The Advocata Institute calls on the government to prioritize competitive bidding as a critical first step toward reforming SOEs, improving transparency, and securing a more sustainable economic future for Sri Lanka.