State owned enterprises under go seven model restructuring process
Sri Lanka’s State owned enterprises (SOES) will be re-structured in multiple ways and work on the sale of Sri Lanka Telecom has started, State Minister of Finance Ranjith Siyambalapitiya announced.
In 2021, a sum of Rs 367 billion s had had been given by the Treasury to maintain the 430 entities and the restructuring process is still not materialized he said adding that it will be a priority this year
The total loss of the key 52 SOEs was Rs. 726.9 billion for the first eight months of 2022 of which 31 SOEs recorded a profit before tax of Rs. 134.9 billion and the balance, 21 SOEs reported a net loss of Rs. 861.7 billion.
Notably, 99 percent of the total loss has been generated by three SOEs namely, CPC, CEB, and Sri Lankan Airlines (SLA) totaling a cumulative loss of Rs. 854.5 billion from these entities.
These three entities have been loss making for years which has resulted from debt overhang warranting cost reflective pricing for CPC and CEB and restructuring of SLA to mitigate large fiscal risks. The levy/ dividend collection dropped to about Rs. 17.8 billion in the first eight months of 2022 due to the contraction of the economy.
The government has already devised seven models for state enterprises that will be re-structured as soon as possible
Among these models are changing the structure into separate entities and managing them,-consolidating enterprises engaged in similar activities, keeping state management but giving operations to the private sector.
The other restructuring models are giving management to private sector and keeping ownership with the state,leasing parts of entity or as a whole,selling down a stake of 49 percent or less and transferring full ownership to another entity on a transparent mechanism
The SOE re-structuring unit had already started work on Sri Lanka Telecom, which was listed in the budget for 2023 for sale, but the model had not been decided, he said.
SLT is a publicly listed company in which the Treasury has a 49.5 percent stake and Global Telecommunications Holdings NV, a part of Malaysia’s Maxis group, has a 44.9 percent stake.The method of sell-down on SLT has not been decided, he said.
The business operations of State-Owned Enterprises (SOEs) have been disrupted during the first eight months of 2022 due to the supply chain disturbances stemming from the difficult economic situation in the country.
The unprecedented pressure exerted by the large rupee depreciation has become one of the contributors to the notable losses of the SOEs. The fiscal risks on the guaranteed debt of SOEs were also notably inclined during the first eight months of 2022.
Two state banks have been highly exposed to the credit risks on SOEs’ borrowings exerting pressure on banking operations. As such, a proactive and well informed balance sheet restructuring strategy for key SOEs needs to be implemented expeditiously to mitigate the fiscal risks to the government finances.
The difficult economic conditions of the country warranted much needed SOE reforms while mitigating the additional burden on the limited fiscal space. As such, energy prices including fuel and electricity have been adjusted to reduce the losses of Ceylon Petroleum Corporation (CPC) and Ceylon Electricity Board (CEB).
Meanwhile, a special unit has been set up to identify the methods for minimizing the financial burden shouldered by the General Treasury while enhancing the performance of SOEs more efficiently and productively.