Editorial

Sri Lanka’s divisive Electricity (Amendment) Bill this week received approval from the multiparty Sectoral Oversight Committee on Infrastructure and Strategic Development for its second reading scheduled for July 24 in Parliament.

The debate—and subsequent vote, which, given the government’s numbers in the House, will favour the Bill’s passing—will proceed despite serious worry among a range of stakeholders regarding the repercussions of the law on the country’s electricity sector. They point out that the much-tinkered-with amendment merely replaces the unwieldy Ceylon Electricity Board (CEB) with “a CEB-like structure” that defeats the purpose of what was meant to be positive, useful, private investor- and consumer-friendly reform.

Among those that have urged the government to rethink and redraft the Bill are the World Bank (WB), the Asian Development Bank (ADB), the Japan International Cooperation Agency, the Public Utilities Commission of Sri Lanka (the regulator), the Lanka Electricity Company (LECO), the transmission company LTL Holdings, think tanks, the Chamber of Commerce and the Joint Apparel Association Forum, renewable energy companies, the Institute of Engineers of Sri Lanka, Ceylon Electricity Board (CEB) unions, other industry specialists, and opposition parties.

Meanwhile, there does not appear to be broad-based support for the Bill, even from within the government. But for a fewer-than-a-handful of vociferous backers, the rest are mute. Who is driving this? Moves to reform Sri Lanka’s electricity sector have historically been fraught with obstacles. Post-1990s, efforts to “unbundle”—that is, split a company or conglomerate into its constituent businesses—stalled owing to political and public sector resistance. WB and ADB-backed restructuring plans were opposed by trade unions and some policymakers.

The CEB has for decades maintained its monopoly, greatly limiting competition and efficiency. Heavy reliance on expensive thermal power from imported oil has affected financial sustainability amidst inconsistent investment in renewable and hydropower alternatives. Tales of a “coal mafia,” “oil mafia,” “renewable energy mafia,” etc., have clouded policy judgement and implementation. Pricing is a whole other can of worms.

The challenges have only worsened. There are many sporadic power outages across the country and even nationwide blackouts at a less-than-ideal frequency. The grid isn’t even “monkey-proofed”. Large-scale infrastructure projects, including proposed renewable energy zones, have suffered protracted delays.

There are grid instability issues arising from high solar and wind penetration in the absence of adequate storage or smart grid systems. Interminable bureaucratic inertia has held back approvals and connections for private renewable energy projects. The public cannot be sure of policy consistency or reliability. On paper, the government is renewable energy-focused, but in practice, it is not.

As the predominant state-owned utility, the CEB suffers from chronic inefficiencies, mounting debt and a lack of commercial discipline, according to the IMF, which calls for corporate governance reforms; subdividing the CEB into commercial entities under the 2024 Electricity Act; and bringing in private sector investment, increased oversight, and operational transparency.

The 2024 Electricity Act was aimed at restructuring the CEB into an efficient, commercially viable entity. What the Electricity (Amendment) Bill does, according to one high-level source in the energy sector, is “make things infinitely worse”.

For instance, it should be a matter of public concern, if not alarm, that the proposed Bill takes away the legal validity given to consumer rights through the prevailing Electricity Act of 2009 (the 2024 law is yet to be operationalised, even though the deadline has passed). It removes the clauses related to the “consumer rights and obligation code” and the “supply services code”—it simply does not define what we, as consumers, are entitled to.

The process related to and the content of the Electricity (Amendment) Bill are rife with a multitude of other problems and issues. The question now remains whether the government will take on board the widely articulated, constructive criticisms and inputs that are urgently being channelled its way.

FTAs a shield against Trump’s tariff war

US President Donald Trump is steaming ahead with his tariff reforms. On July 9, Sri Lanka was among a list of countries for which new rates were announced, receiving a reduction of the duty on its exports from 44 percent to 30 percent.

In response, Sri Lanka has formed a committee to study the impact of these tariffs and to develop a course of action. A high-level delegation has also started discussions—a virtual meeting was held even this week—with the US Trade Representative with a view to gaining further relief.

Sri Lanka will reciprocally have to open up its market to the US more than ever before, offering generous tariff concessions and committing to purchase American goods (oil and gas being two commodities under consideration). The ideas to narrow the trade imbalance, which has consistently been in Sri Lanka’s favour, by far.

Deputy Finance Minister Anil Jayantha’s assertion that the US is ready to grant 0% duty on 70-80 percent of Sri Lanka’s exports seems premature and not based in fact. Something else that is unclear is what, if anything, the government is doing about the country’s stalled negotiations on free trade agreements (FTAs) with various nations.

Talks with Malaysia and Indonesia were at the nascent stage. China was playing tough and needed a lot more work. But discussions with India on an Economic and Technology Cooperation Agreement (ETCA) had been progressing well, with two more rounds having been scheduled at the time the administration changed in Sri Lanka last year, officials say.

With the future uncertain as regards our traditional (mostly global north) trading partners, it has long been emphasised that “new markets have to be found”. And one of the ways in which some impact of the US tariff blows could be cushioned—to a degree—is through trade deals with other nations.

Many countries around the world have and are moving fast with bilateral FTAs, but Sri Lanka lags well behind. Our failure (and now silence) to advance with this vital tool is concerning.