Sri Lanka CPC to end cut-priced fuel to power utility

Mar 21, 2011 (LBO) – Sri Lanka’s state-run Ceylon Petroleum Corporation will end the sale of subsidized fuel to Ceylon Electricity Board (CEB), a state power utility, a report said, amid a controversy over the financial performance of the two entities. The usual excuse has been that they are doing a ‘service’. Meanwhile state energy utilities have also been exempted from income tax.

The controversy arose after the CEB said it had posted a 5.0 billion rupee profit in 2010, partly helped by good rainfall after running a string of losses in earlier years.

Word War

The petroleum ministry responded by saying that most of CPC’s losses was caused by selling cut-priced heavy fuel to the CEB. This week, worker trade unions at CPC also joined the fray, blaming their weak finances on the power utility.

Both the CEB and CPC have been running losses for years because energy prices are arbitrarily set by rulers without regard to cost or justice. The problems in energy utilities worsened after a price formula was scrapped in 2004.

The CEB is now on a less arbitrary pricing framework with a regulator to set prices on an evidence based process, though the 2011 price proposals came under fire for being arbitrary and outside the process.