Why CEB?

 

20 June 2022

All eyes are on the Ceylon Electricity Board (CEB). But why now and what is at stake for the working people? I address below the dangers of privatising CEB, the IMF’s push for market pricing electricity and the problematic Adani-deal.

Crises and privatisation

For over a decade the privatisation push that came along with the second wave of neoliberal policies characterised by financialisation, urbanisation and infrastructure build out had put “reform” of CEB on the agenda. Reform in this context is a euphemism for privatisation, and for extraction of profits from utilities. By 2016, market pricing energy and restructuring State- Owned Enterprises such as CEB was put forward in what became Sri Lanka’s 16th IMF Agreement. 

Crises as we have seen around the world are an opportunity for setting the landscape for exploitation, extraction and capitalist accumulation. The long queues for fuel despite the prices being tripled and the desperation of people during hours of power cuts show the necessity of energy for any economic activity. This means that there is tremendous potential to extract profits from the energy sector. Furthermore, as Sri Lanka goes through a balance of payment crisis, a fire sale of assets becomes the finance capitalists’ easy and desirable fix. The external debt then can be addressed by selling the country’s strategic assets to global capital, and the local elite can reap profits in the process of privatisation and creating an environment for continued extraction from the public.

In this context, there are many ways of privatising electricity services in a country like ours. It could start with allowing large companies like Adani Group to generate and sell electricity, or it could be through outsourcing bill collection, or it can be through floating CEB in the stock market to be controlled by financiers whose only motive is profit. In the end such privatisation leads to increased burden on the working people who have to pay much higher prices for electricity or face disconnection from the electricity grid.

Losses and subsidies

The current attack on CEB claims that it is a loss making entity and a great drain on national coffers. According to the Central Bank Annual Report for 2021, the CEB lost Rs. 22 billion in 2021 and Rs. 69 billion in 2020, the difference mainly caused by the availability of rain water in the catchments for hydroelectricity generation. And CEB’s long-term liabilities by the end of 2021 stood at Rs. 503 billion. But this accumulated debt of CEB should be put in context with for example the Government’s investment in highways and road, which for example in the Budget for 2022 alone was Rs. 270 billion.

The question nevertheless is how can such losses – which really are subsidies – be addressed? We must first acknowledge that Sri Lanka is unique; it is one of the few Third World countries where almost the entire population is connected to the electricity grid. In fact, a majority of our population pay just Rs. 7.5 per kWh of electricity or less than Rs. 500 a month, and gain from the subsidy for using below 60 kWh. The cost of production of electricity in 2020 and 2021 was about Rs. 20 per kWh, so obviously there is a major subsidy given to our working people. Next, the pricing structure is such that the total average cost of electricity for domestic users including the wealthier classes was Rs. 15, industries Rs. 15, government Rs. 18 and hotels Rs. 18. In other words, almost all the major sectors have got subsidised electricity making so-called losses inevitable. Furthermore, electricity tariffs have not been revised for the most part since 2014. Therefore, while CEB like any other institution needs to be made more efficient, the real issue is about pricing by the Government to ensure there is greater redistribution through electricity prices; where the wealthier classes and the tourism sector for example pay much more. Moreover, there needs to be redistributive taxation to ensure subsidised services for the working people. 

If we take the current year, with less water available for hydroelectricity and the tremendous rise in global prices for oil with the war in Ukraine coupled with the depreciation of the rupee, the generation of electricity can go as high as Rs. 50 per kWh. These price rises and the attendant “losses” should not be used to attack CEB and push for its privatisation. Rather there needs to be prioritising of state support and allocations for essential sectors, including with redistribution through income and wealth taxes. 
Furthermore, raising the price of electricity for lower consumers can lead to further dispossession. As the incomes of working people fall with the economic crisis, electricity prices can affect their livelihoods; they will for example find it hard to irrigate their gardens and continue with petty production requiring 
electric power.

Corporates and resistance

In this context, the Adani wind power plant deal is a notorious case that should concern all of us. The cost apparently agreed to in an MOU for the generation of one kWh is US$ 0.0755 where as the market rate internationally is less than half that amount. Indeed, if such high costs are incurred in generation of electricity in a deal that came through without bidding, those costs are going to be passed on to the consumers or tax payers. Second, the massive 500 MW capacity plant will absorb almost all of the projected 700 MW allocated for wind power considering diversification for various forms of electricity generation totalling usage now of between 2,300 MW and 2,800 MW in Sri Lanka. This could prove a serious problem in the future, as it curtails other market entrants and also provides tremendous monopolistic leverage to Adani Group. Finally, unlike bidding for projects where the specifications should have been set by Sri Lanka, this is a project that Adani has designed and Sri Lanka has meekly accepted. With land allocated in Mannar and Kilinochchi for this project, if Adani dumps less efficient wind power infrastructure, we will be tying up much larger tracts of lands without considering the opportunity costs of land use. These are convincing arguments conveyed by some engineers, and the Government should clarify, or alternatively repeal the deal if it is so detrimental to the country.

I am also concerned about the social and political consequences of the kind of opposition that can emerge to the Adani deal. We should be clear about the class interests behind this deal, and it is not about whether Adani is Indian, Chinese or American. A xenophobic nationalist reaction fuelling anti-Indian sentiments detracts from the issue of providing electricity services in a sustainable and affordable manner to our working people. 

Clarity on the class politics in opposing global and Sri Lankan corporate interests affecting our working people is needed as we are likely to see many more deals like this as the economic crisis deepens. For the moment, we must come to the defence of CEB and its unions under attack and resist the moves underway to privatise electricity.