By: Staff Writer
September 21, Colombo (LNW): Sri Lanka’s loss-making state power utility, the Ceylon Electricity Board (CEB), has requested yet another tariff hike an overall 6.8% increase for the October to December quarter citing surging energy and financing costs alongside long-standing debt tied to the controversial Uma Oya hydro project.
The proposal, submitted to the Public Utilities Commission of Sri Lanka (PUCSL), would mark the third tariff revision in 2025 and affect more than 7.2 million electricity users.
The CEB warns that without higher tariffs, it faces a Rs 7.7 billion deficit in the final quarter of the year. Its revenue forecast of Rs 112.3 billion falls well short of the Rs 125.3 billion needed to cover generation, capacity, transmission, distribution, and finance costs. Energy expenses alone are projected at Rs 68.4 billion, with the utility blaming rising demand.
Financial disclosures paint a bleak picture. For the first half of 2025, the CEB reported a group loss of Rs 9.5 billion, with revenue plummeting 38% year-on-year to Rs 201.5 billion.
Although lower interest rates have cut financing costs to Rs 7.78 billion, legacy debt continues to drain the utility. Loan repayments and interest payments account for more than Rs 6 billion this quarter alone, including capital repayments of Rs 4.3 billion and interest of Rs 1.7 billion.
A portion of the debt stems from a Rs 20 billion debenture issued in April 2021 at a 9.35% coupon rate far higher than government securities. Most of these funds, Rs 14 billion, were spent on paying private power producers, while another Rs 6 billion went to the Ceylon Petroleum Corporation. Debenture interest now adds another Rs 471 million to CEB’s costs.
The Uma Oya hydro project remains a costly burden. Financed partly by an Iranian loan during the Mahinda Rajapaksa era, the project has triggered payment obligations of USD 5 million (Rs 1.5 billion) due to delays.
The CEB admits that more than USD 19.3 million (Rs 5.8 billion) remains overdue to contractor Farab, with only partial payments made. In a Cabinet decision, the Ministry of Agriculture has been tasked with shouldering some of the debt repayment, raising concerns over fiscal transparency.
Adding to the controversy, the CEB’s cost forecasts have repeatedly proven unreliable. Its June estimates for power generation, finance costs, and distribution revenue are now off by billions, with the utility offering only the vague explanation of “a significant increase in all major cost items.” Errors in transmission revenue calculations flagged in previous submissions also remain unresolved, while fuel supply agreements for key plants have yet to be signed.
These developments unfold against the backdrop of an IMF technical team’s visit to Colombo, which reviewed electricity sector reforms under the Extended Fund Facility (EFF). The IMF has pressed for a formula-driven, cost-reflective tariff mechanism to eliminate ad-hoc hikes and shield consumers from inefficiencies. Its latest technical report emphasized that tariff discipline is essential for unlocking further external financing.
Analysts warn that consumers will once again shoulder the burden of decades of mismanagement. “The CEB is passing structural inefficiencies onto the public instead of fixing them,” one energy sector expert observed. “The IMF’s formula is meant to depoliticize tariffs, but unless governance improves, these hikes will only buy time.”
As unions resist restructuring and households brace for higher bills, the government is caught between public backlash and IMF demands. The October tariff proposal now stands as a test of whether Sri Lanka can finally confront its power sector’s entrenched flaws—or whether, as in the past, consumers will pay for the failures of the state.
