By: Staff Writer
January 04, Colombo (LNW): Sri Lanka’s proposed electricity tariff increase has reignited a contentious national debate, placing the Government’s economic reform agenda on a collision course with public hardship and political accountability. As households reel from the aftermath of Cyclone Ditwah and rising living costs, the proposed 11.57% tariff hike has drawn sharp criticism, particularly from the Opposition, who argue that the timing and scale of the increase are both unjust and contradictory to electoral promises.
Opposition Leader Sajith Premadasa has emerged as one of the strongest critics, warning that millions already displaced or economically strained by the cyclone would bear an unfair burden. He has accused the Government of abandoning commitments made while in Opposition, when current leaders pledged to reduce electricity bills by as much as 33%. Instead of relief, consumers now face higher charges, a move Premadasa describes as a breach of the public mandate.
However , the Government’s position is rooted in structural reform. In response to public backlash, the Ministry of Energy has released the National Electricity Policy for public consultation, outlining a binding framework aimed at restoring financial discipline to the power sector. Issued under the amended Sri Lanka Electricity Act, the policy marks a decisive shift away from politically administered tariffs toward a pricing regime based on long-term system costs and financial sustainability.
Central to the policy is the reaffirmation of cost-reflective tariffs, a cornerstone of Sri Lanka’s ongoing International Monetary Fund (IMF) Extended Fund Facility program. The policy asserts that electricity prices must reflect the true cost of generation, transmission, and distribution, while ensuring the financial viability of utilities. Any subsidies, it states, must be transparent, targeted, and explicitly funded rather than hidden through cross-subsidisation.
To address social concerns, the policy allows for limited “lifeline” tariffs for vulnerable consumers, subject to regulatory approval. However, it makes clear that broad-based subsidies are incompatible with long-term sector stability. The framework also formalises the unbundling of the Ceylon Electricity Board (CEB), creating separate entities for generation, transmission, distribution, and system operations, with a strengthened National System Operator overseeing planning and dispatch.
Renewable energy expansion is positioned as a strategic priority, but the policy introduces tighter controls, emphasising competitive procurement and grid stability over ad hoc approvals. Digitalisation, loss reduction, and demand-side management are also highlighted as tools to contain future tariff pressures.
The IMF has repeatedly underscored the importance of these reforms. During its last review mission, IMF officials stressed that cost-recovery pricing remains a continuous structural benchmark, warning that losses at the CEB would ultimately fall on taxpayers. While the tariff hike may be economically defensible within this framework, critics argue that without timely relief measures, cost-reflective pricing risks deepening social inequities during a period of national vulnerability.
