By: Staff Writer
April 27, Colombo (LNW): Sri Lanka’s power sector remained under intense financial pressure in 2025, with the Ceylon Electricity Board (CEB) posting a loss of Rs. 38.7 billion despite multiple tariff adjustments and ongoing reform measures, according to the Central Bank’s Annual Economic Review.
The losses highlight a persistent imbalance between electricity pricing and generation costs. At the start of the year, tariffs were reduced by an average of 20% in January 2025, following earlier cuts in 2024. While intended to ease consumer burdens, the move significantly weakened the CEB’s revenue base. At the same time, a dry spell forced increased reliance on expensive thermal power generation during the first quarter, sharply driving up operational costs.
Although a 15% tariff hike was introduced in June 2025 to counteract these pressures, it proved insufficient to offset earlier losses. Financial strain continued to build, with short-term borrowings rising to Rs. 206.2 billion by the end of the year, up from Rs. 174.3 billion in 2024. Long-term liabilities also edged higher to Rs. 411.2 billion.
A further tariff increase of 10.3% came into effect in April 2026, reflecting continued dependence on price revisions to stabilize the utility’s finances. However, the repeated adjustments underscore the structural challenges facing the sector.
Electricity demand grew by 5.8% in 2025, mirroring the broader economic recovery. Growth was seen across all major consumer categories, with household demand accelerating from the second quarter. However, momentum slowed toward the end of the year due to disruptions caused by Cyclone Ditwah.
On the supply side, improved hydropower conditions provided some relief. Reservoir levels averaged 69.6% during the year, allowing hydropower to contribute 35.5% of total generation. Coal accounted for 27.4%, fuel-based generation 12.5%, and non-conventional renewable energy 24.7%. Solar power saw particularly strong growth, with rooftop installations nearly doubling, signaling a shift toward decentralized energy sources.
Structural reforms gathered pace during the year, including the passage of new legislation to restructure the CEB into four state-owned entities covering generation, transmission, distribution, and system operations. These changes are expected to enhance efficiency, improve governance, and introduce competition into the electricity market.
At the same time, investment in renewable energy infrastructure accelerated, with projects spanning hydropower, wind, solar, and battery storage. Funding support from international partners, including the Asian Development Bank, has played a key role in advancing these initiatives.
Despite progress, the Central Bank stressed that long-term sustainability will depend on maintaining cost-reflective pricing, deepening reforms, and expanding renewable energy capacity to reduce reliance on costly thermal generation.