According to the Central Bank’s Annual Economic Survey, the Ceylon Electricity Board (CEB) and the Ceylon Petroleum Corporation (CPC) have the potential to reduce electricity and fuel production costs by enhancing operational efficiency and improving competitiveness. The report highlights that by addressing these structural inefficiencies, both institutions can deliver direct financial benefits to consumers.
The survey further emphasizes that, rather than implementing broad, untargeted subsidies by setting utility prices below actual production costs, a more effective strategy would be to channel support to economically vulnerable groups through targeted benefit programs. This would ensure that assistance reaches those who need it most, without placing unnecessary strain on public finances.
It also notes that Sri Lanka has a longstanding practice of offering general subsidies on electricity and fuel, regardless of a consumer’s income level. This blanket approach, according to the report, has significantly undermined the financial health of both the CEB and CPC.
The Central Bank suggests that rethinking this model by adopting cost-reflective pricing and introducing well-designed, targeted subsidies could strengthen the energy sector’s financial sustainability and reduce fiscal pressure while still protecting the welfare of low-income households.
