Global financial giants, the World Bank, ADB, and JICA have raised red flags over Sri Lanka’s amendments to the Electricity Act, warning that the changes threaten governance, transparency, and investment potential in the energy sector. Their joint objection urges the government to revise the legislation to safeguard financial stability and investor confidence.
World Bank, ADB, JICA Strongly Oppose Amendments to Sri Lanka’s Electricity Act
Three of Sri Lanka’s most influential development partners, the World Bank, Asian Development Bank (ADB), and Japan International Cooperation Agency (JICA) have voiced strong opposition to the government’s proposed amendments to the Electricity Act. They have jointly urged the Sri Lankan government to reconsider the legislation, highlighting concerns over governance, competitive procurement, regulatory independence, and the financial stability of the power sector.
In a letter addressed to Energy Minister Kumara Jayakody, World Bank and IFC Sri Lanka Country Manager Gevorg Sargsyan, ADB Country Director Takafumi Kadono, and JICA Country Manager Kenji Kurunuma expressed unified concern over the potential negative implications of the amendments, which were gazetted on May 16, 2024, and tabled in Parliament.
The donors emphasized that, despite ongoing discussions with key government stakeholders, the current amendments risk undermining the core objectives of the Electricity Act. They warned that such changes could weaken efficiency, governance, and financial sustainability key pillars essential for delivering affordable, high-quality energy services to Sri Lankan consumers.
Permanent Government Ownership
One major concern relates to the legislative entrenchment of 100% permanent government ownership over specific entities listed in Section 17, Subsection 2. While state ownership of entities like the NTNSP and Pension Liability Company is understandable, enforcing this through law may hinder private sector participation and limit investment opportunities, especially in power generation and distribution.
National Transmission Network Service Provider (NTNSP)
Section 20, Subsection 3 includes the transfer of LTL Holdings and Sri Lanka Energies under NTNSP. However, both entities are active in power generation and various non-core businesses. Integrating them into NTNSP whose primary function is transmission could dilute operational efficiency and transparency. The donors argue that this contradicts one of the key goals of the reforms: clear separation of generation and transmission functions within the Ceylon Electricity Board (CEB).
Distribution Company Concerns
Section 20, Subsection 4 outlines a transfer plan where LECO’s assets, liabilities, and functions would be absorbed by another distribution licensee. The donors warn that such a merger disregards the commercial, legal, and operational consequences. LECO, currently known for innovation and efficiency, risks being buried in bureaucracy, compromising service standards.
Tariff Regulation Weakening
Section 29, Subsection 3 changes the regulatory framework for tariff setting. Replacing the phrase “in accordance with the National Tariff Policy” with “after consultation with the Ministry of Finance” creates ambiguity over regulatory authority. The development partners caution that such vague language could invite legal disputes and implementation delays, making tariff setting vulnerable to political interference.
The donors stress that these legislative changes threaten to reverse progress made under previous reforms supported by ADB’s policy-based lending and the World Bank’s development policy operations. Furthermore, they could significantly damage Sri Lanka’s investment appeal in the power and energy sector.
Copies of the joint letter were shared with Members of Parliament, including the Sectoral Oversight Committee on Infrastructure and Strategic Development, along with officials from the Ministries of Finance and Energy.
The message from Sri Lanka’s development partners is clear: amend the Electricity Act to uphold good governance, transparency, and investor trust. Failure to do so could stall critical energy sector reforms, restrict financing, and place additional burdens on both the government and consumers.
