Connect with us

Features

Power sector reforms- urgent need to revisit them

Published

on

by Dr Janaka Ratnasiri

The government of Sri Lanka (GoSL), in a policy decision made in 1998, expressed its commitment to power sector reforms and embarked on a programme to restructure it by unbundling the Ceylon Electricity Board (CEB) into separate companies for generation, transmission, and distribution, as reported in the ADB Report on Country Assistance Programme Evaluation: Power Sector Assistance Evaluation, August 2007. To give effect to this policy, a Bill was drafted to introduce reforms in the power sector as far back as 2002.

ELECTRICITY REFORMS ACT 28 OF 2002

The draft titled Electricity Reforms Bill was presented to the Parliament in 2002, outlining sector reforms comprising restructuring of the electricity industry by breaking the Ceylon Electricity Board (CEB) and Lanka Electricity Company (LECO) into several independent state-owned companies to carry out generation, transmission, and distribution functions.

The Bill proposed that independent companies be incorporated for the following purposes:

One company to take over the functions of the CEB relating to hydroelectricity generation and thermal electricity generation,

One company to take over the functions of the CEB relating to transmission and bulk procurement of electricity,

Three or more companies to take over the distribution of electricity, and

One or more companies to take over other functions of the CEB and LECO.

The Bill when presented to the Parliament brought in strong protests from many quarters including the CEB trade unions and other trade unions as well as from several political parties. They saw this Bill as an initial step towards privatizing the CEB and consequently loss of employment for its staff. Once the government gave the workers an assurance that the workers’ rights would be safeguarded, the protests died down and the Bill was passed in March 2002. It was gazetted as Electricity Reforms Act No. 28 of 2002 on 13 December 2002. However, the necessary order to give effect to the Act was not gazetted by the Minister and as a result the Act did not come into operation.

 

ENERGY EXPERT’S RECOMMENDATIONS FOR UNBUNDLING THE POWER SETOR

Prof. Priyantha Wijayatunga, Director of the South Asia Energy Division of Asian Development Bank (ADB) said at the launching of the Techno 2019 exhibition held in July 2019, that “Sri Lanka still needs to go a long way in relation to sector governance, compared to other countries in the region. It is time that we look at this closely so that we do not lag behind. Reforms will undoubtedly help the energy sector and hence the country’s economic development,” (Daily Mirror, 18.07.2019).

He specifically pointed out that improved governance in the energy sector in India and Bangladesh enormously helped conceptualizing and implementing clean energy initiatives, while enhancing their energy security. He highlighted the important role played by independent energy regulators and separation of functions of the energy sector in these countries, which had paved the way for breakthroughs in clean energy initiatives. 

Prof. Wijayatunga elaborated “By now, a large majority of the countries, including many in the developing world around us, have fully unbundled the energy supply industry with a reasonably independent regulatory environment. If we look at South Asia, India and Bangladesh have already significantly advanced and are rapidly progressing in these areas,”.  Further, he noted that “reforms also led to an increase in private sector participation in all sub sectors, including generation, distribution and even in transmission business in these countries”. 

 

RECOMMENDATIONS OF INTERNATIONAL ORGANIZATIONS

The GoSL, from time to time, engaged the services of international institutions such as World Bank (WB), Asian Development Bank (ADB) and Japan International Cooperation Agency (JICA) to make recommendations to improve the power sector. Among the reports produced from these studies are:

JICA Master Plan Study on the Development of Power Generation and Transmission System in Sri Lanka, February 2006,

Asian Development Bank report on Assessment of Power Sector Reforms in Sri Lanka, 2015,

JICA Report on Electricity Sector Master Plan Study in Sri Lanka, March, 2018, and

World Bank Group study on Sri Lanka Energy Infrastructure Sector Assessment Programme (InfraSAP), April 2019.

The 2006 JICA report observed that “political intervention is making it impossible for the CEB to manage itself autonomously. As a result, its management has been criticized as inefficient by external parties. Moreover, it has piled up a debt big enough to jeopardize its continued sustenance. One of the areas where politics has been heavily involved is the tariff question. Thus far, political considerations have worked against attempts to raise tariffs, and tariff revisions to reflect the costs have consequently been delayed. To put a halt to political intervention in CEB management as well, it is necessary to lay down the proper conditions for corporate business. This is to be done by unbundling the current CEB, which is a vertically integrated government-owned monopoly; making the generation, transmission, and distribution divisions completely independent”. The report further recommended that “a fundamental reform of the sector is absolutely essential for promotion of long-term investment and increase in the overall efficiency. To this end, the government must present a detailed vision and schedule for CEB unbundling, and swiftly complete the reform, which is currently stalled.” But no follow up action was taken by the GoSL towards unbundling of the CEB.

The 2015 ADB report in its concluding paragraph said that “The next stage of reform requires establishing six independent companies out of the CEB’s generation, transmission, and four distribution licensees. The organization culture in the government-owned company LECO needs to be replicated in the CEB’s distribution licensees by creating corporate entities that report to the CEB holding company. The functional business units currently established within the CEB are adequately staffed and organized to enable the formation of six corporate entities. The corporatization need not involve privatization if political decision makers do not wish to involve private capital more fully in the sector, provided the state-owned firms operate as independent commercial companies”.

The ADB report further said that “The electricity sector was proposed to be restructured to ensure increased efficiency, transparency, autonomy, accountability, competition, and financial viability. The CEB functions were to be vertically and horizontally unbundled. For this purpose, the CEB owned subsidiary companies were planned to be established under the Companies Act No. 17 of 1982. The electricity sector was proposed to be restructured to ensure increased efficiency, transparency, autonomy, accountability, competition, and financial viability. The CEB functions were to be vertically and horizontally unbundled. For this purpose, CEB owned subsidiary companies were planned to be established under the Companies Act No. 17 of 1982”.

The 2018 JICA report reviewed and updated the 2006 JICA Master Plan. However, it did not refer to the issue of unbundling the power sector but recommended incorporation of renewable energy projects as well as natural gas in the energy mix for generation of electricity up to 2040 including consideration of financial commitments. It also considered the option of generation with 100% renewable energy sources by 2040, recommending that to meet the deficit of power arising out of continuing high cloud cover for several days, storage batteries need to be installed at an estimated cost of USD 1,000 million.

The 2019 World Bank report says “Apart from a few recent competitive outcomes, the country has not yet been able to develop utility scale non-conventional renewable energy (NCRE) projects at tariffs comparable with other projects globally or in the region or to tap into commercial financing and private sector participation in larger scale projects. As part of the preparation of the InfraSAP, two pre-feasibility assessments for potential large scale NCRE park sites were conducted for sites in Pooneryn and Moneragala, respectively, totaling about 500 MW of potential generation capacity”.

“The Solar and Wind power has the potential to further optimize the cost of power in the country. In line with what is being witnessed across the globe (i.e. low tariffs in solar and wind-based generation), it seems reasonable to assume that by opening the sector to international players with adequate incentives and risk mitigation mechanisms in place, a significant reduction in cost of power could be achieved in Sri Lanka. The solar and wind-based generation could be potentially used to replace some of the expensive imported oil-based power, which is currently utilized to offset the low availability of hydro resources” (p. 17).

Though the government sought the assistance from these multilateral agencies for improving the performance of the CEB, it has not taken any initiative to implement them, particularly those on reforms. The CEB is also rather slow in pursuing building of large-scale solar energy systems despite the government giving high priority for them and availability of funding from India on a credit line to the extent of USD 100 million specifically for solar energy project development (See The Island of 03.09.2020)

 

PRE-REQUISITES FOR UNBUNDLING OF CEB

Once the CEB is unbundled, separate companies are to be set up to take over the generation, transmission, distribution and other functions. There will be one company each for generation and transmission and three or more for distribution, according to the draft Act. However, it will be more prudent to have separate generation companies for each of the generation complexes, Kelanitissa, Laxapana, Mahaweli and others including large renewable energy plants. These companies will serve as independent power producers (IPP) and will have to sell the energy they generate to the transmission company, along with other IPPs. Electricity generated at power plants other than from small power plants, is transmitted to grid substations using 220 kV and 132 kV transmission lines.

When the available capacity exceeds the demand, the System Controller will have to decide the amount of power to be purchased from the IPPs based on a merit order system. Generally, plants providing firm output at low cost is given priority according to which power from renewable sources may get low priority. However, with the government policy to meet a minimum of 80% of generation from renewable sources, a mechanism will have to be worked out to accept power from RE sources, possibly by providing storage facilities which will even out their fluctuations.

Before selling energy, it has to be measured to an accuracy of at least ±0.1% using instrumentation which need to be type approved by the Department of Measurement Units, Standards and Services (MUSS) as required by the relevant law. Further, the instruments need to be regularly calibrated by an accredited laboratory. The CEB is already having a Meter Laboratory and this may have to be brought under the control of the transmission company with updated instrumentation serving as secondary standards with accuracy traceable to international standards. This can be verified by calibrating them against the primary standards available at MUSS Department, which is a legal requirement. Every generating unit before being connected to the grid for transmission, needs to go through the metering unit which will monitor the energy dispatched on a daily or monthly basis and transmit the data to the transmission company. It will then pay the IPP at rates agreed to in the power purchase agreement entered into between the IPP and the transmission company, based on the energy dispatched.

For distribution, the CEB has already divided the country into four regional divisions and a subsidiary company, Lanka Electric Company Ltd, covering the Western coastal townships from Negombo to Galle, excluding the city of Colombo. Electricity distribution from 220 kV/132 kV grid substations to the rest of the country is carried out using 33 kV lines which are again converted to 11 kV at load centres for local distribution. The 33 kV or 11 kV line voltage is again converted into 230/400 V for supplying to consumers. Currently, one 33 kV line may extend across two division boundaries, but if these two divisions are to be set up as two independent companies, there has to be separate distribution lines, each covering only one division receiving electricity from one or more GSSs located within the division. It will be then possible to measure the amount of energy transferred to this particular distribution company separately. Hence, certain amount or modifying the distribution system may have to be undertaken prior to unbundling.

 

FINANCIAL VIABILITY OF CEB

The CEB has been selling electricity to most of its consumers below cost price which is around Rs 20 per unit. For example, the tariff for households consuming up to 90 kWh per month is only Rs. 10 per unit for the last 30 units and less for lower slabs. For industries with demand up to 42 kVA and for other industries during daytime, the tariff is below the cost price. The average cost of generation per unit of electricity in 2017 was Rs 20.40, while the average selling price per unit in 2017 was Rs. 16.26. The corresponding values for 2018 were Rs. 19.12 and Rs. 16.29, respectively. These low tariffs resulted in the CEB incurring a net loss of Rs. 47.6 billion in 2017 and Rs. 30.5 billion in 2018 (AR, 2018).

In view of these losses, the CEB has not been able to settle its dues to the Ceylon Petroleum Corporation (CPC) for supplying fuel in 2016 amounting to Rs. 12.43 billion and also to settle the payments to IPPs for supplying power which amounted to Rs. 21.52 billion in 2016, according to General Manager’s Review appearing in the 2016 Annual Report (AR). Further, the total long-term borrowings as at end of 2016 were recorded as Rs. 220.5 billion, while that for 2018 were recorded as Rs. 281.3 billion, as given in respective annual reports. This poor financial status of CEB is an impediment for it to raise any borrowings from commercial banks.

The subsidies given to low-end consumers amounted to Rs. 70 billion in 2017 and Rs. 60 billion in 2018 (AR 2018). These were partly recovered by selling to high-end consumers at above-average cost price. The surplus recovered by these means in 2017 was Rs. 15.2 billion and Rs. 20.6 billion in 2018. Had the CEB was operating as a commercial enterprise, the logical measure that would have been done was either to increase the selling price above the cost price for all consumers and also reduce the cost of generation.

Being a government organization, the tariff is determined by the government policy to provide electricity to low-income households at an affordable price and hence the CEB is constrained against raising the tariff. However, this issue needs to be carefully studied and an upward revision of the tariff should be considered, removing the subsidies at least partly. Even for industries, to make them competitive in the global market, the government policy is to supply electricity to small and medium industries at below cost, but this policy too needs to be reviewed.

There is also the possibility to reduce the cost of generation. The CEB has been generating electricity from petroleum oil to the extent between 25% – 35% with the generation in 2017 being 5,000 GWh. According to 2016 Generation Performance Report of the Public Utilities Commission of Sri Lanka (PUCSL), the cost of generation from oil-fired power plants has been between Rs/kWh 22 and Rs/kWh 38. On the other hand, the cost of generation from NG fired power plant is no more than Rs/kWh 15 as quoted in the tender for the 300 MW gas power plant to be installed at Kerawalapitiya. If the thermal power plants presently operating with diesel are converted to NG, the saving is of the order of Rs. 50 billion annually.

 

The Cabinet of Ministers as far back as December 2010 decided to introduce natural gas (NG) in all sectors including power and industries and authorized the Ministry of Petroleum to pursue the matter, but no action was taken either by the Ministry of Petroleum or Ministry of Power and Energy. It is hoped that with the mandate given to the Ministry of Renewable Energy to convert all oil power plants at Kelanitissa complex for operation with NG, will inspire the CEB to give priority for this conversion which will reduce the losses incurred by the CEB.

The other matter that needs to be resolved is the delay in public sector organizations not paying up their bills for electricity on time, and this has caused liquidity problems in the CEB. As a result, the CEB is unable to pay the CPC for the fuel it purchases from the CPC on time and also unable to pay the IPPs for the power it purchases from them on time. With the unbundling of the sector, this system could be improved. Every Distribution Company (DC) should collect the payments due from the consumers on time giving a grace period of say one month. The Transmission Company (TC) should collect the payments from every DC for the electricity sold to them on time and settle the payments due for each of the Generation Companies (GC) on time. The GCs could then settle the payments due for each of the IPPs for the electricity they purchase from them. With the availability of on-line banking facilities and smart metering systems, all these operations could be undertaken without human intervention, other than occasional verification.

 

PRESENT STATUS OF SRI LANKA’S POWER SECTOR

In 1969, the Ceylon Electricity Board (CEB) was established by an Act of Parliament for the purpose of developing and coordinating of generation, supply and distribution of electricity island-wide, taking over the functions of the Department of Electrical Undertakings. By the end of 2018, the total installed capacity has grown to 4,045 MW of comprising 1,400 MW of hydropower plants, 1,137 MW of oil power plants, 900 MW of coal power plants and 608 MW of other renewal energy plants owned by both CEB and independent power producers. The total electricity generation in 2018 was 15,300 GWh, with the per capita electricity consumption 650 kWh, which is only above the least developed countries in Asia. The forecast for generation in 2030 given in CEB’s long term generation plan is around 31,000 GWh.

In 1983, Lanka Electric Company was established as a subsidiary company of the CEB and took over the distribution of electricity in coastal townships between Negombo and Galle, which resulted in reducing the distribution losses. In 2007, the Sri Lanka Sustainable Energy Authority (SLSEA) was established with the main objective to identify, assess and develop renewable energy resources in the country. However. The SLSEA has been operating more as a regulator than as a promoter of RE projects.

It is noteworthy to compare Sri Lanka’s power sector situation with that of another Asian country, Taiwan, where the population in 2018 (23.78 million) is similar to that of Sri Lanka (21.67 million) and land area (36,200 sq. km) is almost half of Sri Lanka’s (65,610 sq. km). Taiwan’s installed capacity in 2018 was a staggering 44,600 MW comprising 13,000 MW of coal power plants, 16,000 MW of natural gas power plants and 4,500 MW of nuclear power plants, generating 275,500 GWh of electricity in 2018 giving a per capita consumption of 11,585 kWh compared to 650 kWh for Sri Lanka (Wikipedia). The rapid growth of industrialization has been the main driver of the power sector, with a GDP (nominal) per capita of USD 24,800 in 2018 compared to USD 4,100 for Sri Lanka. It will be interesting to find out how Taiwan was able to achieve such high performance in the power sector – whether superior competency and dedication of professionals or correct policies in place or strong political leadership.

 

LACK OF TRANSPARENCY IN SELECTING MAJOR PROJECTS

Unlike in many Asian countries, Sri Lanka has been able to provide electricity to almost 100% of households, which was made possible through funding made available through decentralized budgeting in which provision of electricity to rural villages has been given priority. While the national grid was extended to cover almost the entire island to meet the power demands of every industry, commercial establishment and household, the CEB has not been able to expand its generation capacity correspondingly.

Efforts to build a coal power plant kept dragging for over 20 years at the beginning of the mid-eighties due to the CEB’s failure to initiate a dialogue with the public and concerned parties and vacillating policies of the government. Instead of inviting bids for building a power plant meeting performance and emission specifications from reputed manufacturers internationally and selecting a plant in a transparent manner, the CEB accepted a plant based on outdated technology offered by China on credit. The plant is known to breakdown repeatedly and the CEB is compelled to retain Chinese technicians even today to attend to its maintenance. Though the CEB claims that the coal power plant generates at the lowest cost, when the cost of financing is added, the cost gets more than doubled as revealed by a study undertaken by World Bank team.

On three occasions between 2000 and 2010, Sri Lanka government announced calls for expressions of interest for building thermal power plants on BOOT basis with capacity 1,000 – 1,200 MW, but pursued none. This gives a poor image of Sri Lanka within the international power industry, as the investors have to incur heavy expenditure on site visits and making bid bonds. In one announcement, the fuel option was kept open to solid or liquid or gas and the site to be selected by the investor while in another, the fuel option was specified as coal with the site to be near Hambantota.

In 2005, India offered to build a 500 MW coal power plant at Sampur, near Trincomalee on cost-sharing basis. Negotiations between the Indian party and the CEB kept dragging for five years before the final agreement was entered into and another five years to get feasibility studies and environment impact studies completed as well as other clearances obtained. By that time, the new government had changed its policy to adopt gas power rather than coal power on environmental grounds and the project was aborted. Had the CEB not taken such a long time to finalize the terms and commenced work sooner, the plant would have been built by now. It needs to be stressed that the proposed coal power plant at Sampur was abandoned because the CEB was dragging the project for nearly 10 years. The project took so long to commence work, obviously because it had problems both technical and operational which the CEB was unable to resolve. Hence, it was best to cancel the project and consider a new project afresh.

The latest attempt to build a 300 MW gas power plant at Kerawalapitiya on BOOT basis also got dragging for nearly four years mainly because of the manner in which the project selection process was handled by the CEB. A 500-page request for proposal (RFP) was announced in November 2016 seeking unnecessary details while the more important information essential for making a decision was left out. Such detailed information would have been in order had CEB was paying for the capital expenditure. With a BOOT project, the investor will ensure that a plant worth the money would have been purchased. The CEB will only have to know the price at which energy be sold to CEB and whether the plant satisfies performance and emission specifications laid down by the CEB.

The lack of clarity in the RFP resulted in the matter taken to the courts for a ruling. Though the approval of the Cabinet has already been granted for the project and the new President has directed this project be given priority soon after he was elected, the CEB has still not finalized its acceptance. Instead, the CEB is pursuing building a 300 MW coal power plant at Norochcholai against President’s policy. Incidentally, China was allowed to build a 400 MW gas power plant along with an LNG terminal at Hambantota with no such detailed RFPs announced.

According to a SLSEA Report dated 27.03.2019, several RE projects submitted by investors that have received the approval of the SLSEA since 2016 have been held up as CEB has not agreed to sign power purchase agreements with them, citing a section of the Electricity Act. This includes 101 RE projects with total installed capacity of 3,052 MW comprising 264 MW of mini-hydro plants, 2,028 MW of solar plants, 673 MW of wind plants and 87 MW of other plants, which could generate over 7000 GWh of energy annually. This situation is shown in Fig. 2 in 2018 Annual Report where the growth of energy added from RE projects to the system shows a stagnation between 2015 and 2018, with the value for 2016 showing a drop of 200 GWh compared to other years. It appears that there was no coordination between the CEB and the SLSEA.

 

FLAWED LONG TERM GENERATION EXPANSION PLAN

The CEB during the last few decades has been preparing biennially a long-term generation expansion (LTGE) Plan and the mandate of the Power Ministry specifies that the sector should be developed to comply with the CEB Plan. It is supposed to determine which power technology will be the cheapest in 20 years hence based on current prices. With the cost of generation depending on plant capital cost and fuel prices both of which could vary widely within a span of 20 years, it is futile to make forecasts now as to which technology is the cheapest in 20 years hence and to adopt it. Therefore, to give a mandate to follow the CEB’s LTGE Plan which is highly flawed for the development of the sector, does not make sense. The CEB Plan for 2018-2037 recommends adding 2,700 MW of coal power plants between 2023 and 2037 under Base Case scenario saying it is the cheapest option. However, the 2019 World Bank report cited above says in p. 18 that “coal ceases to be the least cost source of power generation, as cost of power from LNG and NCRE could potentially be lower than US cents 9 / kWh” which is the estimated coal power price.

When the CEB submitted its LTGE Plan for 2018-37 to the Public Utilities Commission of Sri Lanka (PUCSL) for approval as required by the Sri Lanka Electricity Act No. 31 of 2013, PUCSL did not approve it but proposed an alternative plan incorporating natural gas power plants in place of coal power plants included in the CEB Plan. The CEB refused to accept this recommendation and the dispute between the PUCSL and the CEB kept dragging for over a year, and the matter was finally referred to the President who gave a directive to the PUCSL to approve the CEB Plan, fearing disruption to the power supply in the country after the CEB Engineers’ Union threatened to resort to industrial action if their demand for coal power plants is not acceded to. This is a clear indication that Sri Lanka’s power sector is being governed not by the PUCSL nor the Ministry nor the Governing Board of the CEB, but by its trade unions. This justifies Prof. Wijayatunga’s statement that “Sri Lanka still needs to go a long way in relation to sector governance”.

 

CONCLUSION

The CEB ha a staff strength about 23,000 with over 1,400 professionals. It is the opinion of several international agencies that this organization be split into several organizations each responsible for different functions undertaken by the CEB, including generation, transmission and distribution. It is expected that such an unbundling process will improve the efficiency, transparency, autonomy, accountability, competition, and financial viability. The CEB has failed miserably in the recent past to increase the generation capacity to meet the growing demand with due consideration for environmental concerns even after granting Cabinet approval for many of them. It has also failed to initiate work on large renewable energy projects for several years, particularly during the last seven months even after the President’s policy of pursuing renewable energy and gas power projects was announced.

Possibly the high inertia of the CEB with its large staff prevents it from being flexible to undertake new projects in keeping with international trends and hence continues to insist on outdated technologies. Hence, it is desirable if the government initiates unbundling of the CEB urgently as recommended by reputed energy experts to make it more flexible. The unbundling will also give an opportunity for the government to get rid of dead wood after giving them a golden hand shake.



Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Features

The hollow recovery: A stagnant industry – Part I

Published

on

The headlines are seductive: 2.36 million tourists in 2025, a new “record.” Ministers queue for photo opportunities. SLTDA releases triumphant press statements. The narrative is simple: tourism is “back.”

But scratch beneath the surface and what emerges is not a success story but a cautionary tale of an industry that has mistaken survival for transformation, volume for value, and resilience for strategy.

Problem Diagnosis: The Mirage of Recovery

Yes, Sri Lanka welcomed 2.36 million tourists in 2025, marginally above the 2.33 million recorded in 2018. This marks a full recovery from the consecutive disasters of the Easter attacks (2019), COVID-19 (2020-21), and the economic collapse (2022). The year-on-year growth looks impressive: 15.1% above 2024’s 2.05 million arrivals.

But context matters. Between 2018 and 2023, arrivals collapsed by 36.3%, bottoming out at 1.49 million. The subsequent “rebound” is simply a return to where we were seven years ago, before COVID, before the economic crisis, even before the Easter attacks. We have spent six years clawing back to 2018 levels while competitors have leaped ahead.

Consider the monthly data. In 2023, January arrivals were just 102,545, down 57% from January 2018’s 238,924. By January 2025, arrivals reached 252,761, a dramatic 103% jump over 2023, but only 5.8% above the 2018 baseline. This is not growth; it is recovery from an artificially depressed base. Every month in 2025 shows the same pattern: strong percentage gains over the crisis years, but marginal or negative movement compared to 2018.

The problem is not just the numbers, but the narrative wrapped around them. SLTDA’s “Year in Review 2025” celebrates the 15.6% first-half increase without once acknowledging that this merely restores pre-crisis levels. The “Growth Scenarios 2025” report projects arrivals between 2.4 and 3.0 million but offers no analysis of what kind of tourism is being targeted, what yield is expected, or how market composition will shift. This is volume-chasing for its own sake, dressed up as strategic planning.

Comparative Analysis: Three Decades of Standing Still

The stagnation becomes stark when placed against Sri Lanka’s closest island competitors. In the mid-1990s, Sri Lanka, the Maldives, started from roughly the same base, around 300,000 annual arrivals each. Three decades later:

Sri Lanka: From 302,000 arrivals (1996) to 2.36 million (2025), with $3.2 billion

Maldives: From 315,000 arrivals (1995) to 2.25 million (2025), with $5.6 billion

The raw numbers obscure the qualitative difference. The Maldives deliberately crafted a luxury, high-yield model: one-island-one-resort zoning, strict environmental controls, integrated resorts layered with sustainability credentials. Today, Maldivian tourism generates approximately $5.6 billion from 2 million tourists, an average of $2,800 per visitor. The sector represents 21% of GDP and generates nearly half of government revenue.

Sri Lanka, by contrast, has oscillated between slogans, “Wonder of Asia,” “So Sri Lanka”, without embedding them in coherent policy. We have no settled model, no consensus on what kind of tourism we want, and no institutional memory because personnel and priorities change with every government. So, we match or slightly exceed competitors in arrivals, but dramatically underperform in revenue, yield, and structural resilience.

Root Causes: Governance Deficit and Policy Failure

The stagnation is not accidental; it is manufactured by systemic governance failures that successive governments have refused to confront.

1. Policy Inconsistency as Institutional Culture

Sri Lanka has rewritten its Tourism Act and produced multiple master plans since 2005. The problem is not the absence of strategy documents but their systematic non-implementation. The National Tourism Policy approved in February 2024 acknowledges that “policies and directions have not addressed several critical issues in the sector” and that there was “no commonly agreed and accepted tourism policy direction among diverse stakeholders.”

This is remarkable candor, and a damning indictment. After 58 years of organised tourism development, we still lack policy consensus. Why? Because tourism policy is treated as political property, not national infrastructure. Changes in government trigger wholesale personnel changes at SLTDA, Tourism Ministry, and SLTPB. Institutional knowledge evaporates. Priorities shift with ministerial whims. Therefore, operators cannot plan, investors cannot commit, and the industry lurches from crisis response to crisis response without building structural resilience.

2. Fragmented Institutional Architecture

Tourism responsibilities are scattered across the Ministry of Tourism, Sri Lanka Tourism Development Authority (SLTDA), Sri Lanka Tourism Promotion Bureau (SLTPB), provincial authorities, and an ever-expanding roster of ad hoc committees. The ADB’s 2024 Tourism Sector Diagnostics bluntly notes that “governance and public infrastructure development of tourism in Sri Lanka is fragmented and hampered.”

No single institution owns yield. No one is accountable for net foreign exchange contribution after leakages. Quality standards are unenforced. The tourism development fund, 1% of the tourism levy plus embarkation taxes, is theoretically allocated 70% to SLTPB for global promotion, but “lengthy procurement and approval processes” render it ineffective.

Critically, the current government has reportedly scrapped sophisticated data analytics programmes that were finally giving SLTDA visibility into spending patterns, high-yield segments, and tourist movement. According to industry reports in late 2025, partnerships with entities like Mastercard and telecom data analytics have been halted, forcing the sector to fly blind precisely when data-driven decision-making is essential.

3. Infrastructure Deficit and Resource Misallocation

The Bandaranaike International Airport Development Project, essential for handling projected tourist volumes, has been repeatedly delayed. Originally scheduled for completion years ago, it is now re-tendered for 2027 delivery after debt restructuring. Meanwhile, tourists in late 2025 faced severe congestion at BIA, with reports of near-miss flights due to immigration and check-in bottlenecks.

At cultural sites, basic facilities are inadequate. Sigiriya, which generates approximately 25% of cultural tourist traffic and charges $36 per visitor, lacks adequate lighting, safety measures, and emergency infrastructure. Tourism associations report instances of tourists being attacked by wild elephants with no effective safety protocols.

SLTDA Chairman statements acknowledge “many restrictions placed on incurring capital expenditure” and “embargoes placed not only on tourism but all Government institutions.” The frank admission: we lack funds to maintain the assets that generate revenue. This is governance failure in its purest form, allowing revenue-generating infrastructure to decay while chasing arrival targets.

The Stop-Go Trap: Volatility as Business Model

What truly differentiates Sri Lanka from competitors is not arrival levels but the pattern: extreme stop-go volatility driven by crisis and short-term stimulus rather than steady, strategic growth.

After each shock, the industry is told to “bounce back” without being given the tools to build resilience. The rebound mechanism is consistent: currency depreciation makes Sri Lanka “affordable,” operators discount aggressively to fill rooms, and visa concessions attract price-sensitive segments. Arrivals recover, until the next shock.

This is not how a strategic export industry operates. It is how a shock-absorber behaves, used to plug forex and fiscal holes after each policy failure, then left exposed again.

The monthly 2023-2025 data illustrate the cycle perfectly. Between January 2018 and January 2023, arrivals fell 57%. The “recovery” to January 2025 shows a 103% jump over 2023, but this is bounce-back from an artificially depressed base, not structural transformation. By September 2025, growth rates normalize into the teens and twenties, catch-up to a benchmark set six years earlier.

Why the Boom Feels Like Stagnation

Industry operators report a disconnect between headline numbers and ground reality. Occupancy rates have improved to the high-60% range, but margins remain below 2018 levels. Why?

Because input costs, energy, food, debt servicing, have risen faster than room rates. The rupee’s collapse makes Sri Lanka look “affordable” to foreigners, but it quietly transfers value from domestic suppliers and workers to foreign visitors and lenders. Hotels fill rooms at prices that barely cover costs once translated into hard currency and adjusted for inflation.

Growth is fragile and concentrated. Europe and Asia-Pacific account for over 92% of arrivals. India alone provides 20.7% of visitors in H1 2025, and as later articles in this series will show, this is a low-yield, short-stay segment. We have built recovery on market concentration and price competition, not on product differentiation or yield optimization.

There is no credible long-term roadmap. SLTDA’s projections focus almost entirely on volumes. There is no public discussion of receipts-per-visitor targets, market composition strategies, or institutional reforms required to shift from volume to value.

The Way Forward: From Arrivals Theater to Strategic Transformation

The path out of stagnation requires uncomfortable honesty and political courage that has been systematically absent.

First, abandon arrivals as the primary success metric. Tourism contribution to economic recovery should be measured by net foreign exchange contribution after leakages, employment quality (wages, stability), and yield per visitor, not by how many planes land.

Second, establish institutional continuity. Depoliticize relevant leaderships. Implement fixed terms for key personnel insulated from political cycles. Tourism is a 30-year investment horizon; it cannot be managed on five-year electoral cycles.

Third, restore data infrastructure. Reinstate the analytics programs that track spending patterns and identify high-yield segments. Without data, we are flying blind, and no amount of ministerial optimism changes that.

Fourth, allocate resources to infrastructure. The tourism development fund exists, use it. Online promotions, BIA expansion, cultural site upgrades, last-mile connectivity cannot wait for “better fiscal conditions.” These assets generate the revenue that funds their own maintenance.

Resilience without strategy is stagnation with momentum. And stagnation, however energetically celebrated, remains stagnation.

If policymakers continue to mistake arrivals for achievement, Sri Lanka will remain trapped in a cycle: crash, discount, recover, repeat. Meanwhile, competitors will consolidate high-yield models, and we will wonder why our tourism “boom” generates less cash, less jobs, and less development than it should.

(The writer, a senior Chartered Accountant and professional banker, is Professor at SLIIT, Malabe. The views and opinions expressed in this article are personal.)

Continue Reading

Features

The call for review of reforms in education: discussion continues …

Published

on

PM Harini Amarasuriya

The hype around educational reforms has abated slightly, but the scandal of the reforms persists. And in saying scandal, I don’t mean the error of judgement surrounding a misprinted link of an online dating site in a Grade 6 English language text book. While that fiasco took on a nasty, undeserved attack on the Minister of Education and Prime Minister Harini Amarasuriya, fundamental concerns with the reforms have surfaced since then and need urgent discussion and a mechanism for further analysis and action. Members of Kuppi have been writing on the reforms the past few months, drawing attention to the deeply troubling aspects of the reforms. Just last week, a statement, initiated by Kuppi, and signed by 94 state university teachers, was released to the public, drawing attention to the fundamental problems underlining the reforms https://island.lk/general-educational-reforms-to-what-purpose-a-statement-by-state-university-teachers/. While the furore over the misspelled and misplaced reference and online link raged in the public domain, there were also many who welcomed the reforms, seeing in the package, a way out of the bottle neck that exists today in our educational system, as regards how achievement is measured and the way the highly competitive system has not helped to serve a population divided by social class, gendered functions and diversities in talent and inclinations. However, the reforms need to be scrutinised as to whether they truly address these concerns or move education in a progressive direction aimed at access and equity, as claimed by the state machinery and the Minister… And the answer is a resounding No.

The statement by 94 university teachers deplores the high handed manner in which the reforms were hastily formulated, and without public consultation. It underlines the problems with the substance of the reforms, particularly in the areas of the structure of education, and the content of the text books. The problem lies at the very outset of the reforms, with the conceptual framework. While the stated conceptualisation sounds fancifully democratic, inclusive, grounded and, simultaneously, sensitive, the detail of the reforms-structure itself shows up a scandalous disconnect between the concept and the structural features of the reforms. This disconnect is most glaring in the way the secondary school programme, in the main, the junior and senior secondary school Phase I, is structured; secondly, the disconnect is also apparent in the pedagogic areas, particularly in the content of the text books. The key players of the “Reforms” have weaponised certain seemingly progressive catch phrases like learner- or student-centred education, digital learning systems, and ideas like moving away from exams and text-heavy education, in popularising it in a bid to win the consent of the public. Launching the reforms at a school recently, Dr. Amarasuriya says, and I cite the state-owned broadside Daily News here, “The reforms focus on a student-centered, practical learning approach to replace the current heavily exam-oriented system, beginning with Grade One in 2026 (https://www.facebook.com/reel/1866339250940490). In an address to the public on September 29, 2025, Dr. Amarasuriya sings the praises of digital transformation and the use of AI-platforms in facilitating education (https://www.facebook.com/share/v/14UvTrkbkwW/), and more recently in a slightly modified tone (https://www.dailymirror.lk/breaking-news/PM-pledges-safe-tech-driven-digital-education-for-Sri-Lankan-children/108-331699).

The idea of learner- or student-centric education has been there for long. It comes from the thinking of Paulo Freire, Ivan Illyich and many other educational reformers, globally. Freire, in particular, talks of learner-centred education (he does not use the term), as transformative, transformative of the learner’s and teacher’s thinking: an active and situated learning process that transforms the relations inhering in the situation itself. Lev Vygotsky, the well-known linguist and educator, is a fore runner in promoting collaborative work. But in his thought, collaborative work, which he termed the Zone of Proximal Development (ZPD) is processual and not goal-oriented, the way teamwork is understood in our pedagogical frameworks; marks, assignments and projects. In his pedagogy, a well-trained teacher, who has substantial knowledge of the subject, is a must. Good text books are important. But I have seen Vygotsky’s idea of ZPD being appropriated to mean teamwork where students sit around and carry out a task already determined for them in quantifying terms. For Vygotsky, the classroom is a transformative, collaborative place.

But in our neo liberal times, learner-centredness has become quick fix to address the ills of a (still existing) hierarchical classroom. What it has actually achieved is reduce teachers to the status of being mere cogs in a machine designed elsewhere: imitative, non-thinking followers of some empty words and guide lines. Over the years, this learner-centred approach has served to destroy teachers’ independence and agency in designing and trying out different pedagogical methods for themselves and their classrooms, make input in the formulation of the curriculum, and create a space for critical thinking in the classroom.

Thus, when Dr. Amarasuriya says that our system should not be over reliant on text books, I have to disagree with her (https://www.newsfirst.lk/2026/01/29/education-reform-to-end-textbook-tyranny ). The issue is not with over reliance, but with the inability to produce well formulated text books. And we are now privy to what this easy dismissal of text books has led us into – the rabbit hole of badly formulated, misinformed content. I quote from the statement of the 94 university teachers to illustrate my point.

“The textbooks for the Grade 6 modules . . . . contain rampant typographical errors and include (some undeclared) AI-generated content, including images that seem distant from the student experience. Some textbooks contain incorrect or misleading information. The Global Studies textbook associates specific facial features, hair colour, and skin colour, with particular countries and regions, and refers to Indigenous peoples in offensive terms long rejected by these communities (e.g. “Pygmies”, “Eskimos”). Nigerians are portrayed as poor/agricultural and with no electricity. The Entrepreneurship and Financial Literacy textbook introduces students to “world famous entrepreneurs”, mostly men, and equates success with business acumen. Such content contradicts the policy’s stated commitment to “values of equity, inclusivity and social justice” (p. 9). Is this the kind of content we want in our textbooks?”

Where structure is concerned, it is astounding to note that the number of subjects has increased from the previous number, while the duration of a single period has considerably reduced. This is markedly noticeable in the fact that only 30 hours are allocated for mathematics and first language at the junior secondary level, per term. The reduced emphasis on social sciences and humanities is another matter of grave concern. We have seen how TV channels and YouTube videos are churning out questionable and unsubstantiated material on the humanities. In my experience, when humanities and social sciences are not properly taught, and not taught by trained teachers, students, who will have no other recourse for related knowledge, will rely on material from controversial and substandard outlets. These will be their only source. So, instruction in history will be increasingly turned over to questionable YouTube channels and other internet sites. Popular media have an enormous influence on the public and shapes thinking, but a well formulated policy in humanities and social science teaching could counter that with researched material and critical thought. Another deplorable feature of the reforms lies in provisions encouraging students to move toward a career path too early in their student life.

The National Institute of Education has received quite a lot of flak in the fall out of the uproar over the controversial Grade 6 module. This is highlighted in a statement, different from the one already mentioned, released by influential members of the academic and activist public, which delivered a sharp critique of the NIE, even while welcoming the reforms (https://ceylontoday.lk/2026/01/16/academics-urge-govt-safeguard-integrity-of-education-reforms). The government itself suspended key players of the NIE in the reform process, following the mishap. The critique of NIE has been more or less uniform in our own discussions with interested members of the university community. It is interesting to note that both statements mentioned here have called for a review of the NIE and the setting up of a mechanism that will guide it in its activities at least in the interim period. The NIE is an educational arm of the state, and it is, ultimately, the responsibility of the government to oversee its function. It has to be equipped with qualified staff, provided with the capacity to initiate consultative mechanisms and involve panels of educators from various different fields and disciplines in policy and curriculum making.

In conclusion, I call upon the government to have courage and patience and to rethink some of the fundamental features of the reform. I reiterate the call for postponing the implementation of the reforms and, in the words of the statement of the 94 university teachers, “holistically review the new curriculum, including at primary level.”

(Sivamohan Sumathy was formerly attached to the University of Peradeniya)

Kuppi is a politics and pedagogy happening on the margins of the lecture hall that parodies, subverts, and simultaneously reaffirms social hierarchies.

By Sivamohan Sumathy

Continue Reading

Features

Constitutional Council and the President’s Mandate

Published

on

A file photo of a Constitutional Council meeting

The Constitutional Council stands out as one of Sri Lanka’s most important governance mechanisms particularly at a time when even long‑established democracies are struggling with the dangers of executive overreach. Sri Lanka’s attempt to balance democratic mandate with independent oversight places it within a small but important group of constitutional arrangements that seek to protect the integrity of key state institutions without paralysing elected governments.  Democratic power must be exercised, but it must also be restrained by institutions that command broad confidence. In each case, performance has been uneven, but the underlying principle is shared.

 Comparable mechanisms exist in a number of democracies. In the United Kingdom, independent appointments commissions for the judiciary and civil service operate alongside ministerial authority, constraining but not eliminating political discretion. In Canada, parliamentary committees scrutinise appointments to oversight institutions such as the Auditor General, whose independence is regarded as essential to democratic accountability. In India, the collegium system for judicial appointments, in which senior judges of the Supreme Court play the decisive role in recommending appointments, emerged from a similar concern to insulate the judiciary from excessive political influence.

 The Constitutional Council in Sri Lanka  was developed to ensure that the highest level appointments to the most important institutions of the state would be the best possible under the circumstances. The objective was not to deny the executive its authority, but to ensure that those appointed would be independent, suitably qualified and not politically partisan. The Council is entrusted with oversight of appointments in seven critical areas of governance. These include the judiciary, through appointments to the Supreme Court and Court of Appeal, the independent commissions overseeing elections, public service, police, human rights, bribery and corruption, and the office of the Auditor General.

JVP Advocacy

 The most outstanding feature of the Constitutional Council is its composition. Its ten members are drawn from the ranks of the government, the main opposition party, smaller parties and civil society. This plural composition was designed to reflect the diversity of political opinion in Parliament while also bringing in voices that are not directly tied to electoral competition. It reflects a belief that legitimacy in sensitive appointments comes not only from legal authority but also from inclusion and balance.

 The idea of the Constitutional Council was strongly promoted around the year 2000, during a period of intense debate about the concentration of power in the executive presidency. Civil society organisations, professional bodies and sections of the legal community championed the position that unchecked executive authority had led to abuse of power and declining public trust. The JVP, which is today the core part of the NPP government, was among the political advocates in making the argument and joined the government of President Chandrika Bandaranaike Kumaratunga on this platform.

 The first version of the Constitutional Council came into being in 2001 with the 17th Amendment to the Constitution during the presidency of Chandrika Bandaranaike Kumaratunga. The Constitutional Council functioned with varying degrees of effectiveness. There were moments of cooperation and also moments of tension. On several occasions President Kumaratunga disagreed with the views of the Constitutional Council, leading to deadlock and delays in appointments. These experiences revealed both the strengths and weaknesses of the model.

 Since its inception in 2001, the Constitutional Council has had its ups and downs. Successive constitutional amendments have alternately weakened and strengthened it. The 18th Amendment significantly reduced its authority, restoring much of the appointment power to the executive. The 19th Amendment reversed this trend and re-established the Council with enhanced powers. The 20th Amendment again curtailed its role, while the 21st Amendment restored a measure of balance. At present, the Constitutional Council operates under the framework of the 21st Amendment, which reflects a renewed commitment to shared decision making in key appointments.

 Undermining Confidence

 The particular issue that has now come to the fore concerns the appointment of the Auditor General. This is a constitutionally protected position, reflecting the central role played by the Auditor General’s Department in monitoring public spending and safeguarding public resources. Without a credible and fearless audit institution, parliamentary oversight can become superficial and corruption flourishes unchecked. The role of the Auditor General’s Department is especially important in the present circumstances, when rooting out corruption is a stated priority of the government and a central element of the mandate it received from the electorate at the presidential and parliamentary elections held in 2024.

 So far, the government has taken hitherto unprecedented actions to investigate past corruption involving former government leaders. These actions have caused considerable discomfort among politicians now in the opposition and out of power.  However, a serious lacuna in the government’s anti-corruption arsenal is that the post of Auditor General has been vacant for over six months. No agreement has been reached between the government and the Constitutional Council on the nominations made by the President. On each of the four previous occasions, the nominees of the President have failed to obtain its concurrence.

 The President has once again nominated a senior officer of the Auditor General’s Department whose appointment was earlier declined by the Constitutional Council. The key difference on this occasion is that the composition of the Constitutional Council has changed. The three representatives from civil society are new appointees and may take a different view from their predecessors. The person appointed needs to be someone who is not compromised by long years of association with entrenched interests in the public service and politics. The task ahead for the new Auditor General is formidable. What is required is professional competence combined with moral courage and institutional independence.

 New Opportunity

 By submitting the same nominee to the Constitutional Council, the President is signaling a clear preference and calling it to reconsider its earlier decision in the light of changed circumstances. If the President’s nominee possesses the required professional qualifications, relevant experience, and no substantiated allegations against her, the presumption should lean toward approving the appointment. The Constitutional Council is intended to moderate the President’s authority and not nullify it.

 A consensual, collegial decision would be the best outcome. Confrontational postures may yield temporary political advantage, but they harm public institutions and erode trust. The President and the government carry the democratic mandate of the people; this mandate brings both authority and responsibility. The Constitutional Council plays a vital oversight role, but it does not possess an independent democratic mandate of its own and its legitimacy lies in balanced, principled decision making.

 Sri Lanka’s experience, like that of many democracies, shows that institutions function best when guided by restraint, mutual respect, and a shared commitment to the public good. The erosion of these values elsewhere in the world demonstrates their importance. At this critical moment, reaching a consensus that respects both the President’s mandate and the Constitutional Council’s oversight role would send a powerful message that constitutional governance in Sri Lanka can work as intended.

by Jehan Perera

Continue Reading

Trending