The Public Utilities Commission of Sri Lanka (PUCSL) and the Treasury are facing heightened scrutiny as the Ceylon Electricity Board (CEB) presses for an 11.5 percent electricity tariff increase, a move closely tied to IMF-driven state-owned enterprise (SOE) reforms aimed at curbing losses and easing fiscal pressure on the State.
The proposed hike comes as the Treasury intensifies efforts to reduce the budgetary burden of loss-making SOEs under Sri Lanka’s IMF programme, which places strong emphasis on cost-reflective pricing, improved governance and the elimination of quasi-fiscal deficits.
Power sector sources said the PUCSL has completed its technical evaluation of the CEB proposal and is expected to announce its determination shortly.
The decision is being closely watched not only as a test of regulatory independence, but also as an indicator of how Treasury-backed fiscal discipline is being enforced through independent regulators.Under the IMF agreement, Sri Lanka has committed to restructuring key SOEs, such as, the CEB to prevent recurring losses from spilling over into public finances.
Treasury officials have repeatedly warned that continued operational losses at the utility could ultimately require state intervention, undermining fiscal consolidation targets agreed with the IMF.
The CEB has justified the proposed 11.5 percent hike by citing high generation costs, foreign currency loan repayments and accumulated legacy losses, arguing that further tariff adjustments are necessary to stabilise finances and avoid a return to Treasury support.
However, critics argue that IMF-aligned reforms should not translate into routine tariff hikes without meaningful improvements in efficiency, cost controls and governance within the utility.
Trade unions and consumer groups have urged the PUCSL to resist pressure from both the CEB and fiscal authorities to simply pass costs on to consumers.
They also note that improved hydropower availability should reduce dependence on expensive thermal generation, easing cost pressures and giving the regulator room to moderate any tariff increase.
Energy analysts say the PUCSL’s ruling will reflect how effectively the Treasury’s fiscal objectives are being balanced against the regulator’s statutory duty to protect consumers, warning that over-reliance on tariff increases could erode public support for IMF-backed reforms.
Business chambers have cautioned that another electricity price hike could weaken industrial competitiveness and slow economic recovery, particularly in export-oriented and energy-intensive sectors already grappling with elevated costs.
Electricity tariffs remain one of the most politically sensitive aspects of IMF-linked restructuring, with previous hikes triggering widespread public discontent and raising concerns over social impact.
The PUCSL is expected to outline the basis of its decision, including whether the proposed 11.5 percent increase will be approved in full, scaled down, or restructured through slab-based mechanisms to cushion low-income households.
An energy expert stressed that Sri Lanka navigates IMF-mandated fiscal and SOE reforms, the forthcoming ruling is widely seen as a defining moment—testing not only the independence of the regulator, but also the Treasury’s ability to pursue reform without deepening the burden on consumers.
By Ifham Nizam ✍️
