The International Monetary Fund-supported reform framework was designed to stabilise Sri Lanka’s economy, ensure debt sustainability, and modernise the energy sector. A key component of these reforms was the gradual privatisation of the state-run Ceylon Electricity Board.
The Sri Lankan government is moving to amend the Electricity Act, which was passed in 2024 under the previous administration’s IMF-backed economic reforms. This marks a significant shift in policy under the leadership of incumbent President Anura Kumara Dissanayake, who has been critical of the restructuring measures tied to the country’s debt recovery programme.
The International Monetary Fund (IMF)-supported reform framework was designed to stabilise Sri Lanka’s economy, ensure debt sustainability, and modernise the energy sector. A key component of these reforms was the gradual privatisation of the state-run Ceylon Electricity Board (CEB) to enhance efficiency and financial viability. However, the new administration has expressed reservations about these plans, leading to a reassessment of the legal framework governing the electricity sector.
Revising the Electricity Act
In response to these concerns, the Ministry of Power has established a high powered committee, subject to Cabinet approval, to review the existing Electricity Act and recommend amendments. The committee has sought input from a broad spectrum of stakeholders, including industry experts, power sector representatives, and development agencies funding energy projects.
According to official documents, a total of 59 stakeholders have submitted written proposals, with additional consultations being conducted through knowledge-sharing sessions. The committee has now presented its final report, outlining proposed legislative changes. Subsequently, the Cabinet of Ministers has approved a resolution to draft a bill incorporating these recommendations.
The anticipated amendments will likely influence the restructuring of the CEB, affecting its role in power generation, transmission, and distribution. While the previous government’s reforms aimed at increasing transparency, efficiency, and private sector involvement, the Dissanayake administration appears to be prioritising a different approach, potentially curbing or modifying privatisation efforts.
Concept Paper on Proposed Amendments
Earlier this year, on January 20, a committee of experts developed a concept paper detailing proposed amendments to the Electricity Act (No. 36 of 2024). The paper underscores the critical challenges facing Sri Lanka’s electricity sector, including high costs, over-reliance on imported fossil fuels, delays in new power generation projects, governance inefficiencies, and the lack of a strategic vision for a sustainable energy transition.
The concept paper castigates that the 2024 Electricity Act mooted by the IMF, saying that it was approved by the country’s Parliament last June “after a narrow stakeholder consultation,” to become an Act of Parliament on 27 June 2024.
It further says, “Sri Lanka’s electricity sector is at a critical juncture, facing multifaceted challenges such as high electricity cost, over-reliance on imported fossil fuels, delays in adding new electricity generation plants to the grid, inefficiencies in governance, and lack of strategic vision for a sustainable energy transition. Reforms and proper restructuring of the institutions in the electricity sector are mandatory to overcome these challenges.”
It further outlines the original objectives of the Electricity Act, which include improving industry performance, promoting competition, enhancing efficiency, ensuring safety standards, identifying tariff principles, and facilitating the de-carbonisation of the electricity industry.
Concerns and Rationale for Amendments
While the Electricity Act introduced in 2024 included key provisions for reforming the energy sector, the concept paper points out several non-optimal or potentially detrimental provisions. It notes that some of the newly established institutions and trade arrangements may not serve the stated objectives of the Act and could impose additional burdens on both the electricity industry and consumers.
Additionally, the paper highlights concerns that certain provisions could complicate efforts to maintain an affordable and secure supply of electricity, making the transition process excessively complex.
Recognising these challenges and the public mandate for a more people-centric energy transition, the Cabinet of Ministers authorised the Secretary to the Ministry of Energy to appoint the specialist committee on January 7, 2025. The committee was tasked with studying the issues, consulting stakeholders, and providing recommendations for amending the Electricity Act.
A Critical Juncture for Sri Lanka’s Energy Future
The proposed changes to the Electricity Act could significantly impact Sri Lanka’s approach to energy sector management. Under the previous administration, the Act aimed to unbundle the CEB’s services, restructure its operations, and open up opportunities for private sector participation. However, the new government’s reluctance to fully embrace privatisation may lead to revisions that reinforce state control while still addressing inefficiencies within the sector.
While Sri Lanka remains committed to broader state enterprise reforms under its IMF agreement, the extent to which the revised Electricity Act will align with these commitments remains uncertain. The amendments may attempt to balance the IMF’s economic stabilisation goals with the government’s emphasis on a more state-led energy transition.
As Sri Lanka navigates its economic recovery, the direction of its energy policies will be closely watched by both domestic and international stakeholders. The amendments to the Electricity Act represent a crucial test of how the Dissanayake administration intends to balance economic restructuring with its commitment to public welfare and national energy security.
A senior official conversant with the developments said, “With mounting pressures to reduce electricity costs, transition towards renewable energy, and ensure financial sustainability in the power sector, the forthcoming legislative changes will play a pivotal role in shaping the future of Sri Lanka’s electricity industry.”
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