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Petroleum, energy, water liberalisation on line

by Ravi Ladduwahetty

The Government will shortly liberalise the petroleum, energy and water sectors, in a sweeping move aimed at reaping full benefits of the market economy through healthy competition.

What the Government intends doing is to enable private operators to enter the market and create a framework of healthy competition so that the consumer gets the best product at the most competitive price, the hallmark of the market economy, Minister of Economic Reform, Science and Technology Milinda Moragoda told the 'Daily News' in a special interview.

What has hitherto happened is, institutions such as the Ceylon Petroleum Corporation the Ceylon Electricity Board the National Water Supply and Drainage Board have enjoyed monopolies. They have been so badly managed with rampant corruption that the losses are astronomical. What has happened is that it is the consumer who has suffered due to high selling prices to sustain the losses of these institutions, Minister Moragoda said.

The liberalisation of the petroleum sector would enable private operators such as Shell, Mobil and Caltex to enter the market for the supply of petroleum products and creating competition with the Ceylon Petroleum Corporation.

The initial liberalisation of the petroleum sector has already been done with the previous Government permitting the private operators such as Caltex, Mobil etc to enter the lubricants market with the divestiture of Lanka Lubricants Ltd, a wholly owned Ceylon Petroleum Corporation subsidiary, he said.

However, the Government will permit these private operators to enter the market but they will have to operate under a regulatory framework like in the telecommunications sector at present where there is a Telecommunications Regulatory Commission. This will ensure that they will not have unlimited freedom at the expense of the consumer, the Minister explained.

He said that the Government allowing the Ceylon Petroleum Corporation to determine its own pricing policy a few days ago, was the first step towards its liberalisation.

There will be a liberalisation of the energy sector as well. For starters the Ceylon Electricity Board will be demarcated into separate limited liability companies and they will be run individually and separately, competing with each other. Private operators will also be made to enter the fray at a later stage, the Minister said.

The water sector too will be liberalised with private operators being given permission to enter the market. The idea will be to be competitive, he said.

Minister Moragoda asserted that the Government would be conscious of consumers who are living below the poverty line and said that it was obligatory on the part of the state to subsidise them with both water and electricity. The current rural electrification programs would continue uninterrupted, he said.

The Government will undertake a sweeping reforms program where certain state entities will be divested to the private sector while others will be restructured to suit consumer needs. Whether it is going to be divestiture or restructuring, it will be done on a case-by-case basis. We are not going to arbitrarily sell everything lock stock and barrel, he said. The Minister will submit a report in this regard to Prime Minister Ranil Wickremesinghe within the next fortnight.

Asked about the prospects for employees under these proposed reforms, he said that in some instances there will be issue of shares for employees in certain entities, while there will be golden handshakes for some. " The modalities are being worked out," he said.

According to him, the Government is currently studying the restructuring process of the two state banks- the Bank of Ceylon and the People's Bank. It is also studying the recommendations submitted by two globally reputed firms of Chartered Accountants- Price, Waterhouse Coopers (PWC) and Ernst and Young respectively for the restructuring of these two banks.

"What the Government has in mind is to ensure that the sovereignty of the consumer is maintained and penalties will be introduced for violations of the rights of the consumer, the Minister said.

These proposed measures are aimed at the economy taking off in top gear though there will be initial teething problems. However, the results will be seen within the next 12- 18 months, he added.

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