CEB Proposes 25–35% Electricity Tariff Hike

 

Tariff Hike Proposal Under IMF Scrutiny

The Ceylon Electricity Board (CEB) proposes a steep electricity tariff increase of 25% to 35%, as part of a revised pricing plan expected to be submitted to the Public Utilities Commission of Sri Lanka (PUCSL). The revision follows a pricing formula agreed upon by both entities and comes under pressure from the International Monetary Fund (IMF), which is closely monitoring the implementation of cost-recovery mechanisms in Sri Lanka’s power sector.

January Tariff Cut Reverses Financial Gains

The proposed tariff increase follows the PUCSL's decision in January to reduce electricity tariffs by 20%, a move taken against the advice of the CEB, which had recommended maintaining the previous rates. This reduction has had a detrimental financial impact.

“Following the tariff cut, the CEB resumed incurring losses,” a senior official said. “We had reduced our accumulated losses from Rs. 473 billion in 2022 to Rs. 271 billion by end-2024, thanks to earlier IMF-aligned rate hikes. But losses are now rising again.”

IMF Conditions and Financial Performance

The financial restructuring of the CEB was a key component of Sri Lanka’s broader economic recovery plan under IMF oversight. In 2022, the government implemented two significant tariff hikes, leading to profits of Rs. 61 billion in 2023 and Rs. 141 billion in 2024.

The IMF has laid out two primary conditions for electricity sector reforms:

Cost-reflective tariffs based on actual expenditure.

An automatic 10% tariff increase if the CEB’s monthly cash flow drops below Rs. 15 billion.

Officials argue that if the January reduction had not occurred, only a 5% increase would have been required in the second quarter of this year.

Missed April Tariff Revision Raises Red Flags

According to the CEB’s agreement with the PUCSL, tariffs should be reviewed quarterly. However, the April revision was skipped, with no clear explanation provided by authorities. The IMF has since reminded Sri Lanka twice that the structural benchmark on electricity pricing has been breached—raising concerns over fiscal risks and the credibility of the reform process.

Mounting Debt and Unsettled Obligations

As of 2022, the CEB’s total accumulated loss of Rs. 473 billion included:

Long-term bank loans

Overdrafts from state-owned banks

Interest payments

Outstanding dues to the Ceylon Petroleum Corporation (CPC) and private power producers

The growing financial instability poses a significant challenge to the energy sector’s long-term sustainability, especially amid continued delays in implementing essential reforms.

Outlook: Public Impact and Political Ramifications

The proposed tariff hike—if approved—will likely trigger public backlash and add to the cost-of-living pressures already burdening households and businesses. With political resistance and regulatory inertia slowing down reform momentum, Sri Lanka’s power sector stands at a critical crossroads in its journey toward financial viability and structural compliance under the IMF programme.