SOE reforms vital to reap benefits of infrastructure development: CB

11 April 2013 07:35 am

The progress in infrastructure development needs to be supplemented with an effective institutional reform agenda to harness maximum economic and social benefits, according to the Central Bank’s Annual Report 2012.

The annual report was referring to the substantially large losses incurred by many state-owned enterprises (SOEs) over the years.

Public investment on economic and social infrastructure development made by the government amounted to Rs.388 billion (5.1 percent of the GDP) in 2012.

However, the report noted that it is a well-known fact that the financial viability of several key SOEs, which provide essential public utility services, has weakened over the past few years.

While the Ceylon Electricity Board (CEB) and Ceylon Petroleum Corporation (CPC) have been making substantially large losses, Sri Lanka Railways (SLR), the Sri Lanka Transport Board (SLTB), SriLankan Airlines (SLA) and the Department of Posts are among the other entities which have also recorded weak financial performance, the report revealed.

As per the financial statements, CPC reported an operational loss of Rs.89.7 billion in 2012, compared to Rs.94.5 billion in 2011, while the CEB recorded an operating loss of Rs.61.2 billion in 2012, compared to a loss of Rs.19.3 billion in 2011.

Further, the operational loss of the SLTB increased to Rs.3.8 billion in 2012, compared to the loss of Rs.3.3 billion recorded in 2011, while SLR witnessed a decrease in operating losses to Rs.3.8 billion in 2012, compared to the loss of Rs.4.1 billion in 2011.

Also, SLA suffered an operating loss of Rs.20.5 billion during the year under review, while Mihin Lanka recorded an operating loss of Rs.1 billion in 2012, compared to the operating loss of Rs.455.3 million incurred in 2011.

According to the annual report, the lack of strategic institutional improvements to ensure the financial viability of these institutions can pose a threat to the macroeconomic stability of the country, considering their importance in the national economy.

Hence, SOEs must be encouraged to adopt sustainable financial and corporate planning, including a rational pricing policy in line with market developments, the report said.

(KP)