News

Controversy over Rs. 10 b loan: Minister and CEB at loggerheads

I was not aware of state bank loan, says Minister
Presidential Secretary’s directive, says CEB
By Maheesha Mudugamuwa

Controversy surrounds the loan amounting to billions of rupees allegedly obtained by the Ceylon Electricity Board
(CEB) from a state bank without the approval of the Minister of Power and Energy, The Morning learnt.

As confirmed by Power and Energy Minister Mahinda Amaraweera, the CEB had obtained Rs. 10 billion from a state bank and denied that the CEB had sought his approval for the loan.

When asked why the Board had obtained the loan, Minister Amaraweera said he was not aware, but assumed it was probably for its expenses.

He told The Morning that the CEB must have obtained the loan with the approval of its Board.
Meanwhile, an official attached to the Power and Energy Ministry stressed that the Minister had directed the CEB officials to provide the details of the loan obtained by the Board.

Responding to the allegation, CEB Chairman Eng. Vijitha Herath told The Morning that the loan had been obtained in a transparent manner. The CEB, as a state institution, obtained the necessary approvals from the line Ministry, and it was also answerable to the Government, he said.

Clarifying on the loan in question, he said the decision to obtain the loan was taken at a meeting with President’s Secretary Dr. P.B Jayasundera and the Chairmen of the Bank of Ceylon (BOC) and People’s Bank (PB) earlier this month. At the meeting, Dr. Jayasundera had instructed the two Chairmen of BOC and PB to grant a Rs. 15 billion loan, from each bank, to run the CEB for the next six months.

“Altogether, Rs. 30 billion was requested from the two banks,” Eng. Herath explained, pointing out that in addition to the loan, the President’s Secretary had also instructed the Ceylon Petroleum Corporation (CPC) to absorb Rs. 10 billion of the amount due by the CEB.

However, PB could grant only Rs. 10 billion and they received only Rs. 5 billion from BOC, the CEB Chairman stressed.

“With that amount, the CEB could run only for three months, and again it would require at least Rs. 10 billion,” he added.

Elaborating that the process was transparent, Eng. Herath stressed that the CEB was running at a loss and needed at least Rs. 5 billion to run its systems. When asked how the CEB sourced finance amounting to Rs. 5 billion every month, the Chairman stressed that it receives financing from different sources, and obtaining loans from state banks was one such source.

As a measure to reduce the debt burden on the CEB, the Treasury through the CPC’s profits, had paid Rs. 38 billion of the amounts due to the CPC, while another Rs. 10 billion was paid to private power companies.

Explaining the reason as to why the CEB should be pumped with Rs. 5 billion every month, the Chairman noted that the electricity
tariffs had not been changed since 2012, and in addition to which, the Board supplies electricity incurring a huge loss.
“When the total cost of a unit is Rs. 23.50, the CEB sells it at Rs. 16 and the loss is higher when it comes to diesel,” he stressed.

As explained by the Chairman, the CEB’s financial crisis was a result of the failure to build new power plants for five years since 2015.