|CEB and Petroleum Corporation with mounting debts
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|Author:||LBO [ Wed Mar 16, 2005 8:27 pm ]|
|Post subject:||CEB and Petroleum Corporation with mounting debts|
16 March 2005 15:46 hours
The Central Bank rapped state Petroleum Corporation and the Electricity Board for mounting debts of over Rs. 2 bn a month, warning that a growing public sector credit bill could not be tolerated.
Monetary aggregates have been growing at higher than expected, the Bank said in its monthly monetary policy review, largely due to expanded credit to the private and public sectors.
“A major contributory factor for the public sector credit expansion has been the losses incurred by the Ceylon Electricity Board and the Ceylon Petroleum Corporation, which will continue to incur losses amounting to about Rs. 2.5 bn per month, unless corrective measures are taken,” the Central Bank said in a statement on Wednesday.
The Bank’s Monetary Board warned that it was vital high monetary and credit growth be arrested to ease inflationary pressures building up.
“Furthermore, the adjustment of administered prices of fuel, electricity and transport, enabling a reduction in the borrowings of public corporations, would also facilitate containing expansion in domestic credit.”
The problem though is recurring, with both forced to keep tariffs low and much of CPC’s core debt is also unpaid bills by other state institutions.
Retail prices for fuel, mainly diesel and kerosene as well as domestic electricity prices are heavily subsidised, and were last revised in September 2004.
Efforts to raise electricity tariffs last November was challenged in court, on the basis that the CEB had not given the public sufficient notice of an increase.
Reform programs to restructure the utilities for better management and to face competition from new entrants have also been derailed following anti-privatisation protests by unions.
“High priority should be given to strengthening the public enterprises reform program. The Board also emphasised the necessity for expediting mobilisation of concessional foreign assistance to cover tsunami related expenditure, as available domestic resources are limited,” Central Bank said.
Already, up to US$ 100 mn in donor funding for the sector hangs in the balance, unless overdue CEB reforms go through by the end of this month, or a deadline extension is won.
The problem is, the ADB loan has already been re-scheduled twice. The state power monopoly already owes to the tune of Rs. 27 bn to banks for selling power below cost.
Apart from a highly unionised staff, the cash strapped Ceylon Petroleum Corporation, is also saddled with unpaid bills from other state corporations that is adding to the mountain of debt.
The Petroleum Corporation has a core debt of Rs. 7.8 bn on its books, largely owed by notoriously defaulting state institutions, including the Armed Forces.
The heaviest debtor is the Ceylon Electricity Board (CEB) owing Rs. 3.7 bn, Independent Power Producers (IPP's) Rs. 1.3 bn, the Armed Forces – Rs. 1.2 bn, the Railways – Rs. 663 mn and the Sri Lanka Transport Board – Rs.44 mn.
Unable to raise prices, the Treasury also owes the Ceypetco Rs. 3.5 bn in outstanding subsidy claims from January to date.
It has only recently managed to settle Rs, 14 bn in subsidy payments for last year, set off against CPC revenue owed to the Treasury and outstanding amounts due to the Inland Revenue.
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