Think Tank Advocata Warns Against Rollback of Sri Lanka’s Power Sector Reforms

Sri Lanka’s leading economic policy think tank, the Advocata Institute, has called on the government to uphold the key electricity sector reforms introduced under the landmark 2024 Electricity Act. The institute has raised concerns that proposed amendments to the Act risk reversing crucial progress toward a more competitive, efficient, and transparent energy market.

In its newly released policy paper titled “Powering Forward: Why Unbundling the CEB is Critical for Sri Lanka’s Energy Future”, Advocata warns that efforts to re-centralize the Ceylon Electricity Board (CEB) — by placing power generation, transmission, and distribution under full State control — could deter private investment, entrench inefficiencies, and add further strain to Sri Lanka’s already fragile public finances.

“The 2024 Electricity Act was a landmark step towards a more efficient and accountable energy sector,” said Dhananath Fernando, CEO of Advocata Institute. “Sri Lanka cannot afford to fall back into a monopoly-driven model at a time when attracting private capital and enhancing efficiency are critical to economic recovery and energy security.”

The proposed 2025 amendments seek to roll back key provisions of the 2024 legislation, which aimed to unbundle the CEB’s functions and allow private sector participation. Advocata’s paper highlights the risks of this reversal and outlines three key arguments in favor of continuing with reform:

• Urgent Need for Private Capital: Public finances are already stretched, with the CEB’s operational losses and infrastructure demands placing a heavy burden on the Treasury. Continued reliance on public funding threatens Sri Lanka’s ability to maintain a primary budget surplus and meet debt obligations under the IMF program. Unbundling the electricity sector could open targeted investment opportunities that attract private capital based on risk-return profiles.
• Proven Economic Benefits of Unbundling: Drawing on international case studies, the report shows that unbundling state-owned utilities — when combined with competitive tendering and regulatory oversight — leads to improved operational efficiency, better transparency, and higher-quality service delivery.
• Strategic Assets Can Be Protected Without Full State Control: Advocata argues that strategic national interests in the energy sector can still be safeguarded through robust regulation, public-private partnerships, and majority state ownership. The paper cites the Lanka Electricity Company (LECO) as a successful example of a publicly owned but commercially governed entity that has delivered innovation and efficiency. The think tank warns that dismantling such models in favor of full State control would be a step backward.

The report ultimately concludes that reinforcing the 2024 Electricity Act, rather than weakening it, is vital for the country’s energy security, economic recovery, and fiscal stability.

The full position paper is available at: https://www.advocata.org/media-archives/2025/07/09powering-forward-why-unbundling-the-ceb-is-critical-for-sri-lankas-energy-future