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Thursday May 13th, 2021

Large Sri Lanka SOEs to ink corporate plans

ECONOMYNEXT – Sri Lanka’s state-run energy, water, airport and port enterprises will ink and publish corporate plans and targets on March 15, which is expected to improve their performance and governance.

The so-called Statements of Corporate Intent (SCI) has also been included in an International Monetary Fund-backed programme to reduce the burden of state enterprises on the poor.

The Finance Ministry said similar agreements will be signed with 350 other SOEs and statutory agencies.

Losses at state enterprises, especially the Ceylon Electricity Board and Ceylon Petroleum Corporation, which was funded by loans from state banks that are ultimately accommodated with printed money, have been a key trigger for balance of payments crises and a collapsing currency.

It is not clear whether a pricing formula is a part of the SCIs. The lack of market pricing is the main reason for bad performance of energy enterprises and the water agency.

At Sri Lanka Ports Authority, over-staffing and extraordinarily higher salaries are a key cost item.

The SCIs will be signed between the Finance Ministry, the line ministry in charge and the boards of the SOE.

Intent (SCI) for Key State owned Business Enterprises (SOBEs)

The government is going to sign the “Statement of Corporate Intent – (SCIs)” initially with some selected “State Owned Business Enterprises – (SOBEs)” at 11 a.m. on 15th March 2017 at the New Auditorium of Ministry of Finance. This move has been approved by the Cabinet of Ministers on 28th February 2017. The five SOBEs, namely Ceylon Electricity Board (CEB), Ceylon Petroleum Corporation (CPC), National Water Supply and Drainage Board (NWS&DB), Airport and Aviation Services (SL) LTD (AASL) and Sri Lanka Ports Authority (SLPA) have been selected to sign this Statement of Corporate Intent.

The SCI would enable to contribute positively to the strategically important SOBEs towards achieving Sri Lanka’s economic goals by enhancing the contribution making to the GDP of the country.

In achieving the set objectives of these SOBEs, the key expectations of the government are to encourage and to facilitate these SOBEs to improve the operational and financial efficiency through improved corporate practices,  innovative financing, strong and prudent financial management, exposure to competitiveness and international best-practices and effective human resource management while enhancing public accountability.

SCI is a tripartite Memorandum of Understanding (MOU) to be signed by Secretary to the Ministry of Finance (MOF), Secretary of relevant line Ministry and the Chairman on behalf of the Board of Directors of the respective SOBEs. The effectiveness of the SCI process will depend fundamentally on to what extent that the SCI will be used as their own management tool by the selected SOBEs and the line Ministries. SCI includes key performance indicators link to Corporate Plan, Action Plan and Annual Budget of the SOBEs for three years’ time horizon stating from year 2017. In addition, the impact of all non-commercial operations by the SOBEs are also taken in to the account and included to SCI.

The CEB has identified its KPIs as improving quality of electricity to customer by continuously reducing System Average Interruption Duration Indicators (SAIDI), reducing System Average Interruptions Frequency Index (SAIFI), increasing electricity generation from renewable resources thereby increase Non-Conventional Renewable Energy (NCRE) generation composition by end of 2019.

The CPC has identified its KPIs as improving refinery efficiency (output) as a percentage of capacity, ensuring financial viability by reducing debt to assets and improving productivity and management efficiency through institutional structural changes.

The NWS&DB has identified its KPIs as increasing new water connections annually, reduce non-revenue water percentage, increasing more access to safe drinking water, enhance the efficiency of employees, improving operational efficiency and thereby reduce leak repairs cost per kilometer per month.

The KPIs of AASL are to improve infrastructure facilities to cater 15 million passenger handling, achieving transshipment cargo out of total aviation cargo, and improving airport performance in the regional ranking in terms of air traffic statistics and improving number of aircraft movements at the Airports of Sri Lanka.

The KPIs of SLPA have been identified as reducing Average Ship Turnaround Time (Hour), maintaining Average Waiting Time of Container Ships (Hour) and to improve Gross Container Productivity per crane (Moves/Hour).

On the success of the implementation of this Priority program, the government is expecting to extend this move for the other State Owned Enterprises (SOEs) as well by time to time. Altogether, there are more than 350 SOEs those can be identified as Corporations, Banks, Academic Institutions, Statutory Boards and Public Companies ect.

The Department of Public Enterprises is in the process of analyzing the results of these institutions in order to align its future path towards success.     

Overall, the SCI provides more transparent and accountable information stream to the real stakeholders i.e. customers, employees, regulatory authorities, government agencies, general public and any other interested parties.


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