Power sector reform: Turning setbacks into sustainable opportunity

The NPP Government faces criticism for rolling back the 2024 power sector reforms, with concerns that increased centralisation will lead to inefficiency, delayed system upgrades, higher costs and inability to attract investment. Is it possible to transform these criticisms into opportunities for sustainable growth through pragmatic measures?

- By Anil Cabraal

The Sri Lanka Electricity (Amendment) Act, No. 14 of 2025 has reversed the liberalisation of 2024, reinstating centralised control. While it aligns with political priorities, critics warn it threatens efficiency, investment, and Sri Lanka’s 2030 renewable energy goal, risking long-term sustainability for short-term gain. My previous article in the Daily FT (10/10/2025) explored the adverse impacts of scrapping the 2024 reforms.(See endnote fi)

This article faces political reality and proposes actions that can improve power sector performance under the 2025 Act. Drawing on international experience, it argues that the Government and CEB can adopt pragmatic, evidence-based solutions focused on results to deliver reliable, affordable, and sustainable electricity and attract the US$5 billion investment needed in the next decade. Five practical pathways address criticisms and offer effective countermeasures.

Critics argue that the lack of real competition and accountability within CEB’s newly segmented entities perpetuates inefficiency and stifles innovation. To address these concerns, the following measures are suggested:

International experience—from China’s State Grid to Malaysia’s TNB—shows that performance-linked budgeting and internal competition can drive efficiency even in vertically integrated utilities, addressing many of the sector’s persistent criticisms.

Adopt Special Purpose Vehicles (SPVs) as model for Public-Private Partnerships in the electricity sector via a practical, reform-focused approach. SPVs enable investment in LTL and CEB subsidiaries. It permits Government oversight through Treasury shares, attracting private investment and improving standards. This supports gradual privatisation, risk management, efficiency, decarbonisation, and funding. The effectiveness of this approach depends on skilled governance, which may be hampered by excessive Government control under the 2025 Act.