Bloated public sector – a major impediment to development
September 06, 2022
Minister Kanchana Wijesekera has publicly stated that the Ceylon Petroleum Corporation (CPC) and the Ceylon Electricity Board (CEB) have employees far in excess than required for the normal functioning of these institutions. For instance, Ceylon Petroleum Storage Terminals Ltd. has 4,200 employees where only 500 are required, and the CEB has around 26,000 employees when half that number is sufficient. He also admitted that Rs. 3 billion has been paid as overtime for the workers at the Petroleum refinery at Sapugaskanda last year.
Politicians of all colours and hues have filled these institutions regularly with their supporters, beyond cadre provisions, leading to the current disastrous situation. The politicians only consider their future political survival and not the economic well-being of the country. These result in a massive loss to the Government, since these loss-making entities have to pay the salaries and overtime to unproductive employees, which invariably come from the Government coffers. Successive governments have taken the easy way out, by requesting the Treasury to bail them out, resulting in an extra burden to the general public in the form of indirect taxes on purchasing consumer goods. None of our leaders had the courage to control the despicable acts of ministers who continue to fill non-existing vacancies in Government Institutions.
The taxes collected either directly by the Internal revenue department and indirectly from each and every citizen during purchasing household items from the market, go to maintain these white elephants. Money which can otherwise go into development projects, to buy medicines for the hospitals, or repairing school buildings, end up to pay the salaries and overtime of idling workers at institutions such as the CPC and the CEB. These institutions suffer losses of billions of rupees, and our politicians continue to exploit these unnecessary appointments hoping they can win future elections with these political appointees.
This phenomenal curse is not restricted to only CEB and CPC, it is rampant in virtually all government departments, semi-government corporations and boards, and politicians are directly responsible for the bloated public sector. The Secretary to the Ministry of Public Administration stated on television that annually one trillion (1,000 billion) rupees is spent on paying salaries of public sector employees, and the number of employees can be reduced to one-third of its present number without affecting the services provided. Some of these institutions are full of directors and managers who are neither directing nor managing the institutions.
There are also a large number of redundant Corporations and Boards, which can be easily closed. Boards and Corporations with unnecessary duplication of duties are common. There is the State Pharmaceutical Corporation and a State Pharmaceutical Manufacturing Corporation, which can easily be amalgamated into a single entity. There is Paranthan Chemicals Ltd. which earlier ran the now defunct Paranthan Chemical Factory, still exists, with their only job now is importing chlorine gas for use by the Water Board. Why the Water Board cannot directly import chlorine is the thousand-dollar question. There is the Ceylon Petroleum Storage Terminals Ltd. which can be managed by the CPC and the Fisheries Harbour Corporation which can be under the Ceylon Fisheries Corporation. Multiple organizations are created solely for the politicians to appoint their friends and political supporters to positions such as Chairmen and other jobs on these boards.
The biggest burden on our taxpayers is Sri Lankan Airlines, which has made every citizen in Sri Lanka indebted to the tune of around Rs. 18,000. It made profits under Emirates management until 2008, and that year it recorded a profit of Rs. 4.4 billion. When a former president and its entourage were refused seats on an already fully booked flight, the government decided to send Emirates home, and appoint a person with no knowledge of aviation management as Chairman. From 2008, Sri Lankan Airlines has been making losses, and the accumulated losses as revealed at a COPE meeting was a staggering Rs. 372,015 million.
It also revealed that a senior management official has been paid a monthly salary of Rs. 3.1 million, and several others earning salaries of over Rs. 1 million, and no wonder why the daily loss for the airline is Rs. 84 million, and our Treasury has been pumping money into this loss-making venture ever since this was acquired by the Sri Lankan Government. In 2022 alone, till April it suffered a colossal loss of Rs. 248 billion. Excessive politicization and wasteful expenditure are often cited as the reasons for such losses, but our leaders are not doing anything to control such excesses. This is unpardonable.
If we take the case of the CEB, the first quarter of 2022 reported a loss of Rs. 65 billion, and the losses incurred during the period 2010-2019 are over 240 billion rupees. CEB has been taking refuge in politically linked unions to hide their inefficiencies and waste and blocked 4000 MW of non-conventional renewable energy (NCRE) including mini-hydro, wind, solar and biomass. Had these been given approval, 800 MW of NCRE could have offset 400 million liters of diesel fuel annually, and the net financial savings to CEB will be Rs. 37 billion. The losses incurred by the CEB are primarily due to the use of expensive sources to produce energy, such as diesel and emergency power purchases at exorbitant rates from the private sector. CEB management is keen to purchase emergency power for obvious reasons. A senior CEB official is under scrutiny for emptying the Randenigala reservoir to reduce hydropower generation – so that they can purchase emergency power from their friends who own private power plants.
The other reason why CEB is incurring losses is due to excessive staff and the exorbitant salaries paid to its employees. The Board of Management of the CEB is a law unto themselves with scant disregard for Cabinet decisions and finance ministry circulars. They are a government within a government and carry on actions contravening government directives. It is alleged that some senior engineers at CEB receive a take-home pay of around Rs. 900,000 a month with all kinds of allowances such as travel, site inspection, outdoor duties, overtime, fuel advance, telephone bill reimbursement, bonus, and gratuities. Metre readers are said to get around Rs. 120,000 each a month including overtime, and drivers around 116,000 each. It is said that they get an allowance for reading the metre correctly too! These employees are entitled to EPF and ETF and their income tax is also fully paid for by the CEB. This is highly irregular since a certain percentage of the salary has to be deducted from an employee for the EPF, while the Institution to contributes a larger share to this amount.
Most semi-government institutions such as universities deduct 10% of workers’ salaries for the EPF while contributing 15%. There is a Supreme Court decision against the payment of PAYE tax by the CEB to its employees. Until recently they have disregarded this court decision and paid the income tax of its employees. It is also amazing how an employee with a 20-year service, gets a pension paid by the CEB for a lifetime in spite of getting the EPF and ETF. Again, it is the lack of action by the ministers in charge of CEB and the Finance Ministry, which has allowed these illegal payments. The High-handedness of trade unions, and an equally ineffective Board of Management, are responsible for such daylight robberies of public funds.
During a strike in 2012, engineers of the CEB were able to maintain power supplies with the help of manpower workers who were outsourced. However, all these manpower workers were absorbed into the permanent staff by the then President Maithripala Sirisena for political gain amidst fanfare, and all these workers join the unions and resort to trade union action now at the drop of a hat.
What is even more astonishing is that the CEB, which is one of the biggest loss-making institutions, pays annual bonuses and grants salary increases owing to a collective agreement with the unions of 25% every three years. Now, these unions are demanding a 36% salary increase, and they are so strong that the government meekly surrenders to their demands, creating severe salary anomalies with other similar workers in the government.
The CPC is another loss-making institution, where the daily loss is Rs. 551 million, but it also pays three annual bonuses, at a cost of Rs. 1,500 million, to its 5,200 employees; and the annual overtime payments alone stand at around Rs. 300 million. At the same time, CPC owes about Rs. 750 billion to banks. Bonuses are meant to reward achieving high-level targets and not for day-to-day functions.
It remains to be seen whether Minister Wijesekera can bring about a radical change to correct these gross anomalies. Earlier too, former Minister Patali Champika tried to rectify some of the illegal procedures, but he was transferred due to objections to a controversial coal tender. He blamed the coal mafia with links to the government. Unless these problems are sorted out without relenting to the unreasonable demands of unions, such colossal losses will continue to be a burden to the general public. What is needed is complete privatization of these loss-making entities. Trade unions are bound to object to privatization because they cannot earn such high salaries and allowances. The general public of this country should support moves aiming to reduce losses if the country is to stand on its feet, instead of going around with the begging bowl.