Advocata Institute urges Govt. to uphold electricity sector reforms

Originally appeared in the Daily FT

The Advocata Institute yesterday called on the Government to reaffirm its commitment to the critical reforms initiated by the 2024 Electricity Act.

The think tank emphasised the necessity of legally separating the Ceylon Electricity Board’s (CEB) functions and fostering a competitive and transparent electricity industry.

“The 2024 Electricity Act was a landmark step towards a more efficient and accountable energy sector,” said Advocata Institute CEO Dhananath Fernando. “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.”

In its newly released paper, “Powering Forward: Why Unbundling the CEB is Critical for Sri Lanka’s Energy Future,” Advocata warns that proposed amendments to the 2024 Electricity Act threaten to reverse decades of progress in the sector. The Institute states that such reversals could severely undermine Sri Lanka’s economic and fiscal stability.

The paper critiques some of the 2025 amendments to the Sri Lanka Electricity Act, which seek to reconsolidate the CEB by placing generation, transmission, and distribution under 100% State control. Advocata argues that this reversal would entrench inefficiencies, deter private investment, and further strain already constrained public finances.

The position paper outlines three key reasons for why Sri Lanka should reconsider reconsolidating generation, transmission, and distribution under 100% State control.

Bullets

• Sri Lanka’s challenges demand private capital: Continued reliance on public financing to cover the CEB’s losses and infrastructure needs is fiscally unsustainable. Circular debt, State guarantees, and legacy liabilities already burden the Treasury, threatening Sri Lanka’s ability to maintain its primary surplus and meet International Monetary Fund (IMF) commitments. They also undermine the country’s creditworthiness, limiting access to capital markets and affordable borrowing. Unbundling the electricity sector can help address this by creating a range of investment opportunities, allowing private investors to engage in specific segments that align with their risk-return preferences.

• Unbundling the electricity industry has economic merit: Drawing on some global examples, the paper demonstrates how unbundling has improved operational efficiency, transparency, and service delivery, particularly when supported by competitive tendering and strong regulatory oversight.

• Strategic interests can be protected without full State ownership: Global and local experience show that strategic assets in generation, transmission, and distribution can be safeguarded through strong regulation, public-private partnerships, and majority State ownership, without full State monopolisation. The paper highlights the case of Lanka Electricity Company (LECO), a publicly owned but commercially governed distributor that has consistently delivered operational efficiency and innovation due to competitive pressures. Rather than dismantling LECO and absorbing it into a centralised, 100% State-owned entity (as proposed), the paper argues that this successful model should be replicated and scaled.

The full position paper is available for download at: https://shorturl.at/Bijus

(https://www.advocata.org/media-archives/2025/07/09powering-forward-why-unbundling-the-ceb-is-critical-for-sri-lankas-energy-future).

Fix flawed Gambling Bill or lose out to rivals, Advocata tells government

Originally appeared in the Daily Mirror

The Advocata Institute, a Colombo-based independent think tank, is urging the Sri Lankan government to withdraw and redraft the proposed Gambling Regulatory Authority Bill, warning that its current form grants “excessive and unchecked powers” to the Minister of Finance, creating a “proxy” regulator instead of an independent body essential for the industry’s integrity and growth.

The call for a complete overhaul comes at a critical time for Sri Lanka’s gaming industry. A comprehensive 2024 report by Advocata highlighted the nation’s unique position as one of only two South Asian countries with legal inland casinos, giving it a significant advantage in attracting patrons from India, China, and the Middle East. However, the report also issued a stark warning that this window of opportunity is closing fast due to increasing competition.

The United Arab Emirates (UAE) and Thailand, both of which have historically opposed gaming, are now rapidly moving to develop their own gaming industries. The UAE has already established a Commercial Gaming Regulatory Authority and greenlit plans for an integrated resort by US-based Wynn Resorts, a move that could substantially impact demand from Sri Lanka’s key patrons.

“If the government of Sri Lanka fails to act quickly, there is a real possibility that other countries will take Sri Lanka’s place in the regional gaming market,” the report stated.

“The independence of a regulatory body is non-negotiable,” said Sudaraka Ariyaratne, a research consultant at Advocata.

“Without it, we risk creating a framework that lacks credibility, is vulnerable to political interference, and cannot deliver on its mandate.”

Advocata argues that the bill is fundamentally flawed, citing several critical deficiencies that extend beyond the lack of independence.

The draft bill overlooks key industry segments by exempting state-run Lotteries Board from oversight and failing to sufficiently regulate the burgeoning online gambling sector. The exemption for the National and Development Lotteries Boards is particularly concerning from an equity standpoint. Advocata’s research points out that the government’s current fiscal policy is regressive, relying heavily on lotteries

A form of gambling patronized disproportionately by lower-income households while the progressive potential of taxing the casino industry, which caters to wealthier clientele, remains untapped.

Other major weaknesses identified include lack of tourism sector input, as the bill fails to include any ex-officio representation from the Sri Lanka Tourism Development Authority (SLTDA), despite the strong link between gaming and tourism.

Further, the proposed authority lacks a mechanism to trace operator revenues, leaving significant room for underreporting and tax revenue leakage in the cash-based industry.

Fines for violations are as low as Rs. 100,000 for most offenses, a penalty considered “grossly inadequate” for a billion-rupee industry and an ineffective deterrent against wrongdoing.

In its call for a redrafted bill, Advocata emphasizes the need to incorporate international best practices and a clear strategic vision for the industry’s growth. The institute stresses that the primary economic benefits lie in promoting the IRs, which combine casinos with hotels, MICE (Meetings, Incentives, Conferences, and Exhibitions) facilities, shopping, and entertainment, have a proven multiplier effect on tourism and foreign exchange earnings. The upcoming City of Dreams project by JKH is cited as the type of investment that the regulatory framework should be designed to attract.

To ensure integrity and proper revenue collection, the reports suggest specific, practical solutions missing from the current bill, including that the authority should be empowered to license key casino employees, such as dealers and managers, following criminal and financial background checks to prevent corruption.

It also recommends that until a foolproof system for tracing gross gaming revenue is in place, Advocata recommends taxing operators based on their gaming capacity, such as a fixed fee per table and slot machine, to ensure a stable and fair revenue stream for the state.