VZCZCXRO0291
RR RUEHLMC
DE RUEHLM #0819/01 1390710
ZNR UUUUU ZZH
R 190710Z MAY 06
FM AMEMBASSY COLOMBO
TO RUEHC/SECSTATE WASHDC 3409
INFO RUCPDOC/USDOC WASHDC
RUEHNE/AMEMBASSY NEW DELHI 9643
RUEHKA/AMEMBASSY DHAKA 9204
RUEHIL/AMEMBASSY ISLAMABAD 6095
RUEHKT/AMEMBASSY KATHMANDU 4130
RUEHCG/AMCONSUL CHENNAI 6649
RUEHLMC/MILLENNIUM CHALLENGE CORP

UNCLAS SECTION 01 OF 02 COLOMBO 000819 
 
SIPDIS 
 
STATE FOR EB AND SA/INS; MCC FOR D.NASSIRY AND E.BURKE 
 
USDOC FOR EROL YESIN 
 
SIPDIS, SENSITIVE 
 
E.O 12958: N/A 
TAGS: ECON ENRG CE
SUBJECT:  Electricity strike could delay reforms 
 
Ref:  05 Colombo 1901 
 
¶1.  (U) Summary:  Unions affiliated with the Marxist- 
Nationalist Janatha Vimukthi Peramuna (JVP) party have 
warned of a strike and country-wide blackout on May 23 in 
protest of government moves to present electricity reforms 
to Parliament, which they fear would lead to privatization 
of the state electrical utility.  However, the strike may be 
ineffective (i.e. unable to produce a blackout or force the 
Government of Sri Lanka (GSL) to give in to union demands) 
as technical staff, including engineers, will not be joining 
the protest.  Nonetheless, the government may delay the 
presentation of the reform bills in Parliament to give time 
for discussions which would appease technical unions, which 
want more time to study the bills.  This is a first, albeit 
small, test of this Government's willingness to stand up for 
needed reforms in the power and energy sector.  End Summary. 
 
¶2.  (U) The government is planning to present two bills to 
the parliament to implement electricity sector reforms 
agreed in 2005 (reftel) after protracted discussions between 
the government and the unions.  The amendments to the Ceylon 
Electricity Board Act and the Electricity Reform Act would 
allow the state-owned power utility, Ceylon Electricity 
Board (CEB), to be reconstituted as a holding company and 
establish six subsidiary companies to take over the current 
generation, transmission and distribution functions of the 
CEB.  The CEB would fully own these subsidiary companies. 
 
¶3. (U)  The JVP-aligned unions do not support any reforms 
and did not approve the 2005 reform package.  The JVP fears 
these reforms will lead to the eventual privatization of the 
CEB.  The JVP union in the CEB has threatened to stop work 
on May 23 and has warned of a countrywide power outage 
unless the bills are withdrawn. 
 
¶4.  (SBU) The JVP trade union action is unlikely to be 
effective.  The powerful engineers union of the CEB will not 
be joining the strike.  Ananda Piyatilake, President of the 
engineer's union, told EconFSN that their union has given 
consent to the reforms, but is urging the government not to 
rush the legislation through parliament.  The engineer's 
union wants time to study the legislation to see if it 
complies with reforms agreed to last year.  (Note:  The 
draft legislation was made available to the public only 
recently and not in sufficient numbers - the government 
publication sales office received just 15 copies which sold 
out immediately.  End note.)  According to Piyatilake, the 
JVP strike will not be effective because engineers and 
technical staff would not participate.  The JVP union has 
membership among clerical and other non-technical staff of 
the CEB.  While the JVP union has threatened to bring 
workers at the government-owned Ceylon Petroleum Corporation 
(CPC) into the strike, several union representatives at the 
CPC told EconFSN that they are not likely to join in a 
strike, although they want to show their cooperation, 
possibly through limited action walkout protests or the 
like. 
 
¶5.  (U) Meanwhile, CPC unions are holding separate 
discussions with the Government regarding CPC reforms.  The 
unions are urging the government to take action to return to 
the CPC the 33 percent of total CPC shares held by the 
Treasury.  CPC unions also fear eventual privatization of 
these shares. 
 
¶6.  (U) According to Mr. M.M.C. Ferdinando, Secretary, 
Ministry of Power and Energy, the government is determined 
to go ahead with the reforms.  Speaking at a recent energy 
managers meeting organized by the PUC, he suggested that the 
government may refer the bills to a parliamentary 
consultative committee without directly presenting them to 
Parliament on May 23 as planned.  According to Ferdinando, 
this decision may delay the parliamentary presentation to 
early June.  It is not clear if this move would be taken due 
to JVP protests or due to complaints of inadequate time for 
consideration of the bills. 
 
¶7. (SBU) Comment:  Recently, the government has shown signs 
of moving reforms ahead in the electricity and energy 
sectors; the most important being the decision to procure a 
much delayed and much needed coal power plant.  Last week, 
 
COLOMBO 00000819  002 OF 002 
 
 
the President laid the foundation stone for a 300MW coal 
power plant, which will be built by the Chinese under a long- 
term concessionary loan.  In April 2006 the government 
increased fuel prices, for the first time since June 2005, 
and is reportedly likely to do so again in the coming days. 
This may partially reduce government subsidies of fuel 
(though a recent analysis suggested that, with oil topping 
USD 70 per barrel, the Government may spend close to USD 2 
billion on fuel subsidies in 2006).  The GSL's response to 
threats by the unions and decisions made surrounding the 
potential strike could be a harbinger of whether this 
government will stand for reform or cave in to union 
pressure on a variety of matters. 
 
ENTWISTLE