Several railway trade unions launched a lightning strike last Wednesday over salary anomalies. The strike was called off after four days but hundreds of thousands of commuters were stranded. Angry commuters took to the streets, some called for privatisation of the railways. Sri Lanka faces a huge problem with public transport which is driving commuters to use private transport. A study by W. J. Weerawardana estimates that 65% of the road space is used by 38% of the passengers; the increase in the use of private vehicles is the major cause of traffic congestion.
At rush hours and school times, the traffic is almost at the point of gridlock. Parking is also a problem. If even a half-decent public transport option were available many more commuters would use it.
Standards of service at the railway are shoddy and reforms to railways must form a part of a larger plan to fix public transport. A summary of some key issues follows, with some ideas for improved services.
The railways lost 6.7 bn in 2016 (7.7 bn in 2015). The railways appear to have been losing money since 1947. The expenditure of the railways exceeded costs by 10% in 1950 but by 1968 this had grown to 52.4%. The wages policy of the government and the policy limitations imposed by the government in the pricing of passenger and goods transport were factors that contributed to this situation. This has not changed much: in 2016 costs exceeded revenues by 49.4% (2015: 45.09%) for broadly similar reasons.
Lack of funds
Fares per kilometre range from 50 cents to a maximum of Rs.2.00 for 2nd and 3rd class travel. 1st class fares range from Rs.1.60-3.60 per kilometre.
Revenue does not cover even salaries. Salaries exceeded revenues by 31.89% in 2016 (28.9% in 2015). Only 42% of the trains run on time (39% in 2015). Delays exceeded 10 minutes for 43% of the trains (46% in 2015).
The assets of the railway are poorly utilised. Income from leases of railway land was Rs.119.58 m in 2016. Lease arrears not collected amounted to Rs.1.8 bn at end of 2016. The Auditor General notes: “Lands about 12,000 acres in extent belong to the Department of Sri Lanka Railways had remained idle for about 150 years without giving on lease or utilizing for another purpose”.
Fares are priced well below operating costs, the trains grimy and overcrowded. Maintaining rail fares at uneconomically low levels is politically attractive but has led to the deterioration of the rolling stock and infrastructure due to a lack of funds for new investment.
There has been a steady increase in passenger numbers from just under 100 m in 2011 to 136 m in 2016, but the service does not appear to have been able to respond adequately to new demands for expanded services or improved quality.
Quality and efficiency
Based on the current operating and cost structure fares would need to double to just to meet recurring expenses and rise still further if the capital expenditure is to be financed. The Government spent Rs.30 bn on capital expenditure in 2015. (2014: Rs.34.6 bn, 2013: Rs.20.2 bn). While a significant fare increase is needed and may be accepted if accompanied by improved service, passengers cannot expect to pay for inefficiency. For example, the COPA has questioned excess staff recruitment (of 1,588) and payment of overtime in contravention of the Establishment Code.
Thus there is a need to restructure of operations to improve service quality and efficiency. In a lecture delivered last year at the Chartered Institute of Logistics & Transport, Dr. Priyanka Seneviratne claimed SLR’s weaknesses stem mainly from lack of timely investment in fleet replacement, technology, and workforce development in the past.
The Ministry of Internal Transport confirms that 65% of the rolling stock is over 30-35 years old which increases the likelihood of breakdowns, increases maintenance costs and impairs service quality.
Dr. Senevirate identified the following measures to enhance revenue:
(i) adjusting fares and tariffs to better reflect costs and improved services;
(ii) leasing more real estate and advertising space at market prices, and
(iii) partnering with the private sector to provide freight and ancillary services such as catering, courier, and real estate management.
The railway currently partners with the private sector to provide a luxury carriage on selected routes.
This could be expanded to cover other routes or possibly even to a whole train, covering, for example, additional services at peak times to cater to office commuters. Service contracts where, for example, railway catering is contracted out could provide increased revenues and improve service. Operations of toilets, canteens could be handled in a similar manner. Idle land could also be redeveloped in partnership with private developers.
The dilemma is ensuring that a public-private partnership is beneficial when corruption is endemic and state capacity is limited.
Sri Lanka’s railways are a drain on the Treasury. With tight budgetary constraints, the Government will face increasing difficulties in allocating adequate resources to maintain, let alone develop, the railways.
The railway is an important component of transport infrastructure and improving its efficiency will contribute to the overall productivity of the economy.
Creating competition and private participation in the supply of services, utilisation of idle assets and supply of railway infrastructure could enhance efficiency and improve service. The Government should explore these options.
(The writer is a Fellow of the Advocata Institute, a Free-Market think tank based in Colombo.)
Add new comment