Sri Lanka's state-run railways lost 4,768 million rupees in 2009 up 4.7 percent from the a year earlier, which was more than its annual revenues, while carrying lower volumes of cargo and passengers, the latest official data shows.

Sri Lanka Railways operated 4,568 million passenger kilometres in 2009, down 2.2 percent from a year earlier, while freight ton kilometres also fell 2.2 percent to 118 million, the Central Bank said in its annual report.
Operating expenses went up 6.8 percent to 8,788 million rupees from 8,225 million rupees a year earlier. Its operating expenses are more than double the revenue.

Revenues rose 9.5 percent to 4,020 million from 3,671 million.

The utility suffers from a vicious circle of chronic under-pricing by politicians to win votes including deeply discounted fares to state workers, which has led to a decline in service standards and a public deserting rail for buses.

Its operational losses do not include depreciation of rolling stock. The government spends billions of rupees in people's money each year buying up rolling stock and building track.

Though roads are also built by public money, the state earns billions of rupees from taxes on motor cars and petrol.

Capex

The Central Bank said the first phase of a three-stage plan to build a new railroad from Matara to Kataragama in the south of the island has started.

Double tracks were built on a coastal track from Ja-Ela to Seeduwa north of Sri Lanka's capital Colombo and Kalutara to Paiyagala, south of the capital

With the end of a 30-year war with Tamil Tiger separatists, the northern railway track was extended beyond Vavuniya to Thandikulam by June 2009.

A 90 kilometre track between Omanthai and Pallai will be re-built at a cost of 21 billion rupees. Work between Vavuniya and Omanthai has already started.

A 56 km railway stretch from Pallai to Kankesanturai is to start soon. The projects are financed by China and India. A track from Madawachchiya to Talaimannar in the northwest has started at a cost of 8.4 billion rupees.

The reconstruction of the coastal rail line from Kalutara to Matara was also in progress at a cost of 168 million rupees.

Railways now carried only 5.0 percent of passenger traffic in the county and 1 percent of freight. By 2016 the utility was hoping to carry 10 percent of passengers and 5 percent of freight, the report said.

There were plans to electrify the suburban railways, start a light rail system and revise tariffs.

The central bank said 73 percent of total motorized transport was by state and private public transport. Buses carried 68 percent of the traffic with state buses taking 23 percent and private buses 45 percent. Nearly 99 per cent of freight carriage was by road.

Plan Needed

"With the complete integration of the Northern and Eastern provinces with the rest of the country, there will be a strong demand for goods and passenger transportation," the Central Bank said.

"To meet this emerging demand, an efficiently formulated institutional arrangement is needed.

"Hence, strong measures are needed to transform state owned passenger transportation entities to run efficiently without burdening the government budget."

In 2009 the state bus service had also lost 5.1 billion rupees despite getting another 4.1 billion rupees in people's money to run 'uneconomical' routes.

Both utilities are heavily over-staffed and unionized after being stuffed with political henchmen of ruling parties for years. Unions, backed by the Marxist-nationalist Janatha Vimukthi Peramuna have resisted attempts to reform the utility.

The state bus service has over 35,000 workers of which over 6,000 are said to be excess.

In May 2008, just before a fare hike was announced, officials said ordinary citizens paid ten times the price state workers paid to travel by rail, in a bizarrely oppressive pricing policy on the man on the street.

Ordinary citizens paid an average of 50 cents per passenger kilometer to travel by rail, state workers paid 5 cents. Its own 17,000 staff paid only 3 cents per passenger kilometer, officials said at that time.

When one state service is subsidized, the cost is borne by others who do not use the service through the general tax system including taxes on basis foods or through inflation if the central bank prints money to fill budget gaps.

Source LBO