Reforming railways

In Sri Lanka investment in transport is often discussed in terms of highways but railways often get lost in the discourse because they are seen as being too outdated and cumbersome to reform. Yet there is clearly a massive need to relook at the country’s once beloved railways as it could be one the best cost effective and efficient ways to spur growth.  

Sri Lanka Railways, a heavily unionised State-run agency, had lost Rs. 7.6 billion in 2017, which is more than the total revenue earned during the year, which also fell due to strikes. The operating loss of Rs. 7,604 million exceeded total revenues of Rs. 6, 477 million, which fell 2.2%, according to the Central Bank. Revenues had fallen amid two strikes, which is common as unions strike to achieve their salary and other demands with little focus on the overall improvement of productivity. Railways workers are also pensionable, a burden on the people which is not captured by data. 

Operating expenditure had risen 5.1% to Rs. 14.1 billion. With capital expenditure, total expenditure was Rs. 27 billion in 2017, down 7.3% from a year earlier, with an upgrade in the northern railway line being completed. The Government had earlier outlined plans to establish economic corridors and link them using a rail system and a metro system for Colombo is also in the pipeline but the efficient running of Sri Lanka railways would clearly need a massive overhaul. 

The rail transportation system in Sri Lanka has tremendous potential to enhance the interconnectedness between different regions economically and efficiently, while reducing emissions, energy consumption as well as productivity losses due to road traffic congestion. However, the lack of timely investment in fleet replacement and the lack of technology usage by Sri Lanka Railways has resulted in the overcrowding of trains and delays, reducing the reliability of the railway transport system.

Things have not been helped by frequent trade union action which disrupts the smooth functioning of the service, and low passenger fares and goods transport tariffs worsen the financial viability of the railways, and thereby reduce the available funds for future investment.

Analysts say after building the rails, taxpayers also have to fund the locomotives and carriages as well as Rs. 7 billion operating losses. In road transport by contrast, vehicle owners stand on their own feet and finance the roads and help government revenues generally. However, building or enlarging new roadways cannot be the only solution to Sri Lanka’s infrastructure shortage and a better plan needs to be put together for this sector. 

In many other developed and developing countries railways exist as an independent entity. Even if they remain under the Government they are run autonomously, giving officials the freedom for long-term planning and management of funds. Sri Lanka Railways is the country’s largest landowner but many of its most lucrative assets are underutilised, especially land in prime urban locations. One way to infuse capital would be to find ways to improve investment by making these assets earn for Sri Lanka Railways. 

Better management, competence, transparency and accountability would also go a long way to stop wastage and give the public a truly worthy service.