Revving up cost effective alternatives

Thursday, 1 March 2012 00:00 - - {{hitsCtrl.values.hits}}

Sri Lanka’s vehicle population is set to double within the next decade, creating the need for larger roads, but financial uncertainty and a growing loan burden are posing challenges.

A study released by the Transport Ministry this week showed that the current vehicle population in Sri Lanka is 130 vehicles per 1,000 people and this is estimated to double to 270 by 2021. Marketing research company Nielsen has also revealed in its report for 2012 that 50 per cent of all Sri Lankan households have some form of vehicle.

This may not seem as much compared to developed countries but increased economic prosperity since the end of a three-decade war in 2009 has put private vehicles at the top of the local consumer list. Aspirational buyers are moving towards vehicles, resulting in severe traffic congestion, increased fuel expenditure for the country and environmental considerations. Nearly three weeks ago the Government increased fuel prices by an unprecedented level, pushing diesel up by 36.9 per cent and petrol by 8.7 per cent.

Irate masses took to the streets in countrywide protests with private busses going on strike the next day demanding that fares be increased or subsidies be given by the Government. Sri Lanka’s large fishing community made the strongest impact after one of their protestors were shot by Police, resulting in escalating tensions, which the Government tried to control by giving into a subsidy scheme.

The current vehicle population of 130 for every 1,000 people comprises of 70 cars and 60 three-wheelers and motor bikes whilst going forward the equation changes to 190 cars and 80 motorbikes or three-wheelers per 1,000 by 2021. This estimate is in line with projected growth in per capita Gross Domestic Product (GDP) in the country, the report insists.

The Government has forecast per capita GDP to double to US 4,190 by 2015 and to over US$ 7,000 by 2021. Since the war ended Sri Lanka’s vehicle imports have doubled from US$ 546 million in 2010 to hit the US$ 1 billion mark last year. In 2011 alone registration of motor vehicles climbed 49 per cent or from 157,668 vehicles to 479,657.

The Government’s aim is to fast track infrastructure investment over the next decade to make up for the dearth of investment during the past three decades. To do this, the Government has maintained public investment rate of about six per cent of GDP, which is over US$ 6 billion in infrastructure development that includes new highways.

According to the Finance Ministry’s 2012 Fiscal Management Report, public investment in roads and bridges in 2011 had increased to Rs. 79.6 billion (US$ 657.8 million), from Rs. 52 billion (US$ 429.7 million) in the previous year. Investment in transport sector has soared from Rs.7 billion (US$ 57.8 million) to Rs. 24 billion (US$ 198.3 million) within two years.

However, it is clear that upgrading public transport needs to be revved up to meet demands and provide a cost effective lifestyle choice for consumers. It is disappointing that this has not been as actively pursued by the Government as infrastructure in this strained economic situation, which is creating the need to go easy on large-scale loans.