Sunday, December 20, 2015

The Sunday Times Sri Lanka

The Sunday Times Sri Lanka

India’s Ircon seeks more contracts in Sri Lanka’s rail network


Ircon International Ltd, which completed a 265 km reconstructed rail network in northern Sri Lanka, says it is looking to expand its footprint in Sri Lanka.In a media statement issued this week, it has assured the Government of Sri Lanka of its continued support to uplift the transport sector and develop further the rail infrastructure of the country. These comments come on the back of railway experts and specialists including a former general manager and Transport Ministry Secretary urging the government to hire local firms and available expertise from Sri Lanka Railways for future projects, which is much cheaper.
Ircon said the Government’s actively considering the utilisation of the available Indian Line of Credit for financing these projects. “Furthermore a new line of credit amounting to US$318 million was also announced during the visit of the Indian Premier to Sri Lanka in March 2015. The Line of Credit is being extended by India as a soft loan having very attractive terms and very low interest rates. The issue of the upgrading of the railway track using Indian expertise and financial assistance was also discussed extensively during the visit of Prime Minister Ranil Wickremesinghe to India in September this year,” the release said. In the release, Project Director, IRCON, S.L. Gupta commenting on defects reported in the newly constructed railway lines in the North, said Ircon is committed to rectify the defects during the defect liability period and substantial steps are being taken in this regard.

Monday, December 7, 2015

Editorial on 2/12/2015


Ailing railway


All unauthorised structures on either side of railroads that run through some parts of the Colombo city and its suburbs will be removed, Transport Minister Nimal Siripala de Silva has said. There are shanties with their roofs almost touching the moving trains. Drastic measures are, therefore, called for to rid the railway land of encroachers.

Minster de Silva was seen inspecting the Kelani Valley railway line a few days ago. It is one of the worst sections of the country’s railway network. The track conditions are appalling and inordinate delays are the order of the day. If properly developed, this railroad has the potential to bring much relief to the commuting public and ease congestion on several arterial roads in Colombo.

Old-timers may recall a funny Sinhala poem about the trains that used to move at a snail’s pace on the narrow-gauge Kelani Valley line in times of yore, stopping as they did at every station and every signal post. The last two lines of the poem read: ‘tharuna joduwak neggama kolombin/daruwek upadi opanayakin (a newly married couple beginning journey from Colombo has their first baby by the time the train reaches Opanayake). Now the situation has somewhat improved, but much more remains to be done.

The need for developing railway as a solution to the ever worsening traffic congestion in the city cannot be overemphasised. The eviction of squatters on railway land alone won’t help develop the service. There needs to be a radical shake-up in the railway administration besides a massive cash injection for developing tracks and purchasing rolling stock. The railway department is one of the worst government institutions characterised by inefficiency and corruption. Minister de Silva has undertaken a Herculean task.

An expert committee has disclosed that the newly built northern railway is full of defects. Sleepers, culverts etc do not conform to the specified standards, as we reported the other day. The Matara-Beliatte section of the coastal line, too, has not been properly built, experts have said. Stern action is called for against those responsible for the defective tracks. Somebody has obviously lined his pockets and the contractors must be held answerable for these serious lapses which would have endangered the lives of commuters if they had gone undetected.

It is good to see the Transport Minister take train rides once in a way. All his predecessors did so with media personnel in tow. If he wants to see how bad the train service is he should travel incognito. Else, the railway authorities do everything in their power to ensure that the trains carrying him and his officials run smoothly. The only way to have the public transport system developed is to make politicians, especially ministers, and top bureaucrats travel in packed buses and trains so that they will realise the suffering commuters undergo daily. Time was when people’s representatives travelled by train.

A high-ranking railway official has told this newspaper that ‘footboard travel’ will be banned on all long-distance trains, but the ban will not apply to crowded office trains as the department cannot augment its ailing fleet for want of resources. One is intrigued. Do the railway officials think that footboard travel is a solution to the shortage of rolling stock?

Minister de Silva’s keen interest in developing the ailing train service is to be appreciated. It is hoped that he will emulate the late Transport Minister Anil Moonesinghe, who did the country proud, and recruit officials of the calibre of the legendary engineer cum railway general manager, B. D. Ramapala, who ensured that the then CGR provided an efficient service to the public. Having the right people in key notches is half the battle in developing any institution.

Daily News 


Budget proposals vague on transport and logistics

The following is an analysis of the Budget Proposals 2016 from the Chartered Institute of Logistics and Transport (CILT) on matters pertaining to the industry it represents. Even though this is unsolicited advice to the Government, it is provided on the belief that through this analysis, the final vote on the budget will be more focused to make the budget an effective instrument of reform, modernization and growth of the sector.
Road Transport
109. The correct diagnosing of the transport and traffic problem as being the continuous negligence of public transport is commended. However the budget proposals do not allocate any significant public investment towards this.
461/467. While attention has been drawn to traffic management, it fails to specify any noteworthy measures or funding. The only proposal is to spend Rs 500 million on traffic encoders which are a yet unproven technology for any form of traffic management. If vehicle owners require better traffic information and security, it is they who should pay for it and not the public.
462.The legislative amendments to the NTC Act are welcome but the budget does not indicate what regulatory steps such as limiting access, tariff or safety are proposed in the control of three wheelers, taxis, school vans and cargo transportation vehicles. No funds have been committed to develop the required institutional capacity for effective regulation. Besides the operational regulation of these are a function devolved to the Provincial Councils and would not entirely be under the NTC.
463. Allocating funds to manufacture new buses from old bus chassis is not the best approach to modernize the fleet of buses which should be aligned more towards higher quality, low floor buses which cannot be manufactured from scrapped buses, in keeping with the increasing income of commuters. Moreover allocating Rs 10 billion at Rs 1.5 million a bus means that 7,000 buses are to be manufactured in 2016. The annual requirement of buses in Sri Lanka is less than 3,000 and in SLTB less than 1,000 buses. Instead there should be an incentive to import modern, low floor, environmentally friendly, low emission modern buses. There could also be concessions offered for setting up local manufacturing plants for high quality buses that could be purchased by both state and private sector.
465. The proposal to encourage four wheelers instead of three wheelers is unlikely to result in better safety as small four wheelers also have poor safety records. Moreover, it has been found that 2/3rd of the three wheeler fleet is in excess of the demand. They have poor utilization. They should be used only as access vehicles for 'last mile operations' and improved bus and rail transport should be encouraged if overall safety is to be improved.
466. Conversion of commercial vehicles to electric maybe a good idea. However allocating Rs 150,000 per three-wheeler may not be cost effective. It is prudent to invest in such a manner after thorough feasibility study of energy conversions as done in many countries rather than to embark on ad hoc technological journeys. In any case the allocation of Rs 50 million will allow the conversion of only 3000 three wheelers thus covering less than 1% of the fleet. Steps must be taken to actively seek measures to reduce the excessive three wheeler fleet. It is more beneficial to incur public investment to conduct an energy audit on the transport sector to qualify for low cost international financing for such upgrade of transport equipment.
468. The proposal to set up a Railway Development Council is commended. However its terms of reference should be clearly specified and intended solely for the purpose of improving the carriage of passengers and goods by railway which is the primary function of the railway. The entry of private sector for better utilizing of unused railway capacity is a progressive step. There is however no mention of the regulatory functions for such a task.
470/473/474. The on-going feasibility study for railway electrification has not been mentioned as a government priority and the proposals of the recently completed Colombo Metropolitan Regional Transport Masterplan have been completely ignored and instead several ad hoc transport projects have been included. For example, Rs 1.5 bn is proposed based on 'demographics' on KV development, a project which ranks much lower in the Transport Masterplan. It is not clear on what basis this investment was decided surpassing many other critically needed investments that have been prioritized. We also fail to understand the justification of exorbitantly high investment in rehabilitation of railway lines. Nothing is mentioned about developing railway freight services, the proposed new Battaramulla railway, or the Negombo line/Airport access development. There is also no push for extension of double tracking of main lines or any other new tracks for which studies have been done. Instead, monorail which is not even been considered as the first two priority alternatives in the Transport Masterplan have been proposed for the Negombo corridor and other corridors. Funds should be allocated for the implementation of projects under this plan and not on ad hoc projects that seems to convey they are supplier driven initiatives.
472. The comments that railway freight is to be encouraged is a statement in the correct direction. It is unfortunate that no strategy to create ICDs, or investment is allocated to make this statement meaningful.
471. It is encouraging to note that "Park and Ride" facilities attached to both railway stations and bus stations have been mentioned. This is a meaningful initiative for which Rs 1 billion has been allocated. However the strategy of charging vehicles that do not carry 4 people is a failed strategy in many parts of the world. Utilizing modern technology such as Electronic Road Pricing is essential if this is to be implemented practically. Moreover, public transport quality has to be significantly improved before Park and Ride can be implemented as an enforced measure. None of these have been mentioned.
475,476/477. Water transport has been provided special attention. It is important to note that none of the planning studies carried to date by international or local experts have identified the financial or economic viability of this mode of transport. Spending Rs 250 million on such an initiative when there are other urgent needs for recommended projects cannot be understood.
490-493. It is encouraging to note that the government intends proceeding with the Central Highway and its extension to the north and east. However it must be reiterated that the feasibility of neither of these is yet to be fully determined and made public. The current traffic levels and current speeds beyond Dambulla are unlikely to make such extensions a necessary investment in the present context. There is a grave danger that the failure of the last government referred to in the budget as the "over-zealous attitude to improve the road network" is likely to continue.
The government which is trying to develop the country with restricted finances should explain how the economic feasibility of projects such as the proposed Ruwanpura expressway has been established. Moreover there is concern that a government established on Yahapalanya principles appears to want to continue with single source contracts without competitive bidding, a feature which was severely criticized by the then opposition before the January 2015 election.
Moreover, none of the roads in the Western Province mentioned in the budget including the elevated road to Kotte, have been found to be economically feasible in the recent transport studies. Allocating nearly Rs 30 billion towards these without any allocation for the recommended projects intended to improve public transport makes the statement of the government that "the important aspect is to what level the public transportation system should be developed to ensure that any citizen of the country could utilize the facility without resorting to private transportation' an empty promise. In all aspects it appears that most of the public money allocated to transport is to be spent on building roads and the rather small allocation in the budget on public transport is only for projects that have little benefit to the public.
494- 497. Creation of an Infrastructure Development Authority awaits explanation. Allocating Rs 1 bn for same is therefore observed with concern. However the intention of creating integrated infrastructure is welcome. The proposed North East highway should have a much broader planning scope that would not only create industrial parks but also improve the quality of life of the people. Expressways are expensive infrastructure for fast movement between two exits of a road, but contribute poorly to overall mobility improvement in a country unless accompanied by the relevant transport and regional development policies. We are unaware of any such in depth studies that have been done either for the Central or the North East Expressway which will have a combined investment of several hundred billion rupees- a fact that has not been disclosed.
557. The government appears to take a very futuristic approach to environmentally friendly vehicles. The reduction of Excise Duty for Solar and for Hydrogen and in the case of Helium which is yet to be even suggested as a fuel for vehicles, is interesting. What is worrying is the non inclusion of more established technologies such as electric and hybrid vehicles which were promoted heavily over the last few years. In reality now there is no real concession for import of vehicles using non fossil fuels. It is a pity that every budget experiments with concessions for different technologies confusing the consumer and causing immense losses to the industry. In other countries, government intervention regarding new fuel types are followed only after universities and research institutes are asked to comment on the viability and future sustainability.
559. The Vehicle Emission Testing program even though somewhat flawed, is one of the most effective steps taken to curb pollution. There is no logic for increasing the fee to Rs 5,000 and will only increase the likelihood of corruption. The testing centres are currently making profits and there is no need to increase the burden on the consumer by raising this fee. The fact that the government has been unable to effectively regulate the two present operators, raises the question how it will regulate liberalized issuance of emission certificates. If government wishes to impose an 'environment tax', adding a levy on fossil fuel would be more effective and equitable.
563. We agree that the vehicle permit should be withdrawn and replaced with a suitable compensatory measure. Senior public officers can and should use public transport whenever possible. In fact we suggest that withdrawing these permits even for Members of Parliament would become one reason to improve the quality of our public transport system. If indeed the government loses Rs 40 billion a year from these concessionary permits, half of that money if invested wisely over 20 years will be adequate to improve and modernize the entire public transport network across the country to a world class system.
605. While the intention of reducing road accidents is laudable, it is sad to note that the only action towards this has been to increase the fine for damaging public property which is unlikely to have any impact. No funding for serious improvement in road safety has been considered. As such the public cannot be assured any safer travel
Aviation Sector
397-409. The intention of converting Mattala Airport to a facility for logistics and cargo services is a welcome approach. However, the key components for attracting airlines or land connections to production areas of goods are not even planned. Moreover flights operating only for cargo (freighters) are questionable, as the yields in Sri Lanka are phenomenally low for a viable operation. The government may consider specific actions such as to encourage especially European, Chinese and Indian leisure carriers to enter into SL using Mattala which eventually will open belly capacity for cargo. It could consider concessions for Sea-Air hub operations targeting markets in Bangladesh, China and Africa.
It is also felt that Sri Lanka in the current context requires only one national airline. Getting Mihin to operate domestically will undoubtedly add more losses and any such move should be only on the basis of commercially viable operations. There is no explanation how the locations for new domestic airports were picked. We need to understand the rationale and benefit of these new investments when many of the existing airports need funding for expansion so that we do not continue with follies similar to Mattala.
478-482.The Government's aim to make Sri Lanka one of the top twenty transhipment hubs in the world by 2025 represents moving up about 10 places in the world rankings, which should be possible if the demand led expansion of the south port continues over the next decade. Since the primary infrastructure is already in place what is now required to make this happen is robust enabling legislation relating to the peripheral development of other maritime related services such as flagging, adjudication and arbitration, regional head offices for maritime players.
The proposal to issue further licenses for "deep sea bunkering" is confusing and raises doubts whether any studies have been done on the impact on the current operations.
Logistics and Freight Forwarding
483-486 It is unclear if the industry is to be liberalized or not. The first step on the road to such liberalization was announced in the speech and retracted by Monday! Implementing an ICD is imperative and private sector investment should be actively sought for this on urgent basis.
484. Introducing an annual license fee of Rs 100,000 per vehicle for entering the port will certainly have a negative impact on transporters as well as import/export trade in the country as it will simply increase operating costs of all the stake holders for no justifiable reason.
131. This statement on how to develop supply chain linkages of agricultural products appears completely incorrect and displays a poor understanding of the working of supply chains. This should be redrafted or removed.
The budget is rather disappointing that it gives no clear direction to improve the sector. The budget appears to follow the trend of previous years in supplier driven ad hoc investment proposals for infrastructure which are likely to increase indirect taxes imposing inequitable bearings on who pays for the use of infrastructure.
Moreover, there are no significant regulatory changes proposed to bring about the paradigm change required in the transport and logistics sector to modernize and to be efficient to make Sri Lanka a globally competitive destination for investment and services.
The continuing preference for single source contracts, lack of transparency and adherence to feasibility studies and dubious economic benefits of many of the proposed projects appear to continue and will invariably take away investment from critical infrastructure upgrades that have been highlighted in many studies and during representations made by industry personnel in public forums and meetings over the last few months. 

Ailing railway – Is there a solution?



By Dr. Janaka Ratnasiri

The Island editorial of 02.12.2015 on "Ailing railway" prompted me to send this write up. The Minister of Finance in his recent Budget Speech said that "Kelani Valley line will be modernized where the speed and the carrying capacity will be increased for which I propose to allocate a sum of Rs.1,500 million". Sometime back a Transport Minister too said that the KV line would be improved by removing several crossings it has between Kosgama and Avissawella, but nothing was done about it. Hope the same thing will not happen here too.

A few decades ago, the narrow gauge of KV line was broadened to the standard gauge at Sri Lankan Government expense but the service was not improved concurrently. Only the dilapidated aged coaches and power sets operate on this line which run infrequently. According to the railway schedules posted in the Railway Dept. (RD) website, only 4 trains operate from Avissawella to Fort daily, 3 in the morning and one in the afternoon, while 5 trains operate from Fort to Avissawella, 3 in the morning and 2 in the evening. It takes about two and half hours to cover the distance of 61 km, which isrunning at an average speed of 24 km/h.

At such operating conditions, it is not surprising that most passengers, except those travelling on cheap government season tickets, prefer to travel by bus despite they are crowded and the service is poor. The High Level Road is almost saturated with buses and there is no room to increase their number plying on this road, without slowing down the existing traffic further. Hence, shifting of bus commuters to railway is necessary. However, even after any modernization of the track envisaged after spending the allocated Rs. 15000 million, there is no guarantee that the KV line will be provided with additional rolling stock and a better service to the commuters.

Take for example the railway line to Matara. In 2009, a project was started at an enormous cost to remove the existing railway track between Kalutara and Matara, concrete the bed and re-install the rails on concrete sleepers, all with a view to enable trains to travel at 100 km/h speed, and the work was completed in 2012, as reported in the media. But, what is the position today? Only six trains ply from Matara to Fort daily, 4 in the morning and 2 in the afternoon, taking over 3 h and 20 min. to cover the 157 km distance, at an average speed about 44-47 km/h. I believe this performance is no better than what it was before.

The Editorial has said that "there needs to be a radical shake-up in the railway administration besides a massive cash injection for developing tracks and purchasing rolling stock" and goes on to say "The railway department is one of the worst government institutions characterized by inefficiency and corruption". If that is the case, no amount of cash injection to the RD will improve its services as some money will get syphoned out before being utilized, as long as the present system prevails. Of course, corruption is not limited to the RD, but prevails everywhere in Sri Lanka. It has now become a part of Sri Lankan culture. It is very unlikely that a change of government could change this culture which has spread as a cancer in our society.

With regard to inefficiency, the inability of the RD to manage the operation of 10 high-tech locomotives imported from France came to light when the manner in which it handled their operation was publicized. Their purchase itself was highly controversial with Presidential intervention, but once the locomotives were delivered, the department had the responsibility of operating them properly. But, they ran into many technical problems and several were taken out of service within a short period and the general public was made to understand that the locomotives were of poor quality.

However, according to a media report that appeared in a local daily on 08.02.2014 quoting an engineer attached to RD, "There was nothing wrong with the French Alstom M9 locomotives dumped by RD as unusable …. It's just that we were not ready for them in a technological sense when they were first brought to the country. At the moment Alstom was the market leader in engine manufacturing.The technology was so advanced, our engineers simply did not know how to operate or maintain them". It may be mentioned in this connection that recently India placed an order for 800 locomotives from Alstom, the same company that supplied the 10 ‘defective’ locomotives to Sri Lanka!

In many countries, operation of railways is undertaken as a public-private partnership. It is not uncommon to see trains owned by a private company running on tracks owned by a public organization or by another private company after leasing out the rights to use the tracks. The government could therefore consider, to start with, leasing out the KV line to a private company to operate trains on it after completing whatever rehabilitation work planned. In order to get travellers attracted to this service, it is imperative it offers a better service, not merely a marginally better but a class better – comfortable seating, more frequent service, shorter travel time and reasonable fares. A first class too could be added for air-conditioned comfort.

The government may grant duty and other concessions for the company to import rolling stock initially and also to assemble the coaches locally if any entrepreneur is interested. The company may even consider electrifying the entire line thus saving a considerable amount of fossil fuel which will help the government to comply with its commitments made at the Climate Change Conference currently being held in Paris.

Depending on the success (or failure) of this exercise, the government may even consider leasing out operating rights on the northern and southern railway lines as well to the private sector. The government has spent an enormous amount of money on reconstructing these two lines and the only way to recover at least a part of this money is to get more and more trains to ply on these lines. These trains could be in addition to what the RD is operating currently. On the other hand, the government could even transfer the operation of these trains also to the private sector for better service. This could also include the new railway line being extended to Kataragama.

Currently, our highways face the problem of heavy traffic congestion not only during office hours but at all times in the day. One cause of congestion is the usage of highways by slow-moving heavily loaded trucks carrying building material, food items and container loads of export items. A century ago, the up-country railway line was built by the British to transport tea and rubber from the plantations to the city for export. But today, all these items and also up-country grown vegetables are transported to the city by road. It should be possible to get the private sector to operate special freight trains to transport these items by train instead of transporting them by road.

To facilitate transfer of the load from the truck to the train at the loading point and from the train to a truck at the receiving end, a special type of containers usable both on a train and with a truck could be employed along with necessary transferring equipment. These container systems are common in the western countries. Shifting of freight transport from road to railways will certainly minimize traffic congestion on our roads.The RD has not been able to provide a satisfactory freight service all these days and one cannot expect them to provide it even in the future, and hence, getting the private sector to operate a freight service is the only solution.

With the increase of frequency of trains, one problem one could envisage is the congestion that could be created due to frequent closure of railway crossings. The solution for this is to build fly-overs at every point where a major highway crosses a railway line. The government could get the assistance of the private sector here too by getting them to build metal flyovers similar to what has been erected at Nugegoda and Dehiwala. They have to just copy what is installed, similar to what the Chinese or the Japanese did. It may also be necessary to strengthen any weak bridges.

It is important that the government selects the private sector parties in a transparent manner calling bids on a competitive basis limiting it only to those who have the necessary resources and the competency. The government should also ensure that this process is not just another opportunity for a few connected parties to make a quick buck, as happened in previous privatization efforts.

Saturday, November 7, 2015

The Sunday Times Sri Lanka

Railway Projects: Way forward for Yahap#alanaya averting derailment

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Opening the Indian built Kilinochchi railway.
The main allegation levelled against the previous Government at the last Presidential election was mismanagement of public funds, particularly in mega projects in the infrastructure development sectors including ports, airports, highways and railways. The accusation was that those projects were implemented through foreign bilateral loans where there was no room for competitive bidding and for maximisation of domestic value added, because the contracts had to be awarded to companies of those countries, thus paving the way for corruption, economic losses and debts. Even an Advanced Level student in Economics or Commerce would understand the advantages competitive procurement offers to buyers, whereby they could compare among different sources, and opt for the best buy. Unfortunately, that simple logic, let alone deep and complex principles of economic good governance, was not adopted in planning and implementation of such mega projects. This was in contradiction with pledges in the Mahinda Chinthana – 2005 thus alienating many professionals who expected much from that Government towards national economic development. In fact, that was one of the strategic errors committed by that Government, which not only acted as a catalyst for self-destruction of that regime in January 2015, but also caused severe foreign indebtedness to the economy, the gravest repercussions of which are yet to be experienced.
Dullas wanted local engineers
Railway projects could be identified as one such domain of blunders committed by that regime. The policy makers went against professional advice and the political will at the Ministry level to construct the Southern railway extension beyond Matara and to reconstruct the Northern railway lines to Jaffna and Talaimannar through domestic effort and Sri Lankan engineering strength. Plans were prepared by transport experts under the Uthuru Mithuru project led by the Minister Dullas Alahapperuma to construct the Northern railway tracks through local effort in 2009. His confidence in the ability of Sri Lanka Railway (SLR) engineers and local entrepreneurship to effectively undertake the Northern railway rehabilitation would possibly have been inspired by Sri Lanka Railway’s exceptional reconstruction of the Tsunami devastated coastal railway in 56 days at a cost of less than Rs. 450 million in 2005. The policy stance taken by the Minister was further demonstrated when he politely declined the bilateral loan facility offered by the Iranian Government for an Iranian company to undertake the task, and instead, requested for credit assistance to procure material such as rails which could not be turned out in Sri Lanka for the SLR to undertake the construction work. Mr. Alahapperuma also appealed to patriotic Sri Lankans to make “per sleeper based” contributions for the Northern railway reconstruction, for which many Sri Lankans living in the country and abroad, positively responded with enthusiasm. Unfortunately, all these initiatives and motivation were ignored, ending up with handing over of the project to Indian contractors, and subsequently scrapping of the Uthuru Mithuru project together with the Transport Ministry portfolio held by Mr. Alahapperuma.
Another effort was made in 2010 to convince the policy makers to locally construct railway track and signalling infrastructure, both in the South and the North. SLR, in effect, constructed the track up to Omanthai in the North and once again demonstrated its capability. Plans were prepared to reconstruct the Palai-Kankesanthurai section by the SLR at an estimated cost of less than US$1 million a kilometre, and even a Joint Communiqué was issued on 13th June 2010 by the then President of Sri Lanka and the Prime Minister of India to the effect that the SLR would undertake the project with Indian credit assistance for material imports. However, this initiative was aborted; the project was handed over to an Indian company for designing and construction, when even the rails ordered by the SLR for indigenous construction of this section were already being shipped.
Needless to say that the outcome of this foreign undertaking of Sri Lanka rail infrastructure construction was detrimental towards the country’s technological advancement and national added value multiplication. The Northern railway construction projects, undertaken by Indian contractors, had an average cost of over $2 million a km and the Sri Lankan engineers, entrepreneurs and workmanship lost both employment and a rare opportunity to develop their skills and competence. Based on the rates worked out in 2010 by the SLR for indigenous reconstruction of Palai-Kankesanthurai section, the economy has had to spend in excess of $250 million (or over Rs. 30 billion) more as capital expenditure for nearly 250 km of track from Medawachchiya to Talaimannar and from Omanthai to Kankesanthurai, and any such excessive capital costs paid also amounts to unnecessarily heavy foreign debt. This “economic loss” would be even more if compared at the rate of SLR’s reconstruction of 10 km section between Thandikulam and Omanthai in 2010 at an average cost of little over one-third of a million dollars a km but the trains could still achieve 100 kmph speed on that section even though lighter section rails were used for the purpose with no continuously welded joints.
The Southern railway extension contract, awarded to Chinese contractors without competitive tenders, also appears to be associated with excessive capital costs averaging to almost $10 million per km, even though one might argue that the imperatives therein, including tunnels, viaducts, marshy terrains, cuttings and fillings, could not be compared against those associated with the Northern line reconstruction work. It might also be worthwhile appraising whether any intended and actually realised benefits sufficiently compensated for the high capital cost of $89 million incurred to rehabilitate nearly 130 km of coastal railway track from Kalutara to Matara on bilateral loans, again with no competitive tenders being called.
Fraction of the cost
This is because any rehabilitation of that line could have easily been undertaken at a fraction of that cost by the Sri Lanka Railway employees, demonstrated beyond any doubt by their exemplary accomplishment of track rehabilitation after the Tsunami devastation. Unfortunately, no such vigilance in capital spending appears to have prevailed, and the economy was made to get into foreign debts of unnecessary scale, which our future generations will have to pay back with interest.
The story does not end there. Absence of competition among suppliers is a clear recipe for quality lapses, because the buyer is deprived of “competitive choice”. Any deficiencies in quality, in return, would result in poor performance of the asset procured or created. One may wonder whether that was the procedural gap which lent to various quality concerns raised by stakeholders including trade unions with regard to recently imported diesel multiple units, compelling the then Secretary to the Ministry of Transport to call for an independent examination of quality by a team of experts in view of rectifying any such defects prior to completing payment on those procurements. Similarly, the Ministry of Internal Transport had to appoint an expert committee chaired by the former General Manager Railways (GMR), Engineer Priyal de Silva, to examine the concerns raised pertaining to track and signaling infrastructure development projects recently implemented on bilateral credit with no competitive bidding. The Committee has produced a report highlighting quality issues, inappropriate technologies procured, procedural flaws, excessive costs, and resultant operating constraints. Most strikingly, the report has highlighted how absence of competitive procurement could lead to the dual disadvantage of excessive costs and inadequate quality. For instance, it has viewed the Northern line’s new signalling system as “out-of-date” and costly, and has pointed out that several stations had been sub-contracted at about 10 per cent of the average contract price. A competitive tender would have attracted even such sub-contractors to directly bid, possibly enabling much lesser capital requirement for a given technology.
Sleepers were cracked
The report has also found newly laid imported concrete sleepers being cracked at several locations, subsidence at bridge approaches, and several bridges being rejected by the Consultants. Inappropriate yard designs at stations, particularly at Kankesanthurai where trains longer than 16 or 17 coaches could not be accommodated, is reported to be constraining train operations. The possibility of capital saving and value multiplication realisable through assigning of at least some civil work to local companies is reported to have been ignored. This report, containing many such important observations and recommendations, was submitted to the relevant authorities for corrective action, for finding out responsibility; but most importantly for taking precautions to avert such flaws in the future, which also is the sole purpose of this article.
One very clear recommendation of the Priyal de Silva Committee is to call for competitive tenders on all future requirements of railway procurement and infrastructure development when such cannot be executed by the department itself. This was completely missing in “negotiated” projects implemented in the past on bilateral loans, may those be of Indian, Chinese or other origin. Given that these were loans, and not “grants”, Sri Lanka being the borrower Government, acting in her national interest, should have had the freedom to decide how such credit would be ustilised for Sri Lanka’ s betterment, and her policymakers should have had the backbone to say “no” to any unfair conditions if laid down by any lending agency. At the minimum, the borrower Government and its agencies should have been able to call for competitive bids among the potential suppliers in the lender country. The Indian Government, for instance, has issued very clear guidelines in respect of Government supported Exim Bank Lines of Credit (Reference: F.No.21/6/2008-CIE-II, July 2010, Government of India, Ministry of Finance;, where the necessity of transparency in procurement, and opening the procurement for competitive bidding is emphasised.
By passing
Therefore, Sri Lankan policymakers and officials cannot justify any procurement bypassing the competitive bidding process, covering behind the banner that those procurements were on Government-to-Government loans and thereby could not be considered “unsolicited”. In fact, they should act with Sri Lanka’s national interest, and implement projects locally wherever feasible so that maximum economic multiplier effects would be accrued to the nation, and go for competitive tendering whenever local procurement is not possible, in view of obtaining maximum technical and operational benefits on least possible capital deployment. After all, these are credit accorded by friendly nations, presumably with the interest of seeing the development of borrower friends, and thus, should not be on self-interest of exploiting the friends in resource shortage for selling their own products and services at uncompetitive costs. Besides, if the lender countries are so confident of the cost competitiveness of their suppliers and contractors, there is no reason for them to worry, and they should not object for the borrowing countries calling for international competitive bids, which, if required, could also be coupled with offers for financing through lines of credit from bidder’s own country.
This is precisely the guiding framework the Ministry of Internal Transport, during the 100 day Government, established vis-à-vis railway and transport sector related development work. The Ministry, under the guidance of the Minister Ranjith Maddumabandara, adopted the three-tiered strategic framework, namely (a) seeking maximum national value added through design and implementation of projects by local engineers and enterprises to the maximum possible extent, (b) imperatively resorting to international competitive bidding whenever procurement from abroad becomes unavoidable (c) call bids together with that of supplier country bilateral credit terms whenever the Government of Sri Lanka finds shortage in capital funds and when multilateral soft loans are not available. The proposals to locally develop the Maho-Vavuniya railway section at an average estimated cost of approximately $0.4 million per km and procurement of new rolling-stock for railways were submitted for the Government approval on those principles, and the intention of these initiatives was to pursue “good governance” to avoid mistakes made during the past few years. In fact, this policy conforms to the procurement procedural norms promoted by the multilateral credit agencies such as the World Bank and the Asian Development Bank, which have also expressed renewed interest in supporting Sri Lanka’s railway development projects through concessionary credit.
Competitive procurement
There is no better alternative to this strategy of competitive procurement and maximisation of national value added in project implementation if the present Government is to succeed in its Yahap#alana agenda from an economic point of view. It should not slip back into “negotiated projects” on bilateral credit without calling for competitive bids. If it gets deceived by the “government-to-government” slogan and go without bidding, such would not only be falling during the day into the same economic and political pit the former Government fell in the night, but also would amount to violating the very principles standing on which the present administration, being in the opposition then, launched corruption allegations against the previous regime.(The writer is also a former GMR (2007-2009) and Transport Ministry Secretary (twice in 2010 and again in 2015). He could be reached at