ECONOMYNEXT – A planned light rail transit system in Sri Lanka’s capital Colombo will need government subsidies, like elsewhere, as income levels are not high enough to make it financially viable on its own right now, an official said.
Thilan Wijesinghe, chairman and acting chief executive of the newly created National Agency for Public-Private Partnerships, under the Ministry of Finance, said the LRT system was needed to reduce traffic jams that experts had said were retarding economic growth.
A feasibility study by the Japanese, who are funding the project, indicated its capital cost of 1.2 billion US dollars would have to be guaranteed by government, he told a forum held by the Chartered Institute of Logistics and Transport on PPP opportunities in transport and logistics.
“But the operating company, based on revenue forecasts, is forecast to lose money for 15 years,” he said.
Three-fourths of metros and LRTS lose money globally and half need subsidies for operating costs, with tariffs charged, in real terms, actually falling, Wijesinghe said.
Transport experts say most LRTs and metros globally rely on non-fare sources of revenue, such as rents from retail space at stations in prime urban locations, since charging high fares would make the public transport services unaffordable.
“We do not have the purchasing power to make the LRT project viable,” Wijesinghe said. “I’m not saying the LRT is not needed – there’s no question (it is).”
But, Wijesinghe, said Sri Lanka should also look at other, less physically invasive options such as improving the bus services revamping laws on bus fares an regulations on how route permits are issued.