Sri Lanka bus operators look for loan bailout as Coronavirus curbs hit revenues
ECONOMYNEXT – Sri Lanka is looking at mortgaging route licenses of private buses to raise cash with operators saying revenues had halved amid Coronavirus health rules and reduced travelling by the public hit revenues.
Sri Lanka was locked down in strict curfews from late March but controls were relaxed in late May with domestic cases of Coronavirus reducing, but not all offices are working at full strength.
Health rules have also limited passengers to the number of seats though buses have usually made money with standing passengers, especially during peak hours.
“And now the income has dropped 50 percent,” Gemunu Wijeratne, President of Lanka Private Bus Owners’ Association said.
“It is same for the long distance busses as well. That is because passengers are not coming yet. In the morning we have some crowd but that is all.”
He said buses used to make about 75,000 to 100,000 margin but with revenues dropping they did not make money.
However the government has announced a debt moratorium which is expected to ease of the lease payment for six months.
Sri Lanka’s health authorities have asked offices to stagger staff clock in times to prevent congestion.
Transport Minister Mahinda Amaraweera said asked the public not to go on non-essential travel yet.
“Coronavirus is somewhat under control in Sri Lanka,” Amaraweera told reporters. “But it is not yet fully eliminated so refrain from going to see relatives and other non-essential travel.”
Sri Lanka’s central bank has also asked lenders to give a debt moratorium to buses on lease subject to paying interest.
“Bus owners have problems,” Amaraweera said. “In addition to not having revenues, buses have also developed mechanical problems after lying idle for two months. Sometime batteries have run down.
“There was a suggestion to give 300,000 rupee low interest loan keeping the route license as security. We have discussed this with the National Transport Commission and Provincial Authorities and they have agreed.
“Now we have to talk with the banks and come up with a program,”
The route licenses are issued by National and Provincial transport authorities and are not easily transferable, which analysts have said is a key reason that the sector has not consolidated into larger companies and there is no innovation.
Wijeratne also expressed concerns whether banks would give loans against the license as a bankable document if it’s not transferable.
“They tell us do get it but practically it should be decided by the banks,” Wijeratne explained.
“Banks have to talk with the relevant authorities on how to get the license as a bankable document. Or what will happen if we didn’t pay the loan of 300,000 rupees.”
Due to over-regulation and low quality, people have been shifting to cars and motorcycles from buses.
Unhampered by government regulation, taxis have grown with call centres and ride-sharing applications giving flexibility and speed.
Wijeratne says about 1500 persons a day is estimated to be dropping off bus transport each day.
About 30,000 motorcycles are sold each month.
“Passengers are now leaving the busses to find alternatives,” Wijeratne said. “They have moved onto other vehicles such as motorcycles.
“This is happening even before this pandemic. According to our calculation 1500 passengers per day are moving to other travel option from buses. With this pandemic I think it has increased up to 3000 per day.”
Sri Lanka however has halted vehicle imports after the central bank printed large volumes of money and created foreign exchange shortages.
Minister Amaraweera said the government is looking to develop a program to give low interest loans to bus owners to buy low floor passenger buses and discontinue the practice of using uncomfortable buses which are built on truck chassis.
Sri Lanka’s nominal interests are high, leading to calls for subsidized credit due to chronic currency depreciation which destroy real capital and makes interest rates volatile to correct balance of payments pressure, critics have said.
Wijeratne said bus operators were also keen to get into low floor buses when the existing buses are taken off the roads. (Colombo/June11/2020)