Don’t bank on fares to make Railway profitable - Dr Gunaruwan | Sunday Observer

Don’t bank on fares to make Railway profitable - Dr Gunaruwan

Improving service standards and efficiency is the way to make public institutions profitable and not simply by increasing fares, said a transportation economist of the Colombo University. Responding to an opinion that the Railway should increase fares to make it profitable and offer a better service to commuters at a ‘Budget 2018 and Vision 2025’ forum conducted by the University of Colombo recently, former Secretary to the Ministry of Transportation and presently Senior Lecturer of Economics at the University of Colombo, Dr. Lalithasiri Gunaruwan said increasing fares is not the method to make the railway profitable. If so, the charges of all services such as education, healthcare and all public utilities have to be raised to make those sectors profitable.

“Many question the railways about the losses it incurs but not the highway sector for which nearly Rs.180 billion was allocated in the 2017 Budget and brings no return,’’ Dr. Gunaruwan said.

He said the railway should make profits by offering quality service and not merely charging more from commuters.

What I have been advocating is to improve efficiency and service standards in the railways.

The allocation for transport and civil aviation in the 2017 Budget was Rs.51,299,087,000.

However, transportation experts said the Railway must reduce operating loss by increasing freight rates to cover the operating cost and improve the quality of service.

Professor of Economics of the University of Colombo Sirimal Abeyratne said the biggest challenge for the country is the debt burden which is expected to exceed US$ 13 billion in the next four to five years.

“However the government aims at a growth rate of 5 percent, inflation around 6 percent and a budget deficit of 4.5 percent and in the medium term a US$ 5000 per capita income, one million new jobs, US$ five billion in FDIs and doubling exports to US$ 20 billion. This is a daunting task given the expenditure exceeding revenue next year as indicated in the 2018 Budget, he said.

The total expenditure for 2018 exceeds revenue which is 16.3 percent of the GDP while expenditure is 20.2 percent. Revenue is estimated to be at Rs.2,316 billion while expenditure is Rs. 3,001 billion for 2018. Tax revenue in 2017 was Rs.1749 billion while the debt service was Rs.1575 billion.

“The economy should record a seven to eight percent growth rate in the next 10 to 20 years if we are to be a rich country and get over the debt trap. We cannot achieve such a growth rate given the twin deficits that burden the economy.

The widening budget and trade deficits need to be bridged to achieve a higher growth rate,” Prof. Abeyratne said.

He said the government has not only to meet the debt service obligation but also to maintain if not improve the macro economic stability and international credit worthiness.

“Revenue and expenditure management is crucial. The Central Bank has commenced debt service management since mid this year. The GDP growth should be accelerated so that the debt ratio would fall. There has to be a shift in the source of growth from fiscal expansion to trade expansion,” Prof. Abeyratne said. He also stressed on the need to drive foreign direct investments to boost economic growth.