An insight to unveil the potential | Sunday Observer
Sri Lanka Railway:

An insight to unveil the potential

11 April, 2021

Sri Lankan railway, one of the oldest in Asia was introduced primarily for the purpose of transporting plantation products from the hill country to the capital from where those products have been exported largely to the European continent.

At the time the railway was introduced in 1864, coffee was the main crop of export, tea together with coconut and rubber made their way through subsequently. Therefore, the railway route was built mainly through plantation regions rather than densely populated areas giving due prominence to cargo rather than as passenger transport.

Still the network is far-extensive. Having a closer look at the network created by the British, one can find that all the provincial capitals and almost all district capitals were linked by the original railway network.

Out of 21 districts in the British period, only Ampara, Moneragala, Hambantota and Kegalle were left out. However, the purpose of building some routes such as the Eastern line seems going beyond just transportation of plantation products and inputs.

The very purpose of such lines could be to open remote regions to improve the mobility of resources and people in those regions so that full contribution of those regions to the economy can be derived. The Naval base in the Trincomalee port which was operated as a commercial port after independence provides a strong justification for eastern line.

Ironically, this has not adequately been focused in the development agendas of post-independence period and the potential of Trincomalee harbour to stimulate the economy of the Eastern region was not harnessed.

At the time of inception of the railway, the bullock cart was the main transport mode in the country. It is evident that there was a gravel road network at least between the main cities where trade activities took place.

With further development of trade, more and more townships had been formed around such network. Introduction of railways made transport of goods much more efficient.

Flexibility and agility

However, railway by nature does not have flexibility and agility to reach all settlement areas rather was able to going closer to such townships in most cases. For these reasons, we can see that most of the railway routes are located far from the cities, towns and often away from highly populated areas.

Later, asphalt roads were built following the traces of those old gravel roads linking all major cities as well as townships. With the changes of the economic structure and the urbanisation, passenger transport became important as movement of people was increased.

There was a surge in passenger movements with the expansion of service sector and government sector activities. All these developments led to expand the land transport modes such as buses, lorries and other vehicles faster.

However, the railway seems not able to keep pace with these developments due to various reasons. High capital cost associated with railway infrastructure and rolling stocks as well as heavy overheads and maintenance costs of the existing network prevented required expansions to more commercially viable areas and services.

Unlike some of the other transport modes such as road transport, railway lines run point to point and do not have ability to freely penetrate into periphery in between. Therefore, the distribution pattern of the network over the space and location of stations are important factors to be considered in evaluating the performance of a railway network.

Comparison of the spatial distribution of network in different countries gives us an indication on the potential of our rail system network to be operated as viable venture.

Spatial distribution: a comparison

The railway network in Sri Lanka is the most extensive compared to South Asian neighbours but lower compared to most of the high-income countries particularly countries where high speed railway services are in operation.

Accordingly, 1 km of railway track in Sri Lanka covers 43 km2 and catered for 13,696 persons (indices for the Western Province are 16.8 km2 and 26,583 persons). Optimum level of population and area catered for, can vary depending on the factors such as livelihood patterns, service quality, connectivity with other modes, affordability etc.

However, if densely populated urban and sub-urban settlements are connected with appropriately spaced stations, the passengers and goods available for our network to transport are adequate to run our railway as an operationally profitable venture while handling traffic flows efficiently.

Current coverage and route design have limitations in achieving this goal. One should not overlook the fact that our commuter traffic patterns especially in the capital city and around are different from many other countries and therefore need further analysis for the purpose of developing the network further. Particularly, in the western region there are peak hours during morning and evening and in the off-peaks, volume of passengers drops significantly.

When we compare the traffic density, it reveals (figure 2) that our usage level of network for moving people is comparable with our neighbours in relative terms but India is way ahead of us. However, as a country with comparatively small land area, our system must be developed on our own way to tap the full potential.

In the meantime, it is necessary to take different rail routes; urban, sub-urban and interregional lines etc. separately for such analysis to identify uneconomical routes and to make necessary changes for service enhancement.

We should not forget the fact that the population in this country as well as large part of economic activities are concentrated in the Western Province. Though the Western Province comprised only 5.6 percent of the land area of the country, around 29 percent of the total population live in this part. Future plans for expansion of network including connectivity plans with other modes and introducing new modes such as LRT should focus on the ways to better serve densely populated areas while ensuring links with the other regions for spatially balanced development.

Countries observed to be divided in to two main groups in railway utilisation patterns. Some high-income countries like Japan or Netherlands concentrate on passenger transport by railway rather than freight.

Countries such as the USA and Ukraine use railway mainly for goods transportation. India widely uses railway as means of goods transportation while giving equal weight to passenger transport. Closer look at the economic structures of these countries indicates that this is not mere spontaneous development but a result of successful adaptation of transport management and planning while creating conducive legal, regulatory and institutional framework to facilitate such navigated development.

It is reported that a few decades ago, the share of goods transportation in the country by rail was fairly high.

Today the rail freight traffic density of our country is very low whereas the same indicator in India is exceptionally high. In fact, around 65 per cent of income of Indian railway is reported to be coming from goods transportation. At this point we should not forget the fact that our railway network was originally designed mainly for goods transportation.

It is at a later stage the focus was diverted more towards passenger transport. Evidence from many countries shows that the earning operational profits from passenger transport alone is not realistic. Lot of countries uses freight transport to cross-subsidise the passenger transport which in most cases the transport mode for common people.

Revenue and operational income

Railway as a transport mode is economically more viable among other land transport modes. Railway is more fuel efficient than road transport owing to low friction between steel wheels and steel rails. Rail transport is operationally efficient as it can carry high volumes of bulk commodities or passengers by single train. Other advantage is railway often less time consuming as it is not associated with the traffic congestion issues having in the roads.

As a rule, negative externalities of railway such as pollution (air, land, water and noise), greenhouse gas emissions and accidents are identified minimum compared to many other transport modes.

However, capital cost of railway such as; construction of track, bridges, tunnels, terminals, signaling and communication systems are high, therefore the railway to be commercially viable, usage levels of infrastructure have to be maximised as much as possible.

It is evident that many railways in the world struggle to achieve at least operational profit unless some of its operations are (vertically) separated from the infrastructure (Rail Track) authority to give more room for flexibility in operations specially using state of the art technologies.

For example, private sector can be invited to participate in freight transportation service where the private sector will obtain the service from the railway while maintaining container yards and connecting freight forwarders.

Status of Sri Lanka Railway

At present SLR is far from the status of running operationally profitable so to minimise operational losses we have two paths; reducing operational cost and increasing operational revenue.

Taking the contribution given to the economy into account, operational costs have to be reduced without compromising service levels and volumes. At present, the railway is the cheapest passenger transport mode in the country and therefore, increasing income of railway is not desirable by increased passenger tariffs.


Passenger income which is the main income source of SLR can again be divided into two main categories; ticket income and season ticket income. Season tickets for government and private sector workers are subsidised at different levels. Currently, on average 82 percent of the income is coming from tickets and the rest (18 percent) is coming from the season tickets. It is estimated that if the forgone amount due to subsidy is taken into account, this ratio will change to 57:43.

Using the above assumptions, the operational loss and estimated subsidy amount for the past ten years have been calculated (figure 5). The graph reflects the operational loss with and without forgone income. For instance, operational loss in 2019 was Rs 7,562 mn and if added forgone income by subsidy the amount will come down to Rs 3,611 mn. The graphs indicate that though the operational loss of the railway is generally increased in past several years, the volume of the service rendered has also increased significantly.

Revenue enhancing

It is worthwhile to examine the revenue and revenue sources of Sri Lankan railway.

As mentioned at the beginning, railways in our country as well as many other countries introduced for the main purpose of transportation of goods.

As economies of scale exists it’s the most competitive modes among land transport for large volumes of bulky goods. For instance india’s main business in freight is coal transportation.

Railways in many countries rely heavily on freight transport as their main revenue source. Highly industrialised and large countries have advantage of having bulky commodities such as coal, metal ores, minerals, construction material, timber etc. availble for transport for long distances.

Due to various reasons freight transport in Sri Lanka by railway has been dramatically declined over the time. One of the main potential areas that can contribute to revenue enhancing is fright transport. It is about time for us to concentrate on the ways and means of enhancing frieght transporattion by bridging the missing links and through inter-agency coordination.

In the meatime, it is required to increase other income sources such as land rental, waste material management, adverticing and explore the possibility of tapping new sources such as container transport, real state develoment using railway land etc.

Operational expenditure

Generally, railway expenditures are threefold. Cost on rail infrastructure network, train operation related expenditure and corporate overheads. Unit costs of these three components tend to lower when traffic level increases with heavy use of the network.

Increase of rolling stock fleet with acquisition of several DMUs and locomotives, train operations in the country have substantially been increased specially during the past decade. As a result, operational expenditure increased. The data show (Figure 6) that main contributor for increase of operational expenditure is personal emoluments.

Total staff in terms of numbers hasn’t changed much during this period. Apparently, the salary hike in the government sector during this period is the main cause of this increase. It is important to note that gap between gross operational income and expenditure widening with time.

It is clearly visible with liner trend lines in the graph at Figure 3 above. Further analysis is required to determine the capacity thresholds for the system to achieve economies of scale so that unit operational cost will come down while looking into matters related to institutional and procedural inefficiencies that prevent to enhance operational income.

Organisational structural aspects

Railways in many countries have traditionally been managed as government monopoly. One of the main disadvantages of such monopoly is poor level of service and inadequate customer orientation.

Institutional structures of such entities are often created to cater to internal needs or needs of other government units. Such situation often creates a vicious cycle.

On the one hand such entities depend heavily on subsidies from the government as they have no ability to earn operational profits.

This on the other hand leads entities to resist restructuring or changing traditional monopolistic structures which prevents them making independent decisions as a commercial entity.

To break such a vicious cycle, a management structure which will more accountable for revenue, expenditure and investment is required. Separate revenue and cost centres have to be identified with adequately delegated power. Otherwise, profitable services and sections which are mixed with unprofitable ones in the system couldn’t be identified.

Some Management Innovations introduced by other countries.


The Sri Lankan Railway designed one and a half centuries ago mainly for goods transportation has hardly had significant additions or change in track route layout and institutional structures.

In the evolution, we tend to deviate from the originally designed function and gradually passenger transport has become the main focus. This has led to encompass with several challenges; utilisation of the railway network as a whole become sub-optimal and low operational income which resulted often in cutting regular maintenance operations leading to major repairs incurring additional costs.

Despite all these shortcomings the SLR provides substantial service to the society though it has a potential to provide much higher contribution. The current contribution has to be duly recognised and quantified in order to make strategic decisions while system and institutional related inefficiencies have to be identified and rectified.

Government policy framework recognises the importance of establishing sustainable, user and environment friendly, affordable transport system where the railway has to play an explicit role.

Connecting economic hubs such as ports, airports along the C shape economic corridor identified by the policy framework will open new economic opportunities while mobilising resources in the regions for the economic development of the country. Rail transportation is an integral part of such economic corridor.

Steps have already been taken to increase volume of goods such as sand, flour, fertiliser, petroleum, solid waste and cement transported by railway. Timber, salt, vegetables are the other potential items. Also, ancillary facilities for goods transportation have to be improved.

Increasing public transport volume is another area of propriety in the policy framework. Recent decision of the government to expand the railway network in Colombo and suburban areas targeting passenger transport is an equally important initiative.

W. A. D. S. Gunasinghe 
Director General (Planning) Ministry of Transport
Currently, General Manager Railway (covering)