Implementation Plan Implementation Plan for setting up of a for setting up of a

Road FundRoad FundRoad FundRoad Fund

11 July 200311 July 2003

►►At the inaugural meeting organised by the At the inaugural meeting organised by the Ministry of Finance on 12 March 2003 and Ministry of Finance on 12 March 2003 and attended by a number of invitees, it was attended by a number of invitees, it was decided to appoint a committee to draft a decided to appoint a committee to draft a plan for implementing a road fund. plan for implementing a road fund.

►► The following were appointed to the The following were appointed to the Committee:Committee:Committee:Committee:��Prof. Amal S. KumarageProf. Amal S. Kumarage��Dr. D.S. Jayaweera Dr. D.S. Jayaweera ��Mr. D.D. WijemannaMr. D.D. Wijemanna��Mr. Suresh K. Shah Mr. Suresh K. Shah ��Mr. U.N. Mallawaarachchi Mr. U.N. Mallawaarachchi ��Mr. K.D.N.R. AsokaMr. K.D.N.R. Asoka

►►At the 1st meeting Prof. Amal S. Kumarage At the 1st meeting Prof. Amal S. Kumarage was appointed Chairman and Mr. Asoka was appointed Chairman and Mr. Asoka functioned as Secretary.functioned as Secretary.

►►It was decided to finalise the report by 31It was decided to finalise the report by 31stst

May. The Committee held 4 meetings. Final May. The Committee held 4 meetings. Final May. The Committee held 4 meetings. Final May. The Committee held 4 meetings. Final Report submitted on Monday 2Report submitted on Monday 2ndnd June 2003.June 2003.

►►In the preparation of the report, the In the preparation of the report, the Committee was assisted by a consultant Committee was assisted by a consultant provided by the Swedish International provided by the Swedish International Development Cooperation Agency (SIDA). Development Cooperation Agency (SIDA).

Need for a Road FundNeed for a Road Fund

This is identified as:This is identified as:►► Even though large capital allocations are made, the state of the road Even though large capital allocations are made, the state of the road

system is generally considered unacceptable. system is generally considered unacceptable.

►► A large proportion of such funds are spent for construction of new A large proportion of such funds are spent for construction of new roads and rehabilitations, thus depriving funds to achieve a desirable roads and rehabilitations, thus depriving funds to achieve a desirable level of maintenance of the existing road network. This causes the level of maintenance of the existing road network. This causes the rapid deterioration of the existing roads which then necessitates rapid deterioration of the existing roads which then necessitates rapid deterioration of the existing roads which then necessitates rapid deterioration of the existing roads which then necessitates expensive restoration.expensive restoration.

►► There is an absence in formal participation of the different There is an absence in formal participation of the different stakeholders in the management of the road network. stakeholders in the management of the road network.

►► The non application of modern methods and tools that would enable The non application of modern methods and tools that would enable maximising cost effectiveness and economic and social benefits leads maximising cost effectiveness and economic and social benefits leads to subto sub--optimal returns to the economy.optimal returns to the economy.

Objectives Objectives

Road funds are intended:Road funds are intended:►► To create an institutional and financial framework leading To create an institutional and financial framework leading

to to better managementbetter management of all or selected aspects of of all or selected aspects of road provision, such as maintenance. road provision, such as maintenance.

►► To bridge the inadequacy of financial means through To bridge the inadequacy of financial means through ►► To bridge the inadequacy of financial means through To bridge the inadequacy of financial means through efficient cost recoveryefficient cost recovery based on a rational process of based on a rational process of road user charges. road user charges.

►► To forge a close liaison with the road users as well as To forge a close liaison with the road users as well as road agencies in order to road agencies in order to improve the designimprove the design, , construction, management of roads by providing construction, management of roads by providing participatory opportunities for end usersparticipatory opportunities for end users

The Road Fund in the 2003 Budget The Road Fund in the 2003 Budget

In the 2003 Budget Speech the following is In the 2003 Budget Speech the following is stated:stated:

A Road Fund is to be established to be financed A Road Fund is to be established to be financed ►►A Road Fund is to be established to be financed A Road Fund is to be established to be financed from levies on vehicles, levied at the time of issue from levies on vehicles, levied at the time of issue or renewal of vehicle licences.or renewal of vehicle licences.

►►The Fund will be managed by a Roads Board, The Fund will be managed by a Roads Board, comprising representatives of the public and private comprising representatives of the public and private sectors under a Road Fund Act.sectors under a Road Fund Act.

Scope of the CommitteeScope of the Committee

DST emphasised that the Committee should DST emphasised that the Committee should

►►Set out an implementation plan for an Set out an implementation plan for an Interim Road Fund that can commence Interim Road Fund that can commence collections within the year 2003 under collections within the year 2003 under collections within the year 2003 under collections within the year 2003 under existing provisions and existing provisions and

►►A strategy to launch the Fund proper. A strategy to launch the Fund proper.

RecommendationsRecommendations--Overall FrameworkOverall Framework

►►The Road Fund should be set up as a body The Road Fund should be set up as a body corporate corporate under Governmentunder Government supervision.supervision.

►►But providing But providing maximum flexibilitymaximum flexibility and authority to and authority to its Board to administer and manage the Fund in its Board to administer and manage the Fund in accordance with the framework, guidelines and accordance with the framework, guidelines and accordance with the framework, guidelines and accordance with the framework, guidelines and criteria set out in an Act of Parliament.criteria set out in an Act of Parliament.

►►The Fund is The Fund is responsive to Governmentresponsive to Government overall overall policies and directives.policies and directives.

►► It should collect and It should collect and manage its own revenuesmanage its own revenues by by way of road user charges. way of road user charges.

Time FrameTime Frame

►► Time limitations prohibit a Road Fund proper being Time limitations prohibit a Road Fund proper being established immediately. established immediately.

►► The establishment of an interim arrangement by the The establishment of an interim arrangement by the Ministry of Finance would be an appropriate Ministry of Finance would be an appropriate arrangement, as a forearrangement, as a fore--runner to launching of the runner to launching of the Road Fund proper. Road Fund proper.

►► This implies effectively that the interim Road Fund This implies effectively that the interim Road Fund will operate as part of the Ministry of Finance for the will operate as part of the Ministry of Finance for the time being subject to the rules of the Public Service.time being subject to the rules of the Public Service.

►► However, the Committee recommends that the However, the Committee recommends that the Interim Road Fund be allowed to act in an Interim Road Fund be allowed to act in an independent manner, and that it effectively be given independent manner, and that it effectively be given the powers it would have as a Board proper.the powers it would have as a Board proper.

The Scope of the FundThe Scope of the Fund

►►The Committee envisages that costs related to all The Committee envisages that costs related to all aspects of road provision need to eventually be aspects of road provision need to eventually be covered by the Road Fund proper, butcovered by the Road Fund proper, but

►►Recommends that the Interim Road Fund initially Recommends that the Interim Road Fund initially be limited to funding for the purpose of be limited to funding for the purpose of routine routine and periodic maintenanceand periodic maintenance of of national, national, be limited to funding for the purpose of be limited to funding for the purpose of routine routine and periodic maintenanceand periodic maintenance of of national, national, provincial and local authority roadsprovincial and local authority roads only. only.

►►This limitation should be reassessed once the This limitation should be reassessed once the Interim Fund has been established and has come Interim Fund has been established and has come into operation.into operation.

Sources of RevenueSources of Revenue

►► The Road Fund charges be equitable and set at a The Road Fund charges be equitable and set at a levels that promote efficiency in the use of roads. levels that promote efficiency in the use of roads.

►► The future road user charging system is envisaged The future road user charging system is envisaged to comprise levies on fuel and vehicles and, to comprise levies on fuel and vehicles and, eventually, also separate charges on heavy vehicles. eventually, also separate charges on heavy vehicles.

�� Initially, the contribution to the Interim Fund is Initially, the contribution to the Interim Fund is proposed to be by way of the levy on vehicles at the proposed to be by way of the levy on vehicles at the

�� Initially, the contribution to the Interim Fund is Initially, the contribution to the Interim Fund is proposed to be by way of the levy on vehicles at the proposed to be by way of the levy on vehicles at the time of annual vehicle licensing as proposed in the time of annual vehicle licensing as proposed in the budget. budget.

�� It is recommended that this be implemented from 1st of It is recommended that this be implemented from 1st of August 2003. August 2003.

�� It is understood that it may be possible to provide It is understood that it may be possible to provide additional funds for the Interim Road Fund in the near additional funds for the Interim Road Fund in the near future by way of a surcharge on fuel. future by way of a surcharge on fuel.

Vehicle TypeLicenses Renewed

2001

AnnualRate (Rs)

Amount (Rs.)

Motor Cycle, Motor Tricycle504,778 250 126,194,500

Motor Car, Ambulance, Hearse, Jeep 136,180 1,500 204,270,000

Lorry105,276 1,500 157,914,000

Dual Purposes Vehicle119,917 1,500 179,875,500

Public Passenger Transport Vehicle 31,874 1,250 39,842,500

Land Vehicle57,213 100 5,721,300

Total955,238 713,817,800

This requires…This requires…

►►Sending a circular to all Divisional Sending a circular to all Divisional Secretaries to collect levies.Secretaries to collect levies.

►►To create a separate vote for the 2004 To create a separate vote for the 2004 budget under Ministry of Finance called budget under Ministry of Finance called budget under Ministry of Finance called budget under Ministry of Finance called Road Fund for crediting funds received in Road Fund for crediting funds received in 2003.2003.

Structure of the Road FundStructure of the Road Fund

Secretary to Treasury

Board of Road Fund

Advisory Council

Directors of Secretariat CEO

Finance ManagerOperations Manger

Policy & Control Manager

Consultant FirmManager/Team Leader

Road Fund Secretariat

The Advisory CouncilThe Advisory Council

►►Advisory Council members may be appointed for a Advisory Council members may be appointed for a period of three years.period of three years.

►►No member may serve continuously for more than No member may serve continuously for more than two consecutive three year periods. two consecutive three year periods.

►►The chairman of the Council will be nominated by The chairman of the Council will be nominated by ►►The chairman of the Council will be nominated by The chairman of the Council will be nominated by Council members and appointed by the Secretary Council members and appointed by the Secretary to Treasury. to Treasury.

►►No person shall serve as Chairman for a No person shall serve as Chairman for a continuous period of more than two consecutive continuous period of more than two consecutive years. years.

Members of Advisory CouncilMembers of Advisory Council

►► 2 Members from Central Government 2 Members from Central Government �� Secretary to the Treasury or his nominee. Secretary to the Treasury or his nominee. �� Secretary, in charge of the subject of Highways or his nominee.Secretary, in charge of the subject of Highways or his nominee.

►► 1 member from Provincial Government nominated by Ministry of Home 1 member from Provincial Government nominated by Ministry of Home Affairs, Provincial Councils & Local GovernmentAffairs, Provincial Councils & Local Government

►► 1 member from Local Government nominated by Ministry of Home 1 member from Local Government nominated by Ministry of Home Affairs, Provincial Councils & Local GovernmentAffairs, Provincial Councils & Local Government

►► 3 members from the Private Sector representing and nominated by3 members from the Private Sector representing and nominated by�� a leading chamber of commerce representing national interestsa leading chamber of commerce representing national interests�� a leading chamber of commerce representing national interestsa leading chamber of commerce representing national interests�� a leading chamber of commerce representing provincial interestsa leading chamber of commerce representing provincial interests�� a recognised institute representing transport service providers.a recognised institute representing transport service providers.

►► 3 members of Civil Society representing road users, who apply for this 3 members of Civil Society representing road users, who apply for this post and are selected by the Secretary to the Treasury based on their post and are selected by the Secretary to the Treasury based on their interest and past performance in representing (a) noninterest and past performance in representing (a) non--motorised road motorised road users (b) bus passengers and (c) private vehicle users. users (b) bus passengers and (c) private vehicle users.

►► 2 members who have academic distinction together with practical 2 members who have academic distinction together with practical experience in Sri Lanka in the fields of transport engineering and experience in Sri Lanka in the fields of transport engineering and transport economics, to be selected by the Secretary to the Treasury. transport economics, to be selected by the Secretary to the Treasury.

The Board of DirectorsThe Board of Directors

►►The Board to have 3 to 4 directors. The Board to have 3 to 4 directors.

►►The ST will appoint the directors for a The ST will appoint the directors for a period of three years, and directors are period of three years, and directors are period of three years, and directors are period of three years, and directors are proposed to be eligible for reproposed to be eligible for re--appointment.appointment.

►► The ST will appoint the chairperson. The ST will appoint the chairperson.

Powers of the BoardPowers of the Board

►► To receive funds.To receive funds.

►► To make disbursements from the fund,To make disbursements from the fund,

►► To procure services required for the fund.To procure services required for the fund.

►► To call for applications for funding of projects. To call for applications for funding of projects.

►► To collect and maintain the databases required.To collect and maintain the databases required.►► To collect and maintain the databases required.To collect and maintain the databases required.

►► To select projects on criterion that is accepted as policy. To select projects on criterion that is accepted as policy.

►► To make assessment evaluating of the programs.To make assessment evaluating of the programs.

►► To monitor the work done from the proceeds of the fund.To monitor the work done from the proceeds of the fund.

►► To make recommendations on the source of funding. To make recommendations on the source of funding.

►► To make recommendations on distribution of funds.To make recommendations on distribution of funds.

Accountability ArrangementsAccountability Arrangements

►►Business PlanBusiness Plan

►►Performance StatementPerformance Statement

►►Accounts and the preparation of annual Accounts and the preparation of annual financial statementsfinancial statementsfinancial statementsfinancial statements

►►A mid year report on its activities during A mid year report on its activities during that financial yearthat financial year

►► Also aAlso accounts and financial statements shall ccounts and financial statements shall be audited as required by the Public Servicebe audited as required by the Public Service

The SecretariatThe Secretariat

►►The Board would have a secretariat as its The Board would have a secretariat as its implementation arm, which will be headed implementation arm, which will be headed by a chief executive officer (CEO), reporting by a chief executive officer (CEO), reporting to the Board. to the Board.

►►The Road Fund itself is during the interim The Road Fund itself is during the interim phase proposed to only have four phase proposed to only have four employees.employees.

►►The other employees would be supplied by The other employees would be supplied by a consultant firm.a consultant firm.

Consultant Consultant

►►This arrangement would enable the Road Fund to This arrangement would enable the Road Fund to be set up quickly.be set up quickly.

►►Also provides for discontinuity if it does not Also provides for discontinuity if it does not function satisfactorily. function satisfactorily.

►►The consulting firm would be required to provide The consulting firm would be required to provide ►►The consulting firm would be required to provide The consulting firm would be required to provide office space and facilities for the work of the Road office space and facilities for the work of the Road Fund for a speedy commencement of the work. Fund for a speedy commencement of the work.

►►The firm of consultants would also be charged The firm of consultants would also be charged with assisting with preparing for the launching of with assisting with preparing for the launching of the Road Fund proper. the Road Fund proper.

Preliminary Recommendations on Preliminary Recommendations on Operational PoliciesOperational Policies

►► Funds would only be available for the following type of Funds would only be available for the following type of road works:road works:�� Routine and periodic maintenance works.Routine and periodic maintenance works.

�� Projects which may be completed within the financial yearProjects which may be completed within the financial year

�� If the project refers to routine maintenance, then it should If the project refers to routine maintenance, then it should either cover one continuous road, a part thereof or an either cover one continuous road, a part thereof or an either cover one continuous road, a part thereof or an either cover one continuous road, a part thereof or an integrated network of roads or parts thereof which are in integrated network of roads or parts thereof which are in close geographic proximity. close geographic proximity.

�� As a measure of confidence building among road users in As a measure of confidence building among road users in road maintenance, it would be required for projects to be of road maintenance, it would be required for projects to be of a nature wherein they are sufficiently large and visible for a nature wherein they are sufficiently large and visible for public comment. public comment.

�� Unsustainable interventions, e.g. periodic maintenance Unsustainable interventions, e.g. periodic maintenance projects will not be supported if the same intervention will projects will not be supported if the same intervention will be required again within 2 to 3 years.be required again within 2 to 3 years.

AllocationAllocation

►► National Roads: A & B Class (up to 60%):National Roads: A & B Class (up to 60%): This allocation is to be This allocation is to be made available to the RDA for distribution across the entire country. made available to the RDA for distribution across the entire country. Allocations would be made to each Provincial Director, but all projects Allocations would be made to each Provincial Director, but all projects from across the country will compete with each other, based on the from across the country will compete with each other, based on the criteria set out below. criteria set out below.

►► Provincial Roads: (up to 30%):Provincial Roads: (up to 30%): This would be made available to all This would be made available to all Provincial Councils. Allocations would be made to each Council, but all Provincial Councils. Allocations would be made to each Council, but all projects will compete for funds. Proposals would be evaluated and projects will compete for funds. Proposals would be evaluated and ranked from a common pool. ranked from a common pool. ranked from a common pool. ranked from a common pool.

►► Local Government Roads: (up to 35%):Local Government Roads: (up to 35%): Each Provincial Council Each Provincial Council would be given a pro rated share (based on an equation considering would be given a pro rated share (based on an equation considering the number of vehicles registered within a province and the extent of the number of vehicles registered within a province and the extent of the existing road network) of this amount for distribution within the the existing road network) of this amount for distribution within the province on the basis of project proposals submitted by all the local province on the basis of project proposals submitted by all the local government authorities in the province. These too would compete government authorities in the province. These too would compete against each other.against each other.

Selection CriteriaSelection Criteria

►► The road agencies would be required to formulate project The road agencies would be required to formulate project proposals.proposals.

►► Each proposal would be evaluated and ranked based on Each proposal would be evaluated and ranked based on factors such as:factors such as:�� The quality of the price estimate The quality of the price estimate �� The benefits and outputs of the proposed projectThe benefits and outputs of the proposed project�� The benefits and outputs of the proposed projectThe benefits and outputs of the proposed project�� The internal quality and financial control systemsThe internal quality and financial control systemsFor periodic maintenance projects, the factors as wellFor periodic maintenance projects, the factors as well::�� The motivation and quality of the proposed designThe motivation and quality of the proposed design�� An economic analysis of the intervention.An economic analysis of the intervention.

►► The best project receives the required allocations The best project receives the required allocations thereafter the next best may be considered and so on until thereafter the next best may be considered and so on until allocated funds are exhausted.allocated funds are exhausted.

Implementation ApproachImplementation Approach

►► Secretary to Treasury should appoint a Secretary to Treasury should appoint a Chairperson of the Interim BoardChairperson of the Interim Board (July (July 2003). 2003).

►► Commencement of Commencement of collection of levycollection of levy by MoF (August 1by MoF (August 1stst 2003)2003)

►► The Ministry of Finance would earmark The Ministry of Finance would earmark four positions in the Ministryfour positions in the Ministry to be filled to be filled by the four officials during the time they are working for the Interim Fund. by the four officials during the time they are working for the Interim Fund.

►► The Chairperson of the Interim Board would initiate recruitment of the four The Chairperson of the Interim Board would initiate recruitment of the four officials of the Secretariat. (August 2003)officials of the Secretariat. (August 2003)

►► Recruitment of the Recruitment of the consulting firmconsulting firm to support the Secretariat. to support the Secretariat.

►► Two (or three) more Two (or three) more Board membersBoard members would be appointed (September 03). would be appointed (September 03).

►► Interim Board would initiate activities to start Interim Board would initiate activities to start disbursementsdisbursements by January 04by January 04

Information and SeminarsInformation and Seminars

There will be a need to ensure that adequate There will be a need to ensure that adequate information is being provided to the road agencies. information is being provided to the road agencies. The following is proposed:The following is proposed:

�� The Chairperson will send out an The Chairperson will send out an information information memorandummemorandum (draft ready)(draft ready)memorandummemorandum (draft ready)(draft ready)

�� A first A first seminarseminar will be organised for the road will be organised for the road agencies on the Interim Road Fund.agencies on the Interim Road Fund.

�� The Interim Road Fund will set up a The Interim Road Fund will set up a WebWeb--sitesiteduring October to provide continuous during October to provide continuous information about the Interim Road Fund. information about the Interim Road Fund.

NEXT STEPSNEXT STEPS

►► Submission of Submission of memo to Prime Minister/Cabinetmemo to Prime Minister/Cabinet to to obtain approval for setting up Interim Fund. obtain approval for setting up Interim Fund.

►►Allocation of Allocation of funds for Interim Boardfunds for Interim Board including including officials during 2003 (estimate ready).officials during 2003 (estimate ready).

►►Allocation of Allocation of funds for the consulting firmfunds for the consulting firm during during ►►Allocation of Allocation of funds for the consulting firmfunds for the consulting firm during during part of 2003 (estimate ready)part of 2003 (estimate ready)

►►Recruitment of the Recruitment of the chairperson of the Interim chairperson of the Interim BoardBoard to work part time on establishing the to work part time on establishing the Interim Road Fund (terms of reference ready).Interim Road Fund (terms of reference ready).

►► Initiation of actions to earmark Initiation of actions to earmark four positionsfour positions in in the MoF to be filled by the Secretariat the MoF to be filled by the Secretariat

Thank You Thank You Thank You Thank You