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PUBLIC EXPENDITURE REVIEW PROGRAM
ROADS PUBLIC EXPENDITURE REVIEW IN SRI LANKA
Submitted to the World Bank, Colombo
Amal S Kumarage
University of Moratuwa
Moratuwa, Sri Lanka
15th
June 2006
FINAL REPORT
i
TABLE OF CONTENTS
1 PRELIMINARIES __________________________________________________________ 1
1.1 Scope and Objectives ____________________________________________________ 1
1.2 Methodology ___________________________________________________________ 2
2 INTRODUCTION ___________________________________________________________ 3
2.1 Road System in Sri Lanka _________________________________________________ 3
2.2 Government Policy of the Road Sector _______________________________________ 5
2.3 Government Developmental Objectives relating to inputs to Road Sector ____________ 5
2.4 Funding for Road Construction & Management ________________________________ 7
3 ANALYSIS OF PUBLIC EXPENDITURE ON ROADS ____________________________ 10
3.1 Public Expenditure on Roads _____________________________________________ 10
3.2 Sources of Funding for Roads and Budgetary Processes _________________________ 26
3.3 Efficiency of Utilizing Funds Allocated _____________________________________ 29
3.4 Sustainability of Road Expenditure _________________________________________ 32
3.5 Institutional Arrangements in Road Sector ___________________________________ 34
4 INTERVENTIONS FOR IMPROVING OUTCOMES OF SPENDING ON ROAD
SECTOR _____________________________________________________________________ 37
4.1 Identify the overall sector Investment Level __________________________________ 37
4.2 Identify Allocation Levels by Type of Investment _____________________________ 38
4.3 Improving Effectiveness of Expenditure Allocations ___________________________ 45
4.4 Improving Utilization of Allocations _______________________________________ 47
4.5 Enhancing Sector Capacity _______________________________________________ 48
5 PERFORMANCE INDICATORS ______________________________________________ 51
6 DATA COLLECTION FORMAT ______________________________________________ 54
7 SUMMARY TABLE OF CONCLUSIONS & RECOMMENDATIONS ________________ 57
Appendix I Data Collection ___________________________________________________ 62
Appendix II Treasury Allocations for Road Construction _____________________________ 63
ii
LIST OF TABLES
Table 1: Road Network in kms _____________________________________________________ 3
Table 2: MTEF Budget Allocations for Pro-Poor and Pro-Growth Regional Development ________ 6
Table 3: Allocations to Local Authority Roads _________________________________________ 8
Table 4: Overview of Allocations for Road Development 2006 ____________________________ 10
Table 5: Spending on National Roads 2005-2006 (Rs Million) ____________________________ 15
Table 6: Spending on Provincial Roads 2005-2006 (Rs Million) ___________________________ 16
Table 7: Spending on Urban Roads 2005-2006 (Rs Million) ______________________________ 18
Table 8: Summary of Spending on Rural Roads _______________________________________ 19
Table 9: Spending on Rural Roads 2005-2006 (Rs Million)_______________________________ 20
Table 10: Total Public Expenditure on Roads and its Analysis (2006 Allocations)- Rs billion ____ 24
Table 11: Trends in Public Expenditure on Roads (2003-2008)- Rs million __________________ 26
Table 12: Road User Charges: 2003 (Million Rupees) ___________________________________ 26
Table 13: Total Public Expenditure on Roads and its Analysis (2006 Allocations)- Rs million ____ 27
Table 14: Treasury Allocations on Roads by Agency Level (2006 Allocations)- Rs million ______ 28
Table 15: Utilization of RDA Funds for 2005 _________________________________________ 29
Table 16: Allocations & Utilization of Funds for National Roads (Ministry of Highways) _______ 30
Table 17: Utilization Rates for funds made available for Provincial Roads ___________________ 32
Table 18: Utilization Rates for funds made available for Local Authority Roads _______________ 32
Table 19: Analysis of Public Expenditure on Roads by Sector (2006 Allocations)- Rs million ____ 39
Table 20: Lane kms of National Road Network ________________________________________ 39
Table 21: Rehabilitation Costs for Road Network ______________________________________ 40
Table 22: Maintenance Costs of Road Network after Rehabilitation ________________________ 42
Table 23: Sector Allocations at different Investment Levels ______________________________ 44
LIST OF FIGURES
Figure 1: Trends in Public Expenditure on Roads (2003-2008) ____________________________ 25
Figure 2: Utilization of Funds for National Roads (2001-2005) ____________________________ 31
1
1 PRELIMINARIES
A core objective of the Public Expenditure Review for which this report is prepared is given as ‘to
assist the Government in increasing the output-orientation of the budget system as an integral part of
its medium term expenditure framework (MTEF), thereby strengthening the links between policy
priorities and the budget’.
The overall goal of this report is therefore, to identify the means by which the government can
improve the efficiency of its expenditures on roads, so that a desirable level of services can be made
available for road users for the level of expenditure provided for roads in the MTEF, which is taken as
the primary instrument of policy implementation of the government.
This review of the road sector budget allocation will investigate if it is in line with the intended
outcomes as defined by policy objectives and the medium term expenditure framework.
However, any success from an outcome-based budget will only be achieved if it translates into timely
delivery of the desired outcomes. Thus, the execution of the budget will also be examined in terms of
performance indicators and efficiency of expenditure.
Therefore, the specific objectives of the study as referred to in the Terms of Reference issued for this
purpose are understood to be as follows:
(i) To assess the expenditure levels in roads and evaluate if government objectives are being met in
allocations and spending.
(ii) To assess and formulate performance indicators to measure the efficiency of expenditures looking
at both costs and the outputs and outcomes of the road sectors in terms of service delivery.
1.1 Scope and Objectives
As outlined in the Inception Report dated 27th March 2006, this report is the Final Report combining
all material set out in the following parts:
• Part I -Assessment of Expenditure Levels
• Part II -Evaluation of Expenditures and Stated Objectives
• Part III -Assessing and formulation of performance indicators
• Part IV -Preparation of a Data Collection Format
The specific objectives for this report are:
• To identify the road network in terms of institutional responsibility for construction &
management
• To identify the different sources of funding
• To quantify the levels of funding provided and utilized for the period 2000 to 2006
• To establish trends in spending on roads during this period
• To identify reasons for any divergence between funds provided and actual utilization
2
• To assess the capacities of these implementing agencies to undertake the scope of work
pertaining to the allocated expenditure and the desired level of output
• To assess the expenditure levels in roads and evaluate if government objectives are being met
in allocations and spending
• To assess if expenditure priorities have been identified in projects and if these priorities have
been observed in expenditure patterns;
• Formulating suitable performance indicators to be used for sector allocations and intra-
sectoral allocations and for budgetary monitoring and
• Formulation of a draft data collection form for prioritizing capital allocation for the road
sector.
1.2 Methodology
This report has been compiled after study of the funding methods pertaining to the road sector
especially with respect to actual expenditure for the year 2005 and allocations for the year 2006. It
has been derived from an examination of budget documents as well as implementation programs and
accounts of on-going projects at all tiers of road administration.
However, the scope of the study which has an overall time frame of six weeks, does not allow for
extensive data collection and verification of all details, particularly at the provincial and local
government levels, where such data is most difficult to arrive at.
Therefore the study, included visits to two provinces, namely Southern and Uva to obtain actual
expenditures received at both provincial and local authority levels and to identify the quantum and
procedures under which such funds are received. The rationale for selecting these two provinces and
the institutions from which data was collected by personal visits and interviews is given in Appendix
I. Spending in other provinces was estimated based on the experiences gathered from these two
provinces.
The estimates of expenditure made in this study are based on data that was collected within the scope
of the study. Road expenditure especially on rural roads has been obtained from numerous sources,
many of which have included such expenditure under broader accounting heads. As such the estimates
at the rural level are only the most educated and scientifically derived estimates and should not be
taken as the final accounting figures. Even at other levels, the lack of an acceptable convention for
accounting of different types of expenditure has led to some degree of discrepancy and variance in
reported figures.
3
2 INTRODUCTION
2.1 Road System in Sri Lanka
The road network in Sri Lanka is made up of several types of roads classified according to their
functionality and management. There is no formally accepted classification system for Sri Lanka. The
following classification and notation will be followed in this report:
• National Roads
• Provincial Roads
• Urban Roads
• Rural Roads
The national road network had by 1959, expanded to 7,034 kms with a further 12,070 kms of other
roads of lesser importance. Since independence in 1948, a noteworthy shift in road building was seen
with emphasis on access roads, particularly to rural villages. This has today, increased to an estimated
75,424 kms. On the other hand, additions to the national road network have been comparatively less
significant, with the majority being upgrades from provincial roads. The most notable contribution of
new roads have come from agricultural and irrigation projects, especially the 467 kms under the
Mahaweli Diversion Program. The detailed inventory of road lengths was last carried out in 1990
when part of the road network was handed over to Provincial Councils by the Road Development
Authority. It was then 94,208 kms, returning a road density of 1.47 kms per square km of land area.
The estimated road length in 20021 was 108,103 kms with over 28,000 kms in paved condition.
Table 1: Road Network in kms2
Year
National
Roads
Provincial
Roads
Urban
Roads
Rural
Roads
Total
Road
1905 6,024 6,024
1959 7,034 12,070◊ 19,104
1990 10,447 14,916 2,791 66,054 94,208
2002 11,760 15,743 5,176 75,424 108,103
National Highways: These are roads that are presently managed by the Road Development Authority
(RDA) and constitute the roads classified as A & B Class. Such roads are generally those that are
considered as part of the national road network or provide access to places of national importance etc.
Roads that belong to the provincial authorities as well as agencies such as the Mahaweli Authority,
Municipal Councils are periodically gazetted and added to the national network. These roads are
maintained by the RDA, with the exception of around 80 kms within Colombo city which is
maintained by the Colombo Municipal Council. .
1 Source National Atlas 2001
4
Provincial Roads: These are roads that were classified as C, D and E class when the Provincial
Councils were established in 1989 under the 13th amendment to the Constitution. Usually, these are
roads on which a bus service operates and where such road is situated entirely within the province.
There has been no physical verification carried out to determine the exact length of provincial roads.
Its extent was estimated at 15,743 kms in 2002. These roads are managed by the respective Provincial
Councils which have a statutory body commonly referred to as the Provincial Road Development
Authority (PRDA) or a Roads Department through which it manages the road network.
Urban Roads: Roads that are not classified as national roads or provincial rods but are within
Municipal or Urban Council areas (MCs and UCs respectively) are identified in this report as urban
roads. These roads are maintained by local governments- i.e. MCs or UCs. Some urban roads such as
in Colombo and Kandy are used by heavy traffic and in a functional sense is part of the national
highway network. The Dehiwela-Mt Lavinia MC has 594 kms of roads, while Colombo MC has 480
kms of road. Other municipal councils have between 30 to 200 kms each, while the urban councils
have between 10 to 50 kms each. There are 18 Municipal Councils and 48 Urban Councils managing
between them 5,176 kms of road. Around 1/4th of this road length may be considered as gravel or
earth roads. Only a length of around 80 kms in Colombo and 8 kms in Galle are two lane or wider,
other being single lane residential roads.
Rural Roads: These are roads in rural areas maintained by rural local authorities called Pradeshiya
Sabhas (Village Councils earlier). The length of these roads was estimated in 2002 as 75,424 kms.
Unlike the other roads described earlier, most of these roads are earth or gravel roads.
Roads maintained by other Institutions: There are yet other roads which do not belong to or are
maintained by any of the agencies specifically charged with road maintenance. These agencies
include the Mahaweli Development Authority, Irrigation Department, Forest Department, Wild Life
Conservation Department, Agrarian Services Department and Plantation Companies. The length of
these roads has also never been properly assessed, but is estimated at 4,500 kms by the Road Sector
Master Plan. Though these roads have not been gazetted as public roads, public funds are used for
their maintenance as these roads in most cases are used as public thoroughfares and accessed by the
rural population.
Roads not maintained by any Institution: There is also an unspecified length of road in each
province, which has not been included in the road inventory of any government institution. These are
usually roads serving a collection of houses or very small villages, which have been constructed
through self help schemes (Shramadana) or funded by the decentralized votes of parliamentarians or
provincial councilors, but have not been officially handed over to the Pradeshiya Sabha. The extent of
such road length is not known.
5
Even though Sri Lanka has an impressive length of road network its performance in terms of speed
and safety are not satisfactory. The TransPlan3 road database on the national road network shows that
less than 2% of the network has an IRI (roughness index) of less than 2 m/km. In fact over 50% of the
length of the network has an IRI of more than 5 m/km- which is considered most unsatisfactory. With
the national network in such poor standard, the provincial and local authority roads for which there
are no measured indicators are bound to have worse conditions. The poor maintenance is contributing
to the congestion costs estimated at Rs 32 billion per annum, accident costs at Rs 12 billion per annum
and lost economic opportunities at Rs 270 billion per annum.4
2.2 Government Policy of the Road Sector
The National Road Policy (2002) give general objectives of the road sector to:
a) Promote the on-going economic development of the country, by taking into consideration the
present and future socio-economic development plans and policies, thereby improving the
quality of the people.
b) Facilitate greater mobility, shorter travel time and provide easy accessibility with improved
safety for the people.
c) Adequately meet the transport needs of the country, both passengers and freight transport
taking into consideration the current and projected future transport demand and such
projections shall accommodate restraint strategies.
d) Improve the quality of roads, by using cost effective and innovative techniques of design,
construction, maintenance and rehabilitation.
However, specific application of these policies in project formulation or in investment planning
cannot be observed at present. The budgetary process also does not include assessment of objectives
or outcomes of proposed projects in order to determine the degree of subscription of a project for
which funding is sought, to these policies.
2.3 Government Developmental Objectives relating to inputs to Road Sector
The Policy of the Government in terms of the ‘Mahinda Chinthanaya’ has been translated to an
implementation strategy through the Medium Term Expenditure Framework (MTEF) for the period
2006-2008. The MTEF perspectives are based on allocating resources to achieve the Millennium
Development Goals (MDGs) and targeting an economic growth rate of 6 to 8 percent. It emphasizes
on programs to eradicate poverty, remove regional disparities of socio economic development, to
empower the poorest and raise the living standards of all segments of the society.
3 University of Moratuwa, 2006
4 Source: Kumarage, Amal S. LBO, May 2006
6
The 2006 budget—initially issued in November 2005 together with the MTEF was later revised in
December 2005 in order to reflect more closely the newly elected President’s vision, increased
emphasis on infrastructure and rural development.
There are a number of lead projects identified under the Pro-Poor Pro-Growth and Regional
Development strategy of the Mahinda Chinthanaya, which has a number of project through which
there are investments intended for roads and bridges. These are given in Table 2.
Table 2: MTEF Budget Allocations for Pro-Poor and Pro-Growth Regional Development5
Project
2006
Budget
Rs mn
2006-8
Projected
MTEF
Budget
Rs mn
Project location and benefits
Gamipubuduwa 672.85 672.85 Implementation of small scale 45,000
projects to develop basic infrastructure
which will include bridges
Maga Neguma 800.06 2900.0 Upgrading of 4,500 kms of rural gravel
roads to motorable level
North East Community Development
and Restoration Project (NECORD)
1450.0 1450.0 Rehabilitation of roads, irrigation systems
and buildings.
Pubudamu Wellasa 506.9 706.9 Rehabilitation and development of rural
roads, and other community
infrastructure.
Road Improvements in Sabaragamuwa,
and Central Provinces (JBIC)
2034.0 4310.0 Rehabilitation of 1280 kms of C,D and E
roads
Road development in Western, North
Western and Uva Provinces (ASB)
2500.0 6750.0
Rural Economic Advancement Project
(ADB)
350.0 2350.0 Rehabilitation and improvement of 25
suspension bridges and other
infrastructure
North East Community Restoration and
Development Project
607.3 607.3 Development of community through
provision of rural roads and other
infrastructure.
Conflict Affected Area Rehabilitation
Project (CAARP)
2538.0 5225.0 Rehabilitation of essential economic and
social infrastructure in conflict affected
areas.
Rehabilitation of bridges (UK) 421.3 421.3 Rehabilitation of 89 bridges
North east Roads rehabilitation project
(EU)
240.0 1021.0 Rehabilitation of provincial and rural
roads
North East Community Restoration and
Development Project (ADB)
1450.0 4450.0 Rehabilitation of roads, irrigation systems
and buildings in north and east.
Trincomalee Integrated Infrastructure
Development Project (ADB)
300.0 1050.0 Development of community through
provision of rural roads and other
infrastructure.
5 Source: Medium Term Expenditure Framework 2006-2008, Department of National Budget
6 Subsequently increased to Rs 1,800 million
7
In addition to the regional development strategy, the following specific road infrastructure
development projects which were identified in the Budget Speech of December 2005 have also been
provided funds in 2006 for the construction of:
• Southern expressway- Rs 6,382 million and
• Highway from Kalutara to Jaffna along the tsunami affected coastal belt- Rs 1,585 million
Domestic funds have also been provided for feasibility studies and land acquisition in the following
projects;
• Katunayake expressway- Rs 935 million,
• Kandy-Colombo Highway- Rs 13 million and
• Outer Circular Road - Rs 625.6 million.
No specific development strategies have been identified for the above investments and are considered
to be part of the overall road sector policy of providing for shorter travel times and greater mobility.
The funding for these projects has not been finalized yet, except in the case of the Katunayake
Expressway Project, for which Chinese funding has been secured most recently.
2.4 Funding for Road Construction & Management
The Government strategy pertaining to the manner of funding the road sector has not been explicitly
stated. The implicit strategy it has followed can be gathered from the funding arrangements in past
years and particularly the manner in which funding has been allocated for the different road networks.
This section investigates the funding for the road sector as contained in the budgetary provisions of
the Government. The actual expenditures based on the data collected from the provinces will be
discussed in Chapter 3.
The past practices before the creation of provincial councils was that all funding for roads was
allocated to two ministries. The Ministry of Highways was given funds for all roads A, B, C, D and E
while each local authority was given an allocation through the Ministry in charge of Local Authorities
for its own road network within their areas. However, with the advent of the Provincial Councils, this
situation changed with the Finance Commission made responsible for determining distributional
criterion for the allocations made by the Government to the Ministry of Local Government and
Provincial Councils under the requirements as per 13th constitutional amendment, together with the
Provincial Council Act No. 42 of 1987 and the Provincial Council (Consequential Provisions) Act No.
12 of 1989 which established legislative and executive powers at the provincial level.
Provincial Roads
Even though it has been observed that decentralization of the public sector and service delivery that
followed the creation provincial administrations has given to confusion and duplicity in many sectors
such as health, education and transport, this has been less so in roads, because of the ability to carve
out roads on a functional basis. Even though the decentralization provided the provincial councils
8
with facilities such as workshops and plants for the provincial use, its biggest set back has been
dealing with the vacuum that was left when the higher technical capabilities, training facilities, codes
and practices and databases were retained at the central government levels. Inmost cases these are yet
to be developed. The provision of foreign funding for provincial roads is a relatively new strategy.
Since, domestic funds provided did not allow for rehabilitation of their networks, provinces have not
developed any investment or developmental plans for roads, other than yearly maintenance schedules.
Local Authority Roads
With the creation of an intermediate 3rd layer of administration, a number of changes in funding,
planning and management of local authority roads also took place. These have continued up to now
thus becoming de-facto ‘policy’. These may be summarized as follows:
• Urban local authorities have been considered as been affluent enough to generate own funds
for maintaining and constructing roads. Hence only a percentage of salaries (around 60-70%)
were paid to them. No capital allocations have been granted until 2006.
Table 3: Allocations to Local Authority Roads7
Year
2002 2003 2004 2005 2006
PSDG Allocation 9,219.0 3,700.0 4,830.0 8,000.0 14,742.0
Allocation for Provincial Roads 1,865.0 690.0 905.0 1,650.0 1,895.0
Allocation for Local Authority Roads 470.0 207.0 245.0 355.0 1,430.0
Allocations for Urban Roads Nil Nil Nil Nil 700.08
• The Pradeshiya Sabhas did not fare any better, getting only a fraction of the total allocations
for roads within the province. As shown in Table 3, even by the year 2002, local authorities
were receiving on average only 1/5th of the Province Specific Development Grants (PSDG)
capital allocations made to the province for all roads. (This situation has since improved with
the 2006 budget providing more than ½ of capital allocation on roads in the PSDG to local
authority roads).
• With the changes to election systems including the introduction of the Proportional
Representative System, where elected representatives had to compete for support in a larger
area, there is a history of spending on rural roads as one of the key strategies to win support.
• With local authorities unable to maintain the existing roads and accessibility becoming a
major social issue particularly in rural areas, Members of Parliament as well as Members of
Provincial Councils began utilizing whatever funds they had access to, irrespective of their
7 Source: Finance Commission
8 From 2006 funding for urban local authorities has been provided. Of the Rs 436.5 million allocation made to
Western Province, Rs 288 million has been ear marked by the Finance Commission for urban roads. Such
allocations to other provinces are being worked out. The value of Rs 700 million has been estimated on this
basis. This amount is from the total allocation of Rs 1,430.0 million for 2006.
9
source, for rehabilitation of roads or for new roads in rural areas, where credit for their actions
was most likely to translate to political support.
• During periods when the centre and the local government were controlled by different
political parties, this situation took an even more politically strategic turn, where different
ministries of the Central Government started spending on rural roads under different
development activities funded by the Treasury.
• As a result a number of institutions are now administering funds for rural roads. The
Commissioners of Local Government in the provinces are often under pressure to utilize
funds intended for local authorities on roads selected by Members of Parliament or of
Provincial Councils. As such District Secretariats and Divisional Secretariats are also found to
be implementing road programs.
• Even though this political situation is not predominant at present, the apparent success of
direct delivery has been further extended in the 2006 budget with the creation of several
regional and development oriented ministries, where most of the projects handled by them
have components for spending on rural roads.
• Since, funds were allocated to different agencies, and road services delivery effected through
each of them, there was no permanent instrument for coordination between them. As a result,
no reviews have been undertaken to consider the equitability of funding between the three
levels. This led to roads having vastly different standards between the different levels as well
as between provinces. Moreover, roads were hardly ever developed as networks for regional
development. In most instances, the benefits of rehabilitating a national highway were not
reaped by the province which did not invest in its provincial roads to improve access to the
highway. On the other hand there are number of instances where the access road has been
developed to a much higher standard than the national road.
In summary it could be concluded that there is presently no evidence of specific policy directions to
determine
a. The overall investment strategy for the road network in terms of determining
allocations between maintenance, rehabilitation and new assets
b. The level of funding required for the road sector
c. The distribution of such funds to the different road networks
d. The distribution of such funds by type of investment namely maintenance,
rehabilitation or new roads.
e. The instruments of coordination between different levels of government or even
between agencies under central government which are provided funds for roads.
10
3 ANALYSIS OF PUBLIC EXPENDITURE ON ROADS
In this chapter the report will attempt to address the following key questions:
a) What is the present level of funding for the road sector?
b) Who provides these funds, what is the associated budgetary process and where and
how are such funds spent?
c) What is the efficiency of using existing funds?
d) Is the spending on target to achieve the development objectives of the Government?
e) What are the capacity constraints for executing the required work program for the
present level of funding?
3.1 Public Expenditure on Roads
According to the NBD, the 2006 budget allocates Rs 53,278 million to the roads sector, with Rs
30,748 million (57%) in foreign funds. An overview of this is given in Table 4. The detailed
allocations made by the NBD on a project basis, are given in Appendix II.
Table 4: Overview of Allocations for Road Development 20069
Ministry
Projects
Na
tio
nal
Ro
ad
Prov
incia
l R
oa
ds
Local
Au
thori
ty
Ro
ad
s
Ru
ral
Roa
d
Ma
haw
eli
Roa
ds
Est
ate
Roa
ds
Tsu
nam
i
Aff
ecte
d R
oa
ds
Co
nfl
ict
Aff
ecte
d
Ro
ad
s
To
tal
FA
Highways 28,039 - - - - - 7,947 35,986 21,714
Road Development 1,70010
100 1,800 500
Local
Government &
Provincial
Councils
PSDG 1,895 1,430 110 80 3,515
RSDB - ADB 2,400 2,400 1,700
PRIP - JBIC 2,034 2,034 1,601
CAARP - ADB 2,538 2,538 1,900
STAART - - JBIC 211. 211 174
Sub Total 6,329 1,430 110 80 211 2,538 10,698 5,375
National Building & Development 1,660 1,348 3,008 2,212
Estate Infrastructure & Livestock
Development
900 900
Regional Development 451 451 174.0
Agriculture, Irrigation & Mahaweli Development
426 426 396
Rural Economic Development 10 10
Grand Total 28,039 6,329 1,430 2,271 506 1,000 9,818 3,886 52,278 30,748
Accordingly, Rs 28,039 million is allocated to the Ministry of Highways for the RDA’s national
roads. The allocations made for provincial and local authority roads through the Province Specific
Development Grant (PSDG) is Rs 1,895 million and Rs 1,430 million respectively. There is also Rs
9 Source; Summarized from computations of National Budget Department
10 Includes Rs 1,000 million in supplementary estimates
11
4,434 million for projects funded by foreign aid. This amount of Rs 7,769 million is allocated to the
Ministry of Local Government & Provincial Councils and disbursed directly to the Chief Secretaries
of the Provincial Councils on the recommendations made by the Finance Commission, based on
expenditure programs submitted by the relevant provincial councils.
There is a further Rs 3,777 million allocated for Rural, Mahaweli and Estate Roads- roads that would
fall within the rural definition adopted in this report. As seen above, in Table 4, this is provided
through 06 different line ministries of the Central Government. A further Rs 9,818 million is allocated
for Tsunami Affected Roads. The bulk of this (Rs 7,947 million) is allocated to the Ministry of
Highways for national roads; Rs 211 million is allocated to Ministry of Local Government &
Provincial Councils for provincial roads with another Rs 1,660 million allocated to the Ministry of
Nation Building & Development, mostly for national roads. In addition there is Rs 3,886 million
allocated for roads in Conflict Affected Areas, with 73% made up of foreign funds. In this instance,
the bulk of the allocation (Rs 2,538 million) is allocated to the Ministry of Local Government &
Provincial Councils for spending on provincial roads. The balance Rs 1,348 million is allocated to the
Ministry of Nation Building & Development for both national and provincial roads in the North East.
According to the above, the NBD has identified 08 line ministries to which funds have been allocated
for spending on roads with Rs 35,986 million voted to the Ministry of Highways and Rs 10,698
million voted to the Ministry of Local Government & Provincial Councils. The balance funds mostly
for rural roads amounting to Rs 5,594 million, is allocated through the following line ministries:
• Head 180 Ministry of Nation Building & Development –Rs 3,008 million
• Head 220 Ministry of Rural Economic Development – Rs 10 million
• Head 310 Ministry of Agriculture, Irrigation & Mahaweli Dev.- Rs 426 million
• Head 530 Ministry of Estate Infrastructure & Livestock Dev.- Rs 900 million
• Head 680 Ministry of Regional Development- Rs 450 million
• Head 630 Ministry of Road Development – Rs 1,800 mn (including to Rs 1,000 mn
from supplementary vote)
Even though these funds are destined for roads coming within the purview of provincial councils or
local government authorities, the funds are not channeled through the Ministry of Local
Government & Provincial Councils or the Finance Commission or even through the relevant
Provincial Council or Local Authority. These are often spent through the Divisional Secretaries
office or the District Secretary’s office.
Moreover, review of present practices reveals that many of the other central government ministries
and agencies were also spending directly on roads mostly at rural level. Information was collected
from the following institutions to quantify their spending on roads as well as the manner in which the
funds are being spent.
• Head 430 Ministry of Local Government & Provincial Councils
• Head 440 Ministry of Infrastructure Development and Fisheries Housing
• Head 500 Ministry of Samurdhi & Poverty Alleviation
12
• Head 520 Ministry of Fisheries & Aquatic resources
• Head 660 Ministry Agrarian Services & Development
• Head 720 Ministry of Rural Livelihood Development
• Head 854 Department of Forests
• Head 863 Department of Wild Life Conservation
• Southern Development Authority
Other ministries which could be potential spenders on roads, but from which information could not be
gathered are:
• Head 360 Ministry of Urban Development & Water Supply
• Head 380 Ministry of Housing & Construction
• Head 450 Ministry of Enterprise Development & Investment Promotion
• Head 480 Ministry of Plantation Industries
• Head 610 Ministry of Agricultural Development
• Head 620 Ministry of Industrial Development
• Head 650 Ministry of Irrigation
• Head 660 Ministry of Agrarian Services & Development of Farmer Communities
• Head 750 Ministry of Environment
The allocations made for 2006 by each of the above agencies will be fully discussed in the next
chapter.
Treatment of Recurrent Costs
Most road sector analysis considers only the capital costs. However recurrent costs such as for salaries
are treated differently by different agencies. In the RDA, in the past an overhead was levied on all
capital work carried out. This was used for payment of salaries and other operational expenses.
However, now RDA receives a recurrent allocation in the budget. In the provinces, even though the
salaries are paid by the block grant from Government, most agencies levy a fee of between 3 to 4%
which is used to meet shortfall in recurrent expenses. This report will consider total costs including
both capital and recurrent costs.
In order to identify the budgetary processes involved in spending on each type of road, this report will
analyze the public expenditure on roads under the following sub headings:
• Public Expenditure on National Roads
• Public Expenditure on Provincial Roads
• Public Expenditure on Urban Roads
• Public Expenditure on Rural Roads
Public Expenditure on National Roads
As outlined earlier, the spending on national roads comes from more than a single sources. These are
identified as:
13
a) Central Government Allocations for both capital and recurrent expenditures made to the
Ministry of Highways for work carried out through the RDA.
b) Projects funded through foreign loans channeled to the RDA through the Ministry of
Highways.
c) Projects funded through foreign loans channeled to the RDA through other central
government ministries and agencies without being allocated to and going through the
Ministry of Highways.
The review of the records of both the RDA and the NBD reveals that even though the spending on
national roads is mostly carried out through the RDA, there are other ministries such as the Ministry
of Nation Building & Development and the Ministry of Local Government & Provincial Councils that
handle budget allocations spent on national roads. The summary of spending for national roads in
2005 and the allocations for 2006 are given in Table 5. In this table the spending by the Ministry of
Mahaweli on a major road which will eventually become part of the national road network has also
been considered here. This is treated in this manner since; several hundred kms of roads constructed
by the Mahaweli Authority have been taken over by the RDA and included in the national network
over the last decade or two. The total allocations for this is Rs 4,829 million and is a significant
proportion when compared with the Ministry of Highways allocation for national roads at Rs 34,831
million.
Public Expenditure on Provincial Roads
The spending on provincial roads also comes from a number of sources. These are identified as:
a) Central Government Allocations for both capital and recurrent made to the Ministry of Local
Government & Provincial Councils and distributed to the individual provinces according to
the recommendation of the Finance Commission;
b) Projects funded through foreign loans channeled directly to the relevant province by the
Ministry of Local Government & Provincial Councils without going through the Finance
Commission;
c) Projects funded through foreign loans channeled directly to the relevant province by other
central government ministries and agencies without going through either the Ministry of
Local Government & Provincial Councils or the Finance Commission and
d) Provincial Revenue allocated for roads through the provincial budgets.
In order to obtain a more reliable estimate of the level of spending on provincial roads, two provinces
namely the Southern Province and the Uva Province were selected for an in-depth evaluation. The
two provinces were selected on the basis of their differences in socioeconomic profile as well as in
topography. The Southern Province has a coastline comprising mostly of agriculture and tourism
based economy. It has been developing slowly, but its main economic centers were severely affected
by the tsunami of December 2004. The Uva Province on the other hand is situated in the central hill
country and comprises of a predominantly plantation economy. It remains as a least developed
province having one of the lowest Regional GDPs.
14
In each of the two provinces, discussions were held with the Chief Secretary as well as the agency
responsible for provincial roads. In the case of the Southern Province this was the Provincial Road
Development Authority and in the case of Uva, it was the Provincial Roads Department.
The report given as Appendix I, describes the data collection process and selection of agencies to
study the spending on roads. This information has been extrapolated to estimate the spending for all
the 08 provinces. Table 6 gives the estimated spending allocations for all provincial roads for the year
2006 as well as the corresponding expenditure incurred in 2005.
The total estimated allocation provided for provincial roads is Rs 9,140 million for 2006. Table 6
shows that the primary source of funding for provincial roads is through allocations made to the
Ministry of Local Government & Provincial Councils and on the recommendations of the Finance
Commission. Part of this is in the form of block grants for recurrent expenditure which is used for the
payment of a percentage (varying from 60 to 100%) of salaries of staff in the provincial councils and
local authorities and for other recurrent expenditure which includes an allocation for road
maintenance and office administrative costs at both levels. This is estimated at Rs 892 million for
2006.
There is also Province Specific Development Grants (PSDGs) amounting to Rs 1,895 million for
2006, which are capital grants to each province for designated purposes, which include spending on
roads. Since there is usually a shortfall from the block grants for administrative and operating
overheads, a percentage between 3 to 6 percent is deducted by the road agencies from the PSDG
capital allocations for provincial roads.
There is also criteria based and matching grants worked out on different basis where funds are
released for specific purposes, some of which includes roads. The portion spent on roads is estimated
at Rs 599.4 million.
However, at present the larger share of funds for provincial roads are for foreign funded road projects,
channeled through the Ministry of Local Government & Provincial Councils. Presently there are
projects funded by the ADB and JBIC amounting to allocations of Rs 4,645 million for 2006. The
provincial councils have varying degrees of involvement in these projects, but are clearly of the
opinion that such funding is not entirely at their discretion or management. Selections of roads, design
standards, contractual matters are some aspects that have been raised to explain the lack of
effectiveness in this spending.
There is a further Rs 896.8 million for tsunami rehabilitation allocated under the Ministry of Nation
Building & Development.. The estimated spending from provincial council funds is Rs 211.6 million
mostly used to pay the balance portion of salaries.
15
Table 5: Spending on National Roads 2005-2006 (Rs Million)11
11
Source, Computations provided by University of Moratuwa, based on Budget Estimates for 2006 12 An estimated Rs 150 million has been reduced for maintenance spending on rural roads carried out by the RDA in 2005, with Rs 300 million allocated from the Road Fund. 13 As estimated Rs 500 million has been reduced for construction work carried out on rural roads by the RDA in 2005, with a provision of Rs 1,000 million for 2006. 14
From a total of Rs 425.7 million, it has been estimated that half would be spent on provincial roads. 15
Total spending for national roads is therefore the net spending on the national roads after reducing RDA spending for non-RDA roads and adding value of work accounted
through other agencies.
Ministry of Highways Other Ministries
Allocation
2005
Spending
2005
Allocation
2006
Project Allocation
2006 Institutional Expenses (Head
300 01 02 and 300 50 01)
Salaries, Administration, Land
Acquisition of Domestic Funded
Projects, Feasibility Studies, R&D
etc.
1,427.0 1,300.0 2,356.0 Nil
Maintenance (Head 300 50 02) 1,900.0 1,649.2 2,710.012 Nil
Rehabilitation & Improvement
of Existing Assets
Mostly FA projects which include
widening, surfacing and
reconstructions
8,810.0 7,096.4 26,123.513
CAARP thro M/LA&PC
STAART thro M/NB&D
Trinco IIDP thro M/NB&D
2,538.0
1,585.0
75.0
Replacement of Existing Assets Replacement of bridges 500.3 285.8 1,285.5 89 Bailey Bridges (EU)
Through M/NB&D
210.614
Acquisition of New Assets New road projects or new bridges 7,431.7 3,518.7 2,356.0 Dambulla-Bakamuna-
Kalagawela Rd project,
which is a Mahaweli Road
but should be part of the
National Network
425.7
Total spending for National Roads15
20,069.0 13,850.1 34,831.0 4,829.3
16
Table 6: Spending on Provincial Roads 2005-2006 (Rs Million)
Source of Funding
Nature of Expenditure
2005 2006 Total
Allocation
of Vote
Actual
Expenditure
on Roads
% Spent
on Roads
Total
Allocation
of Vote
Estimated
Allocation
for Roads
Province Specific Development Grant (Channeled through the M/LG&PC and
provincial allocations made by the
Finance Commission)
All road related expenditure for Provincial
Roads
1650.0 1,286.2 100% 1895.0 1,895.0
Sub Total 1,895.0
Criteria Based Grants & Matching Grants for Capital Projects (Channeled
through the M/Local Government &
Provincial Councils and allocations
made by the Finance Commission)
Rehabilitation & Improvement of Capital Assets
(buildings, roads, bridges etc)
25% 1,998 499.5
Acquisition of Fixed Assets (buildings,
acquisition) etc
5% 1,998 99.9
Sub Total 599.4 Recurrent Grant (Channeled through
the M/Local Government & Provincial
Councils and provincial allocations made
by the Finance Commission)
Road Maintenance 0.75% 59,497 446.2
80% of Salaries Ministry & Road Agency Staff 0.75% 59,497 446.2
Sub Total 892.4
Foreign Funded Projects (Channeled
through the Ministry of Local
Government & Provincial Councils)
Road Sector Development Project (ADB-RSDP) 2,280 1,963.0 100% 2,400 2,400.0
Provincial Road Improvement Project (JBIC) 1,290 263.5 100% 2,034 2,034.0
STAART 211 211.0
Sub Total 4,645.0 Foreign Funded Projects (Channeled
through Ministry of Nation Building &
Development)
North East Community Restoration and
Development Project (ADB-NECORD)
1,986 1,249 100%
North East Emergency Restoration Project (WB) 620.0 100%
Part (estimated at 50%) of the funds for 89
Bailey Bridges Project for provincial roads (EU)
212.8 210.6
Projects -NECORD, NEIP and NECCDEP) 686.2 686.2
Sub Total 896.8
Provincial Revenue allocated to Roads (channeled through the Provincial
Budget)
Balance Salary (20%) 111.6
Other allocations (e.g. Chief Minister’s Fund) 100.0
Sub Total 211.6
TOTAL 9140.2
17
Public Expenditure on Urban Roads
Urban roads have fewer sources of funding when compared to provincial roads. The primary
source of funding amounting to Rs 1,900 million out of a total allocation of Rs 2,776.2
million is through their own funds. As shown in Table 7, these funds are used primarily to pay
the shortfall in salaries after the payment of 60% of salaries provided by the Central
Government through the Ministry of Local Government & Provincial Councils and disbursed
direct to the respective Provincial Council based on the recommendation of the Finance
Commission. Except for a few councils which have reasonably good revenue bases, others
claim that they do not have adequate funds for maintenance and rehabilitation work on the
urban road system.
From 2006, the Finance Commission has agreed to release part of the funding under the
PSDG for local authority roads to urban and municipal councils as well. In addition, several
councils have to pay back loans taken for the UDLIHP program funded by the ADB during
2000 to 2004. This is for roads and bridges constructed under this project. The repayment is
based on a loan component of 20% of the total cost after a grace period of 3 years. While
some councils have kept up with repayments (e.g. Bandarawela UC), others (e.g. Badulla
M.C.) are struggling to do so. The overall spending on the urban road network is estimated at
Rs 2,776.2 million for 2006. Presently, urban roads do not receive any significant foreign
funds. Neither do they have any source of road user charges as opposed to Central
Government collections of import duties, fuel taxes etc and provincial revenues from fuel
taxes as well as vehicle licensing fees, which is reality is collected on their behalf too.
Public Expenditure on Rural Roads
The spending on rural roads cannot be estimated to any degree of reliability or accuracy. This
is because there are numerous sources, most of them executing the work through different
arrangements that vary from place to place. The primary source of funding is the annual
PSDG grant from the Central Government channeled through the Ministry of Local
Government & Provincial Councils and distributed through the Finance Commission with
instructions to the relevant Provincial Councils on the allocations to each Pradeshiya Sabha.
This has been estimated at Rs 1,000 million. There are also PSDG funds under a numerous
other headings such as Backward Areas Roads, Development of Scenic Resources, Mahaweli
Roads, Estate Infrastructure, Rural Infrastructure and 5 year Development Plan, which are
found to incur varying percentages of the allocated funds to each such vote on rural roads.
Such funding has been estimated at Rs 464.2 million in Table 8 which gives the summary of
the total calculations set out in Table 9. Apart from this there is Rs 199.8 million for varying
degrees of salary payments ranging from 70% to 100% and also for other recurrent
expenditure including an allocation for maintenance of roads.
18
Table 7: Spending on Urban Roads 2005-2006 (Rs Million)16
Source of Funding
Nature of Expenditure
2005 2006
Total
Allocation
of Vote
Actual
Expenditure
on Roads
% Spent on
Roads
Total
Allocation
of Vote
Estimated
Allocation
for Roads
Province Specific Development Grant (Central
Govt funds voted to M/LG&PC on basis of
provincial allocations made by the Finance
Commission and distributed within province by the
relevant Provincial Council to Pradeshiya Sabha) )
Local Authority Roads (assuming 30% of this
for urban Local Authorities)
355.0 193.6 100% 430.0 430.0
Sub Total 430.0
Recurrent Block Grant (Central Govt funds voted
to the Ministry of Local Government & Provincial
Councils on and distributed within province by the
relevant Provincial Council to the Pradeshiya
Sabha)
60% of Salaries of Municipal or Urban Council
staff working on roads
0.75% 59,497 446.2
Sub Total 446.2
Municipal/Urban Council funds allocated for
roads (channeled through the own Budget)
Balance 40% of salaries above, Contract staff,
other recurrent expenditure including
maintenance for all councils and loan
repayments to roads and bridges projects carried
out under the ADB funded UDLIHP grant/loan
scheme 2000-2004. Computed from interviews
from 5 councils at the rate of Rs 1 million per
km for 200 kms of multi lane roads and balance
4,917 kms at Rs 350,000/- per km.
1900.0
Sub Total 1,900.0
TOTAL 2,776.2
16
Source: University of Moratuwa based on data collected for urban local authorities in Southern and Uva Provinces and the CMC
19
Table 8: Summary of Spending on Rural Roads17
Source of Funding
Nature of Expenditure
2006
Total
Allocation
of Vote
Estimated
Allocation
for Roads
Province Specific Development Grant • Local Authority Roads 1000.0 1000.0
• Backward Area Roads 1153.0 462.6
Sub Total 1462.6
Criteria Based Grants & Matching Grants for Rehabilitation &
Improvement Capital Projects
3,998 199.8
Recurrent Block Grant mostly for 80%-100% of Salaries of Pradeshiya
Sabha staff
59,497 59.5
Foreign Funded Projects voted to a ministry other than the M/LG&PC but
implemented through the Provincial Council such as Rural Economic
Advancement Project
230.0 230.0
Foreign Funded Projects voted to a ministry
other than the M/LG&PC and implemented
directly
Maganeguma Program for
rural and estate roads
1800 1,800.0
Local Funded Projects identified as ‘Road Projects’ where funds are voted to
a ministry other than the M/ LG&PC is disbursed directly to the Pradeshiya
Sabha for rural roads
2,920.7 1,120.7
Local Funded Projects not identified hitherto as ‘Road Projects’ but where
funds voted to a ministry other than the M/ LG&PC is spent directly on rural
roads including Decentralized budget for all Members of Parliament at Rs 5
mn for 225 MPs (i.e. Rs 1,125 million @ 25% for roads Rs 281.3 mn).
814.7
Funds Allocated to RDA, spent on maintenance and reconstruction of rural
roads under vote heading such as ‘Emergency Road repairs’ etc
1,300.0
Provincial Revenue allocated to Roads
(channeled through the Provincial Budget)
PC Members and Chief
Ministers Vote
283.0
Pradeshiya Sabha funds allocated for roads
(channeled through the PS Budget)
Balance 20% of
salaries and other
expenditure
637.3
TOTAL 7,907.6
However, it can be seen from Table 8, that the majority of funds amounting to over 75% are
channeled outside of the purview of the Provincial Council or the relevant Pradeshiya Sabha.
This is because funds allocated to other ministries are usually spent through the District
Secretary’s office or the Divisional Secretary’s Office which come under the central
government.
17
Source: University of Moratuwa, computations based on Budget estimates and surveys made at rural
local authorities in Southern and Uva province.
20
Table 9: Spending on Rural Roads 2005-2006 (Rs Million)18
Source of Funding
Nature of Expenditure Total
Allocation
of Vote
2005
Actual
Expenditu
re on
Roads
2005
% Spent
on Roads
Total
Allocation
of Vote
2006
Estimated
Allocation
for Roads
2006
Province Specific Development Grant (Central Govt funds
voted to Ministry of Local Government & Provincial
Councils on basis of provincial allocations made by the
Finance Commission and distributed within province by the
relevant Provincial Council to the Pradeshiya Sabha) )
Local Authority Roads (assuming only 70% for rural
Local Authorities from 2006)
355.0 193.6 100% 1000.0 1000.0
Backward Area Roads 70.0 67.2 100% 110.0 110.0
Maintenance of Mahaweli Assets 80.0 n/a 100% 80.0 80.0
Estate Infrastructure Other than Housing 32.0 n/a 20% 33.0 6.6
Development of Lesser Known Scenic Resources 23.0 n/a 20% 30.0 6.0
Rural Infrastructure 160.0 n/a 60% 100.0 60.0
Implementation of 5 year Development Plan - - 25% 800.0 200.0
Sub Total 1462.6
Criteria Based Grants & Matching Grants for Capital Projects (Central Govt funds voted to the M/LG&PC on
basis of allocations made by the Finance Commission and
distributed to Pradeshiya Sabhas within the province by the
relevant Provincial Council)
Rehabilitation & Improvement of Capital Assets
(buildings, roads, bridges etc)
5% 1998 99.9
Acquisition of Fixed Assets (buildings, acquisition
etc.)
5% 1998 99.9
Sub Total 199.8
Recurrent Block Grant (Central Govt funds voted to the
M/LG&PC and distributed within province according to
staff positions, by the relevant Provincial Council to each
Pradeshiya Sabha)
80%-100% of Salaries of Pradeshiya Sabha staff 0.1% 59,497 59.5
Sub Total 59.5
Foreign Funded Projects (voted to a ministry other than the
Ministry of Local Government & Provincial Councils but
disbursed through the relevant Provincial Council)
Rural Economic Advancement Project (ADB-REAP
(SP)) thro M/Regional Econ. Dev
220 220.0
Rural Economic Advancement Project (ADB-REAP
(Matale)) thro M/Regional Econ. Dev
10 10.0
Sub Total 230.0
Foreign Funded Projects (projects identified as ‘Road
Projects’ where funds are voted to a ministry other than the
Ministry of Local Government & Provincial Councils and
Maganeguma Program for rural and estate roads,
where funds are voted to M/Road Development and
spent on projects recommended by the Members of
575.0 500.8 1800 1800.0
18
Source: University of Moratuwa, computations based on Budget estimates and surveys made at rural local authorities in Southern and Uva provinces.
21
Source of Funding
Nature of Expenditure Total
Allocation
of Vote
2005
Actual
Expenditu
re on
Roads
2005
% Spent
on Roads
Total
Allocation
of Vote
2006
Estimated
Allocation
for Roads
2006
disbursed directly to the Pradeshiya Sabha for rural roads) Parliament. (This was implemented thro M/Highways
up to Nov 2005)
Sub Total 1800.0
Local Funded Projects (projects identified as ‘Road
Projects’ where funds are voted to a ministry other than the
Ministry of Local Government & Provincial Councils and
disbursed directly to the Pradeshiya Sabha for rural roads)
Budget Proposal 10 ‘Estate Infrastructure
Development in Estate Sector administered by
M/Estate Infrastructure & Livestock Dev.
100 103 100% 750 750.0
Construction of Roads & Bridges administered by
M/Estate Infrastructure & Livestock Dev.
100% 150 150.0
Uva Wellassa Development (Rehabilitation of Rural
Roads) administered by the M/Regional Econ Dev.
100% 196.5 196.5
Integrated Rural Development Project for NW
Province administered by M/Regional Econ. Dev. In
2005 this was under M/Irrigation & Mahaweli Dev.
300 11 10 10.0
Infrastructure Development Galle District/Township
Development & Rural Roads administered by
M/Regional Econ. Dev.
14.2 14.2
Sub Total 1,120.7
Local Funded Projects (projects not identified hitherto as
‘Road Projects’ but where funds voted to a ministry other
than the Ministry of Local Government & Provincial
Councils and spent directly on rural roads)
Road Projects under Samurdhi Program (6114 in
2005) and around 6,500 in 2006) where each project
is provided with Rs 30,000 plus labour. Administered
through M/Samurdhi and Poverty Alleviation (only
voted funds considered here)
183.4 195
Under Head 310 04 04 Donor Assisted Projects of the
Mahaweli Authority implemented under the
M/Agriculture, Irrigation & Mahaweli Dev. In 2006
roads totaling 30 kms is being built in Udawalawe
Left Bank project estimated cost Rs 150 mn.
2,638 10 160
Rehabilitation of Road Network under Department of
Wild Life Conservation Head 863 58 01 Rs 7.5 mn in
2005 and allocated Rs 6 mn plus Rs 4.5 mn in 2006
7.5 6.7 11.5
Access roads to fisheries communities under Projects
of the M/Fisheries and Aquatic Resources Head 520
41 03 under Dheewara Gammana Program and
Project for Completion of Infrastructure Facilities for
265.9 25% 50 12
22
Source of Funding
Nature of Expenditure Total
Allocation
of Vote
2005
Actual
Expenditu
re on
Roads
2005
% Spent
on Roads
Total
Allocation
of Vote
2006
Estimated
Allocation
for Roads
2006
Fishing Villages
Head 720 52 01 Decentralized budget for all MPs at
Rs 5 mn per year for 225 MPs.
1,125.0 25% 281.2 281.2
Batticaloa Development & Rehabilitation Project
administered by the M/Infrastructure Development &
Fisheries Housing
145.6 50% 118.9 55
Estimate of road expenditure under ‘Rehabilitation
and Improvement of Capital Assets’ of other relevant
ministries such as
• M/Urban Development & Water Supply
• M/Housing & Construction
• M/Enterprise Dev. & Investment Promotion
• M/Plantation Industries
• M/Agricultural Development
• M/Industrial Development
• M/Irrigation
• M/Agrarian Services & Farm Communities
• M/Environment
100
Sub Total 814.7
Funds Allocated to RDA, spent on maintenance and
reconstruction of rural roads under vote heading such as
‘Emergency Road repairs’ etc19
Maintenance20
(Head 300 50 02) 130.0 300.0
Rehabilitation and improvements of existing assets
(rural roads) 21
500.0 1000.0
Sub Total 1300.0
Provincial Revenue allocated to Roads (channeled through
the Provincial Budget)
Provincial Council Members Decentralized Budget
Allocations approx 488 M/PCs at average of Rs 1.5
mn each
488 25% 183.0
19Refer Table 4: Spending on National Roads 20
An estimated Rs 150 mn has been spent by the RDA for maintenance spending on rural roads in 2005, with Rs 300 mn allocated from the Road Fund for 2006. 21
An estimated Rs 500 mn assumed to be spent for construction work carried out on rural roads by the RDA in 2005, with an estimate of Rs 1,000 mn for 2006.
23
Source of Funding
Nature of Expenditure Total
Allocation
of Vote
2005
Actual
Expenditu
re on
Roads
2005
% Spent
on Roads
Total
Allocation
of Vote
2006
Estimated
Allocation
for Roads
2006
Other allocations (e.g. Chief Minister’s Fund) 100.0
Sub Total 283.0
Pradeshiya Sabha funds allocated for roads (channeled
through the PS Budget)
Balance 20% of salaries 14.9
Contract staff, other recurrent expenditure and
maintenance costs average of Rs 8,000/- per km for
77,800 kms in the 270 Pradeshiya Sabhas.
622.4
Sub Total 637.3
TOTAL 7,907.6
24
This includes, Rs 281.3 million estimated to be spent on roads by representatives at both the
national and provincial levels of government through the decentralized budgets to be spent in
their constituencies. A significant share (estimated at 25%) of the Rs 5 million given to each
MP and less amounts (varying by province) given to each MPC, is also known to be spent on
rural roads, bridges and road drainage. However, this situation prevails almost exclusively
only in rural areas. In contrast, urban areas do not receive such funds, other than what is
allocated through the respective council budgets.
While Provincial Councils and Pradeshiya Sabhas are aware of such spending, the degree of
involvement in such work or even agreement varies from place to place. In some cases, such
spending is on the invitation of the relevant Pradeshiya Sabha. On the other hand, those
having the discretionary power over the use of such funds appear to decide and some times
even complete the work without any concurrence of the legal owner/manager of the road
which is the Pradeshiya Sabha. As a consequence different roads are repaired to different
standards. Moreover, after repair the Pradeshiya Sabhas are expected to maintain them, even
though no specific allocations are provided for this purpose. Over riding the legal powers of
local authorities is rarely questioned as the funds are considered to be used for a public project
and it is perceived that questioning such an intervention would be unpopular and a potential
political risk.
Total Public Expenditure on all Roads
The total budgetary allocations made for roads for the year 2006 classified by the types of
roads, is given in Table 10. This shows that all public sources which includes both capital and
recurrent expenditure allocations for the year 2006 are Rs 59,484 million about 13.5% higher
than the amount reported by the NBD. As can be seen the largest degree of under-reporting is
from the urban sector, where only around 1/5th of the total public expenditure is recorded by
the Treasury as much of it goes directly from Municipal and Urban Council sources.
Similarly, rural roads are under reported by 2/3rd and provincial roads by 22.9%.
Table 10: Total Public Expenditure on Roads and its Analysis (2006 Allocations)- Rs
billion22
Total
Allocation as
per NBD
records
(1)
Percentage
of Allocation
as per NBD
records
(2)
Total
estimated
allocation
(all sources)
(3)
Percentage of
estimated
allocation
(all sources)
(4)
% of Under
reporting
{(3)- (1)}/(1)
National 39,660.3 75.9% 39,660.3 66.7% 0%
Provincial 7,436.8 14.2% 9,140.2 15.4% 22.9%
Urban 430 0.8% 2,776.2 4.6% 545.0%
Rural 4,750 9.1 7,907.6 13.3% 66.5%
TOTAL 52,278 100% 59,484 100% 13.7%
22 Source: Computed from Tables 5 to 9.
25
Trends in Public Expenditure on Roads
The trend in expenditure (2003-5), allocations for 2006 and projections (2007-8) tabulated
from computations by NBD and adjusted for estimates given in Table 10 for expenditure not
accounted for by NBD (Appendix II) is given in Table 11. The table shows the rapid increase
in investment in the road sector where the investment ratio has doubled within 2 years, from
0.7 % of GDP in year 2003 to 1.4% by 2005, with further increases of up to 2.47 %
anticipated by 2007. However, the expenditures are projected to fall after this due to
completion of funding for tsunami projects. This is also illustrated by Figure 1.
Figure 1: Trends in Public Expenditure on Roads (2003-2008)
This clearly reveals the governments’ pursuit of the objective of making investing in roads a
high priority. It also underlines the need to increase the capacity in the road sector to handle
the increase work loads that will be forth coming and to improve the benefits from such
investments which are intended to bring about the desired economic, regional and social
benefits.
However, such intentions can only bear fruit if the sector can utilize the allocated funds
efficiently and effectively. Therefore these are two issues which will be examined in Sections
3.3 and 3.4. Statistically, Table 11 indicates a growth in expenditure of 65% from 2003 to
2004, which translates to an average annual growth of 30%. As such the potential for growth
from 2005 expenditure levels should be at least this range. This means that actual expenditure
in 2006 is likely to be around Rs 45 billion at a utilization rate of 75%, (consistent with past
performance). It will therefore be only in 2008 that spending could actually reach the desired
level of spending of around Rs 60 billion in 2006 prices. It is therefore necessary to have
capacity enhancement programs in place as quickly as possible.
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2003 2004 2005 2006 2007 2008
Ru
pe
es.
(Mn
)
M/Highways Provincial Roads (PSDG & Foreign funded projects)
Urban & Rural Roads (under all heads in PSDG) Tsunami & Conflict Area (projects under different ministries)
Expenditure Allocation Projections
26
Table 11: Trends in Public Expenditure on Roads (2003-2008)- Rs million23
3.2 Sources of Funding for Roads and Budgetary Processes
Road User Charges
It is of direct interest in budgetary preparation to determine the issue of road user charges or
the revenue that is collected from the road users. The collections for 2003 have been tabulated
in Table 12 taken from the Road Sector Master Plan.
Table 12: Road User Charges: 2003 (Million Rupees25
)
Central
Government
Provincial
Government
Local
Government
Total
Registration & Transfer of Vehicles 620 620
Annual Licensing of Vehicles 905 905
Duty & VAT on Petroleum Products 22,989 22,989
Vehicle Import Taxes 24,331 24,331
Duty & Taxes on Spare part imports 2,555 2,555
Provincial Tax on Petroleum
Products
778 778
TOTAL 50,495 1,683 Nil 52,178
Some of these revenues are used for the running of services such as the Department of Motor
Vehicles, Traffic Police, Traffic Courts, health care for accident victims etc. These costs have
not been computed accurately in recent years. Based on estimates made in 199926, this cost
would be around Rs 12 billion for the 2003. Moreover, the actual spending on road sector by
23
Source: Budget estimates and summary prepared by National Budget Department 24
Other sources refer to all other expenditures over and above what is recorded by the NBD as spent on
roads and given in Table 4 as well as Appendix II. Details of these sources can be obtained from Tables
5 to 9. 25
Source: Computed from Road Sector Master Plan, Final Report, December 2005 26 Assessment of Investment in Transport Sector Projects, 1999, Kumarage A.S. Ed Storm, et al.
Expenditure Allocation Projections
2001 2002 2003 2004 2005 2006 2007 2008
M/Highways 10,442.0 8,066.0 9,296.0 12,255.0 19,206.7 28,184.0 35,945.9 39,909.5
Provincial Roads (PSDG & Foreign
funded projects)
749.5 494.1 1,021.0 1,968.0 4,702.0 6,329.0 6,385.0 5,807.0
Urban & Rural Roads (under all
heads in PSDG)
80.2 59.9 285.0 503.0 1,180.0 4,207.0 4,834.0 4,854.0
Tsunami & Conflict Area (projects
under different ministries)
Nil Nil 102.0 2,204.0 3,662.0 13,704.0 17,644.0 8,853.0
Sub Total 11,271.7 8,619.6 10,704.0 16,930.0 28,750.7 52,424.0 64,808.9 59,423.5
% of GDP 1.33 0.98 0.60 0.81 1.19 1.92 2.10 1.72
Spending from other sources (add
approx 13.5%)24
1,521.6 1,163.6 1,445.0 2,285.6 3,881.3 7,077.2 8,749.2 8,022.2
TOTAL ESTIMATED 12,793.4 9,783.2 12,141.0 19,215.6 32,632.0 59,501.2 73,558.1 67,445.7
% of GDP 1.51 1.11 0.70 0.96 1.40 2.26 2.47 2.02
27
the Treasury in 2003 was given as Rs 12,318 million in Table 8. Thus it appears from
estimates in the Road Sector Master Plan, that the Treasury made a net surplus on Road User
Charges of approximately Rs 26 billion in 2003. The Road Sector Master Plan does not
provide details computations of the manner in which these figures were arrived at. Hence, this
estimate may not be entirely reliable. However, it seems apparent that there was as substantial
surplus in previous years.
In the present context of higher fuel prices and governments having to subsidize some portion
of the fuel imports, it is possible that the Road User Charges have reduced. However on the
other hand, vehicle import duties increased in 2005 and the vehicle fleet and the registration
of new vehicles have also increased compared to 2003. Hence, this is possibly an urgent area
for a detailed study to determine if indeed the Road User Charges are been utilized for
improved road services.
Foreign Funding
The foreign funding for road projects varies between the different tiers. Prior to 2003, only
the national level roads and some urban roads received foreign funding. As shown in Table
13, it is clear that at present, both the provincial roads and rural roads receive 38.9% and
25.3% percent of their respective total funding in terms of foreign funds. However, it should
be noted that there is presently no aid/loan pipeline for urban roads, which have at present, the
lowest level of foreign fund allocations.
Table 13: Total Public Expenditure on Roads and its Analysis (2006 Allocations)- Rs
million27
Type of Road
Total
Allocation
Amount of
Foreign
Funding
Foreign
Funding as
% of Total
National Roads 39,660.0 25,669.5 62.2%
Provincial Roads 9,140.2 3,475.0 38.9%
Urban Roads 2,776.2 Nil Nil
Rural Roads 7.097.6 2,000.0* 25.3%
TOTAL 59,484.0 31,144.5 52.4%
Treasury Funding
The Treasury funding in terms of central government budgetary allocations for each level of
road agency is shown in Table 14. This shows that the Treasury provides 92.8% of the overall
allocations for all roads. At the level of the national roads, this is 100%. The lowest level of
Treasury funding is for urban roads at 31.6%. On the other hand, only 81.2% of these
allocations are made direct to the agency managing the roads. Even though urban roads get
the lowest percentage of their requirements from the Treasury, all of Treasury funds are
received directly to the particular council. On the other hand even though rural roads get
27 Source: Tables 5 to 9 and Appendix II
28
nearly 82.5% of their requirements from the Treasury, the agencies managing the rural roads
get only 21.5% of this. This shows that both urban roads as well as rural roads have problems
albeit different to each other.
Table 14: Treasury Allocations on Roads by Agency Level (2006 Allocations)- Rs
million28
Type of Road
Total
Allocation
from all
sources
Treasury
Allocation
made to road
network
% of Total
Treasury
allocations to
agency managing
road network
% of
Treasury
allocation
to agency
National Roads 39,660.0 39,660.0 100.0% 34,831.0 87.8%
Provincial Roads 9,140.2 8,926.0 97.7% 8,031.8 90.0%
Urban Roads 2,776.2 876.2 31.6% 876.2 100.0%
Rural Roads 7,907.6 6,531.4 82.5% 1,722.2 21.8%
TOTAL 59,484.0 55,993.6 94.1% 45,461.2 76.4%
Provincial Council Funding
Provincial Councils are entitled to receive motor vehicle revenue license fees and a Provincial
petroleum taxes (termed Traffic Fees in the Budget estimates). The estimated allocations for
07 provinces, excluding the North East, amounts to Rs 2,130 million for the year 2006.
However as shown in Tables 6 and 9, the estimated allocations using Provincial Council
Revenues, is Rs 211.6 for provincial roads and Rs 283.0 million for rural roads, making up Rs
494.6 million which is only around 23% of the estimated ‘Traffic fees’ estimated for 2006.
Hence, it can be held that provincial councils are presently not investing an adequate share of
their own revenues on roads from the use of which they derive this revenue.
But in reality, these revenues are deducted by the Treasury from the block grant when it is
given to each provincial council Therefore in effect; this is added revenue to the central
government, even though it is collected for the province.
Local Authority Funding
Unlike Central Government or Provincial Government, local authorities are not entitled to
collect any revenue for the use of their roads. Therefore they are entirely dependent on either
general taxes or allocations from both central and provincial governments. Most local
authorities both rural and urban were found to be spending around 20% of their revenues on
roads. The total estimated expenditure on road by urban local authorities was found to be Rs
1,900 million, while the rural local authorities were spending Rs.637.3 million.
In summary it seems that the central government and provincial governments which is
entitled to collect road user charges (but the proceeds of which are deducted from the block
28
Source: Tables 5 to 9 and Appendix II
29
grant) invest only part of such collections on the road network, whereas local authorities who
do not collect any funds are investing on roads.
3.3 Efficiency of Utilizing Funds Allocated
One of the measures of ascertaining the capacity of the road sector to utilize such a rapid
increase in funding levels is the historical utilization of such funds at the different levels of
the road network. The allocations and spending patterns of the two key funding sources for
the period 2001 to 2005 have been analyzed to determine the utilization of funding provided.
Funds Spent on National Roads
According to the NBD analysis, the RDAs overall utilization of funds is much higher at
83.1% of recurrent allocations and 69.8% for capital allocations provided for the year 2005.
The period between 2001 and 2005 saw this utilization range between a minimum of 76% and
a maximum of 92% for recurrent expenditure and a five year average of 82%. In the case of
capital expenditure has ranging between 70% and 91% during this same period, with a five
year average of 75%.
This analysis is presented in summary form in Table 15. The analysis by funding source
shows that foreign funded projects under loan or aid for the year 2005 have the lowest
utilization at 61.2%. However, the domestically funded components of the same projects have
a higher utilization at 84.2%. This is reasoned out as the costs for the physical operation of
Project Management Units (PMUs) in terms of staffing continuing even when other spending
has stopped due to problems of acquisition or mobilization delays. Since the required land
acquisitions for these projects are also included under this category, under assessment of
acquisition costs is also stated as a possible reason.
Table 15: Utilization of RDA Funds for 200529
Final Revised
Allocation
(Rs mn)
Actual
Expenditure
(Rs mn)
Utilization
%
By Expenditure Category Recurrent 708 588.1 83.1%
Capital 19,936.8 `13,912.0 69.8%
By Funding Source Domestic Funds 4,753.0 3,581.2 75.3%
Foreign Aid Loans & Grants 10,719.0 6,561.4 61.2%
Foreign Loan related Domestic
component
5,172.8 4,357.5 84.2%
TOTAL 20,644.8 14,500.1 70.2%
The RDA has computed the funds accounted by them and the Ministry of Highway for the
years 2001-2005 for the National Roads for some of the basic expenditure categories viz; (a)
maintenance, (b) improvements & rehabilitations (c) acquisition of new assets, (d) land and
29 Source: National Budget Department
30
land improvements and (e) miscellaneous. . This excludes projects expenses incurred by the
office of the Ministry of Highways which is the reasons for the slight variance between the
total values reported between Table 15 which of excluding the ministry office and Table 16
which includes it.
Table 16: Allocations & Utilization of Funds for National Roads (Ministry of
Highways)30
2001 2002 2003 2004 2005
Maintenance Allocated (Rs mn) 337 908 1,625 1,212 1,900
Expenditure(Rs mn) 1,530 967 1,700 1,211 1,799
% Utilized 454 106 105 100 95
Improvements &
Rehabilitation
Allocated(Rs mn) 6,422 4,482 2,874 6,440 7,489
Expenditure (Rs mn) 8,445 5,095 4,867 4,942 6,606
% Utilized 132 114 169 77 88
New
Constructions
Allocated (Rs mn) 7,051 3,031 4,179 3,023 5,569
Expenditure (Rs mn) 119 2,018 3,092 1,833 2,048
% Utilized 2 67 74 61 37
Land &Land
Improvement
Allocated (Rs mn) 0 1,000 200 2,951 3,445
Expenditure (Rs mn)
% Utilized
Miscellaneous Allocated (Rs mn) 555 252 1,199 3,667 2,742
Expenditure (Rs mn)
% Utilized
Total Allocated (Rs mn) 14,365 9,613 10,077 17,293 21,145
Expenditure (Rs mn) 10,442 8,066 9,139 12,279 14,390
% Utilized 73 84 91 71 68
.This is also illustrated in Figure 2, where the following observations can be made:
• The maintenance funds have the highest utilization exceeding by far the allocations
provided. This indicates the back log rehabilitation and need for correspondingly
higher levels of maintenance funding.
• The utilization has been lowest for new constructions ranging from a low of 2% in
2001 (mostly due to the non mobilization of the Katunayake Expressway and the
Southern Expressway) up to a maximum of 74% in 2003.
• It is also noted that for the national network, the funds spent for new construction
since 2002 have exceeded those spent for maintenance by an average of
approximately 70%.
It must however be noted that the definition of maintenance and rehabilitations have not been
consistently followed in fund allocations. Thus a problem of project labeling and investment
identification exists particularly at the national level.
30 Source: Planning Division, RDA
31
Figure 2: Utilization of Funds for National Roads (2001-2005)
Provincial Roads
20012002
20032004
20052006
Expendiure
Allocation-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Ru
pe
es M
illio
n
Amount Allocated & Spent for Rehabilitation of National Roads in Sri
Lanka (2001-2006)
Source : RDA
20012002
20032004
20052006
Expendiure
Allocation-
500
1,000
1,500
2,000
2,500
3,000
3,500
Ru
pee
s M
illio
n
Amount Allocated & Spent for Maintenance of National Roads in Sri Lanka
(2001-2006)
Source : RDA
20012002
20032004
20052006
Expendiure
Allocation-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Ru
pe
es M
illio
n
Amount Allocated & Spent on new constructions of National Roads in Sri
Lanka (2001-2006)
Source : RDA
32
As discussed earlier, there are many sources of spending on provincial roads. Utilization rates
for all of these are difficult to obtain and even when available not entirely reliable. Table 17
gives the utilization of the Province Specific Development Grant (PSDG) for provincial
roads. This shows that utilization is around 78% in recent years.
Table 17: Utilization Rates for funds made available for Provincial Roads31
2000 2001 2002 2003 2004 2005
Allocations
under
PSDG
Allocated
(Rs mn) 1485 1405 1865 690 905 1650
Expenditure
(Rs mn) 768 749.5 494.1 539.3 N/A 1286.3
%
Utilized 51.7 53.3 26.5 78.2 78.0
Local Authority Roads
Both Provincial Councils that were studied have experienced that of the numerous sources of
funding made available at the local authority level, funding that is direct and personally
supervised such as the Decentralized Budgets have the highest utilization rates. However,
they may lack in effectiveness or perhaps even in transparency. The utilization of funds
allocated to local authorities through the PSDG is tabulated in Table 18. This clearly shows
that such funds are poorly utilized.
Table 18: Utilization Rates for funds made available for Local Authority Roads32
2002 2003 2004 2005 2006
Allocations
under PSDG
Allocated (Rs mn) 470 207 245 355 1430
Expenditure (Rs mn) 59.9 15.1 N/A 193.5
%
Utilized 12.7 7.3 54.5
3.4 Sustainability of Road Expenditure
Given that adequate funds are available and that projects are properly planned to achieve
optimum returns where projects are well implemented and funds fully utilized, there would
still be a question of sustainability of these infrastructure in the future. In other words, can
adequate funds be provided to ensure that these roads remain at an acceptable quality and able
to provide the outcomes that were intended of them? This is particularly pertinent in Sri
Lanka where the bulk of the road work is still awaiting rehabilitation and as such, increasing
level of maintenance funds will need to be provided in parallel with investments to bring the
road network to maintainable standard. Therefore, any rehabilitation has to be supported by a
source of sustained funding to keep it in optimum condition.
31
Source: Finance Commission 32 ibid
33
Experience has shown that when the urgency for rehabilitation becomes apparent it is the
maintenance funds that are often reduced to accommodate such spending. Thus maintenance
has always been under provided. This of course leads to shorter life spans of even the new
roads as well as the rehabilitated roads and in most cases, the desired socioeconomic benefits
never fully materialize in the long-term. As such factories open and close, employment
increases and then falls away, even social services are abandoned due to deteriorating access.
However with the proliferation of the number of ministries and votes available for spending
on roads, most of this spending appears to be poorly planned, ad hoc and with little or no
targeted benefits. It is most likely that lead projects under the ‘Mahinda Chinthanaya’ would
also suffer a similar fate unless the question of continuity and sustainability can be addressed
satisfactorily. There are a number of issues that need to be highlighted under this aspect:
a) According to the present development strategy, road development occurs under
several ministries handling community development projects. These ministries
usually have no technical capacity to oversee such work. Moreover, once the project
is completed there are no funds made available to the local authority to maintain them
in that condition. Hence roads in the long-term will not be able to sustain the returns.
Therefore, it would be necessary to have an arrangement where the local authorities
are involved in every such project from the beginning. As such a condition may be
imposed that the local authority should be asked to design, construct and maintain
such roads. It may be better for such work to be awarded on contract basis, where the
contractor also maintains the roads for five years. This period should be adequate for
the local authority to obtain increased funding for maintenance under the road fund.
b) Foreign funded road projects carried out at the provincial and local authority level are
also presently suffering from this same problem. For example, the urban road &
bridge development projects implemented under the UDLIHP program are also not
been maintained as adequate resources are not available with the urban and municipal
councils. A similar situation exists on provincial roads where maintenance contracts
which were signed at time of contract have been terminated due to various problems,
especially after the intense flood damages that many of the rehabilitated roads
suffered in 2003.
c) GoSL has made progress recently by implementing an interim road maintenance trust
fund (known as the RMTF) so that continuous and adequate flow of funds is available
and to avoid funds required for maintenance competing with the more popular
spending on new roads. The Road Maintenance Trust Fund is now operative, but
presently is confined only for national roads. This year Rs 3,010 million has been
allocated. The Trust Fund intends to set up a process of disbursement and monitoring
of outcomes for disbursement made from the Fund. The efficiency of labour inputs
may also need to be studied with excess labor either offered a VRS or found alternate
work on projects rather than in maintenance work alone. This may need to be
extended to cover all roads. Provincial and local authority road could be drawn in on
the basis of setting up a fund for all future road rehabilitation and improvements.
34
3.5 Institutional Arrangements in Road Sector
As discussed in Chapter 2, roads services across the country are delivered by all three tiers of
government. However the spending for roads is made through a number of different sources.
These were identified in Section 3.1.
National Roads
The RDA is the agency charged with managing the 11,760 kms of national highways. The
RDA which comes under the Ministry of Highways. The funds for the RDA are allocated
through the Treasury. The recurrent funds are based on staffing levels and other operational
costs, while the capital allocations are based on project proposals that are submitted to the
Treasury and included in the budget. These include projects that are funded entirely through
domestic funds as well as projects which are funded by foreign donors with counter part
funding. Most projects are identified by consultants provide by the donor agencies. In the case
of domestically funded projects there is no particular pipeline for projects. Projects are chosen
based on prevailing political expediencies. Large scale domestically funded projects however
are usually mentioned in the budget speech thus officially declaring such projects as policy
decisions.
Recent practice in the RDA has been to create a Project Monitoring Unit (PMU) for all
foreign funded projects. Such projects are usually staffed by RDA officers who are seconded
to such projects at a higher salary. There are presently no incentive schemes offered for
project completion. There is monitoring of the utilization of funds by the Ministry of Project
Implementation and the Ministry of Transport through quarterly reviews. However this
process only investigates bottlenecks in key projects and does not usually serve as a process
for monitoring all projects and their processes.
The RDA has in recent years obtained foreign assistance in strengthening its planning
functions. As such some software for Road Maintenance Expenditure Control (RMEC) and
HDM IV are now available for costing and prioritization of maintenance work. It is also
acquiring detailed road inventory and road condition data. The RDA has the technical
manpower to carry out the road works, but would need capacity enhancement in several key
areas including new techniques, project management, planning, road safety, traffic
management etc. Another short coming is that presently a significant portion of its manpower
is utilized in attending to emergency work on non-RDA roads. Other than for maintenance, all
project work is carried out through contractors and their labour.
From 2006, the maintenance funding has been channeled through a Road Maintenance Trust
Fund. This fund is considered an interim arrangement till a fully fledged fund is set up after
observing the effectiveness of having a trust fund. One of the issues facing the fund is the
high component of wages for maintenance. Unless more funds are made available it is
unlikely that there would be adequate funds to purchase material once wages are paid. Such a
fund therefore also runs the risk of becoming an employment generator. However, the
35
Technical Advisory Committee is charged with setting up checks and balances for the funds
issued to the RDA. Moreover, it has been decided to set up a secretariat with technical and
financial assistance to facilitate this work under World Bank funding.
Provincial Roads
The primary source of funding for provincial roads is through allocations made to the
Ministry of Local Government & Provincial Councils and distributed to the provinces through
the Finance Commission. This is in the form of block grants for recurrent expenditure, part of
which is used for the payment of 80% percentage of salaries of all staff at provincial roads
agencies. The balance is usually funded through an administrative levy of between 3 to 6
percent made on all capital projects.
The provincial roads are owned and maintained by the relevant Road Development Authority
of Roads Department of the Provincial Council. Provincial Councils do not have any
Investment Plans. They rely on projects proposals which are usually a list of names with the
length and the total estimated cost as a means of getting funds through the Provincial Budget.
Projects are added on request made by elected representatives. The PCs do not use proper
road inventories or software for prioritization of rehabilitation or costing of road maintenance.
However, at present the larger share of funds for provincial roads are channeled through
several regional and subject specific ministries of the Central Government. These projects
have PMUs, similar to at the RDA. However unlike at the RDA, there is a severe dearth of
technical staff at the provincial councils. Hence, capacity is limited. Moreover even those
available are not adequately trained for functions such as design, planning, etc. The Provincial
Councils have deferred joining the Road Maintenance Trust Fund on the premises that the
present allocation for maintenance is in adequate and if the same quantum of funds were to be
given with more conditions, then joining such would not be advantageous. The provincial
councils do not have large labour forces and carry out most of their work through contractors.
Urban & Rural Roads
At the lowest level of rural local authority roads (i.e: Pradeshiya Sabhas), there are several
sources of funding for roads. The primary source once again is the allocations made to the
Ministry of Local Government & Provincial Councils and distributed to the Provinces, which
are required to pass these on to the Pradeshiya Sabhas through the Provincial Commissioner
of Local Government.
In addition to these funds, the Urban, Municipal Councils and Pradeshiya Sabhas use parts of
their own revenues collected through taxes for road construction & maintenance. Only
allocations made to the Provincial Councils and revenue collected from the local authorities is
considered for the road sector budget. These works are implemented by the relevant authority.
In the case of Pradeshiya Sabhas they usually have a Technical Officer and a few labour for
maintenance works. Larger works are contracted out. They do not have any other plant or
machinery. In the case of urban councils, they have a Works Superintendent and couple of
Technical Officers as well as maintenance staff. They also have fewer equipment. Most
Municipal Councils have one or more engineers and a technical staff. However except for the
36
Colombo Municipal Council, none of them have staff qualified in modern road construction
techniques or have a design office or use any computational aids.
However, these funds are only fraction when compared to numerous other sources of funding
which is channeled directly to rural roads from central government allocations made to other
development oriented ministries. In most of these cases, the implementation of the work is
carried out by external agencies, with the Divisional Secretariat and the District Secretariat
also getting involved to varying degrees of project supervision and implementation. At
present District Secretariats also have technical staff that assist in carrying out these tasks. As
such there are often duplication of work between the Pradeshiya Sabha staff and the
Secretariat staff. While most central government agencies prefer to use the Secretariat and its
staff, the fact remains that such roads belong to the Pradeshiya Sabha and the legal
arrangements are by-passed.
37
4 INTERVENTIONS FOR IMPROVING OUTCOMES OF
SPENDING ON ROAD SECTOR
This chapter will elaborate the strategic intervention that is required to improve the outcomes
of the current level of spending on roads. These include
• Identifying the overall sector investment levels that need to be set for the next decade
or so
• Identifying the allocations to be made for different types of investments required
• Identifying a strategy for improving efficiency of utilization of funds
• Identifying a strategy for capacity enhancement of road sector institutions
4.1 Identify the overall sector Investment Level
The total public expenditure allocated for roads for the year 2006 is estimated at Rs 59.5
billion. This is 2.26 % of GDP. This amount has increased favorably since 2003, when it was
only 0.7%. This is an unprecedented level of funding which if maintained for a decade, would
enable the backlog of un-rehabilitated roads at all levels to be brought up to maintainable
standard.
This is clearly a paradigm shift from previous years, where funds available for hardly
sufficient of the routine and periodic maintenance, which resulted in neglect of maintenance
and rehabilitated resulting in an almost totally deteriorated road network of which less than
5,000 kms (or 5%) has been rehabilitated within the last 10 years.
The objective of maintaining the present level of funding may be interpreted as a commitment
to allocate between 2% to 2.5% of the GDP for road sector, which is the funding level in the
MTEF for 2006 to 2009. This translates to allocating between Rs 55 billion to Rs 65 billion
per year (at 2006 prices).
The development strategy will need an element of urgency so that the road network is
developed as quickly as possible, so that the accumulating rehabilitation and maintenance
back log could be cleared while at the same time ensuring the sustainability in the long-term.
However, the efficiency of utilizing these funds has much room for improvement. Hence, the
ten year period could target increasing this from the 70% at present to at least 90%. This
would also provide for a 20% increase in spending levels or a 20% reduction in allocations,
whatever seems appropriate at that point in time.
An Integrated Investment Plan
38
This increased funding also opens up hitherto closed doors for an integrated approach towards
managing the road network. Up to now since the level of funding was grossly inadequate for
even basic maintenance, the Central Government had no leverage to initiate developmental
activities that could be based on integration of the road networks. The low level of funding
only resulted in crisis-management of the road network at all levels, as described in Section 3.
This was most evident at the rural level with so many agencies spending funds from time to
time desperately trying to keep the rural road network from falling apart. .
But with increased funding one of the strategies would be to provide for additional funding in
a manner that promotes holistic development. This could start with a sector wide allocation
cutting across all three layers of government. The allocations made could be tied in to
motivational programs such as criteria based or matching grants which are even at present
well understood at the provincial and local authority level. However, such programs have to
be well designed and performance indicators to monitor output and outcomes accordingly.
The next section will determine the amounts of funding that each level will require.
Distributional formula based on road length, lane length, traffic volumes, terrain, type of road
surface and for rural roads, the number of households and service establishments served may
be considered in distributing these across the different agencies. Design standards may also be
tied in with this to prevent over designs, the most common of which would be to provide
metalled roads where compacted earth roads or gravel roads are appropriate.
4.2 Identify Allocation Levels by Type of Investment
In order to estimate the overall investment in the road sector, this report identifies the need for
the following capital expenditures:
• Rehabilitation & Improvements to Capital Assets
• New Capital Assets
• Maintenance of Capital Assets
• Institutional Development
Many previous studies have identified expenditure requirements based on developing a
section of the road network identified on priority basis. However, the fact that the
Government has committed Rs 59.5 billion for the road sector has to be considered when
considering the extent of the development. As will be shown in the following sections, this
report will propose an approach of developing the entire road network as a strategic approach
so that the heavy periodic maintenance that is being incurred now due to long over due
rehabilitations can be speedily reduced and correspondingly made available for a systematic
maintenance program.
The total spending (inclusive of capital and recurrent, maintenance, rehabilitation, new roads
etc) at present is distributed across the different types of roads as shown in Table 19. At first
glance this shows an approximately equitable variation in overall funding per km of road at
each level of the road network. However more analysis will be necessary to compute the
39
overall cost per km and compared with international norms. The macro picture if Sri Lanka is
spending too much or too little on roads needs some international comparisons, not only of
costs but also of outputs and the conditions under which spending is incurred. This will be
further examined in Chapter 5 under the formulation of performance indicators.
Table 19: Analysis of Public Expenditure on Roads by Sector (2006 Allocations)- Rs
million33
Type of Road Total
Allocation
Rs Mn
Kms of road Allocation per
km (Rs/km)
National Roads 39,660.0 11,760 kms 3,372,449/=
Provincial Roads 9,140.2 15,743 kms 580,588/=
Urban Roads 2,776.2 5,176 kms 536,360/=
Rural Roads 7,907.6 75,424 kms 104,842/=
TOTAL 59,484.0 108,103 kms
Provision for Rehabilitation: To bring Road Network to Maintainable Standard
One of the long term objectives for a high level of capital investment on a road network is to
rehabilitate the badly deteriorated road network at present to maintainable levels, so that the
present requirements of maintenance would reduce to regular and scheduled maintenance.
This requires the extent of the network to be calculated.
The RDA which has 11,760 kms of road reports the lane length as 18,405 kms as shown in
Table 20. This means an average road width of 1.56 lanes. Since, similar data from provinces
and local authorities are not available; this report assumes an average road width of 1.3 lanes
for provincial roads, with 200 kms of 2 lane urban roads and the balance urban roads and all
rural roads as single lane.
Table 20: Lane kms of National Road Network34
Road
Classification
Width
(range)
Road Length
kms
Lane kms
Single Lane Less than 4metres 2,970 2,970
Intermediate Lane 4 to 5 ½ metres 4,690 7,035
Double Lane 5 ½ 9 metres 3,800 7,600
Multiple Lane Over 9 metres 200 800
TOTAL 18,405
In order to assess the total cost of rehabilitation of the entire network over the next 10 to 15
years, including the roads that have been rehabilitated in the last few years, Table 21 has been
prepared with current rehabilitation costs ascertain from the road agencies. The RDA costs
have been taken from average cost per lane for contracts signed recently, with additions for
33
Source: Tables 1 and 10 34 Source: Planning Division, RDA
40
bridges and other administrative costs. A lane km of national roads with Asphalt Surfacing or
DBST has been estimated at Rs 15 million. Similar computations have been made for the
provincial and urban roads to be finished with DBST or metal and tarring and rural roads a
mixture of metal and tarring, gravel with sections in concrete where slopes are steep or
passing through poor ground conditions.
As shown below, the total cost of this exercise is Rs 466.2 billion. It should however be noted
that these costs are approximate, and indicative only. Moreover, each type of road will have a
different life cycle and the impact of that variation on costs has been ignored in this
calculation.
The Road Sector Master Plan projections for the 10 years i.e. 2006 to 2015 has a higher level
investment of Rs 47 billion per year and a constrained investment plan of Rs 37 billion per
year, both of which have been exceed by the provisions made available in the year 2006 itself.
Moreover this is only to develop selected sections of the road network as opposed to the entire
network.
Table 21: Rehabilitation Costs for Road Network35
Provision for New Roads: To provide for increased growth in traffic
Increase in vehicle registrations following increasing personal incomes leads to higher vehicle
use. The TransPlan traffic forecasting model shows that traffic growth in Sri Lanka for a 5%
growth rate in GDP, would translate to traffic flow growths of around 6 to 7 percent per
annum, in a scenario when quality of public transport deteriorates. But the increase in road
capacity is only 3% p.a. since the growth is mostly in the fleet of smaller vehicles, which
means that the average vehicle size (PCU) reduces together with the average vehicle
utilization (AVU) in annual kms per vehicle. With vehicle ownership increasing at faster rates
in rural areas than in urban areas, this means that the entire road network at all levels would
be constrained every year. Otherwise, traffic congestion which is estimated at Rs 3236
billion
will increase further.
35
Source: Table 1; Planning Division RDA, Commissioner General of Local Government and cost
estimates from interviews conducted by University of Moratuwa and evaluation of recent projects. 36 Estimated by TransPlan, University of Moratuwa, 2005
Type of Road Road
Length
kms
Lane
Length
Lane kms
Cost of Reconstruction
Rs per km
Total Value
Rs bn
National Roads 11,760 18,405 Rs 15 mn per lane km (DBST or AC) Rs 276.1 bn
Provincial Roads 15,743 20,466 Rs 4 mn per lane km (DBST or metalling) Rs 81.9 bn
Urban Roads 200 400 Rs 20 mn per lane km (DBST or AC) Rs 8.0 bn
4,976 4,917 Rs 3 mn per km (metalling or DBST) Rs 14.8 bn
Rural Roads 20,000 20,000 Rs 1.5 mn per km (metalling and concrete
sections)
Rs 30.0 bn
55,424 55,424 Rs 1 mn per km (gravel with concrete
sections)
Rs 55.4 bn
TOTAL 108,103 108,103 Rs 466.2 bn
41
Therefore if one assumes that half of this requirement can be achieved through increased
capacity coming from the rehabilitation of roads-due to better surfaces, then the other half has
to come from entirely new roads or widening (e.g. Baseline Road). This means we need to
provide for a minimum 1 ½ % growth in lane capacity of the road network per annum. This
is consistent with the growth in lane kms over the last two decades.
If the asset value of the road network can be estimated at Rs 466.2 billion, then a 1 ½ %
growth p.a., roughly translates to a requirement of around Rs 7 billion per year for new roads.
This when compared to the spending of approximately Rs 2 to 3 billion for new roads over
the last 4 years, is reasonable, given the fact that utilization of funds was very low, with
many new road programs been substantially delayed for different reasons.
Provision for Maintenance: To provide for sustainability of the road network
Presently, the road network is badly deteriorated due to delayed rehabilitation for many
decades. Some roads have not been improved since their original construction 50 years or
more. This means that the network presently requires high maintenance inputs. It is
commonly observed that the life cycle of an application of sand sealing or DBST or even an
asphalt surfacing lasts much less on such roads where the bases have not been properly
reconstructed. In an unpublished study of the cost between routinely maintained roads and
roads under ‘stop-gap’ maintenance strategy in Uva Province, the overall life cycle cost was
found to be 19 times higher when compared with the cost of maintaining under routine
schedules37
.
The objective of higher level of investment on roads is to reduce this spending so that roads
remain within their maintainable life span, and maintenance costs both routine and periodic
would be minimal. An estimate of the total annualized maintenance cost has been given in
Table 22. It is assumed that the annualized cost is taken as 2% p.a. of replacement value for
higher end roads such as DBST and Asphalt Surfacing and 5% p.a. for others. This follows
norms in asset management techniques38
. This means that the annual maintenance cost would
be around Rs 12.3 billion for a fully rehabilitated road network.
This amount also tallies with the estimates in the Road Sector Master Plan of Rs 11.1 billion
for maintenance, which is made up of Rs 4.5 billion for national roads, Rs 2.9 billion for
provincial roads and Rs 3.7 billion for local authority roads.
37
Amerasekera, RM, unpublished paper, 2002. 38
Planning Division of RDA and other Engineering units such as in SPRDA, Uva Roads Department,
CMC. More work in this regards is intended in Parts III and IV under performance indicators.
42
Table 22: Maintenance Costs of Road Network after Rehabilitation
The RDA presently uses the Road Maintenance Expenditure Program (RMEC) which is an
Exel based program spreadsheet with varying traffic levels and terrain and estimates cost for
different maintenance activities such as pothole patching, edge metalling etc. It does not cover
costs of maintenance of bridges, culverts, lighting, intersection controls, traffic signs,
markings & signal etc- other than cleaning and repainting. This year the RMEC program was
used to allocate the Rs 3 billion for the maintenance of RDA roads. The RTF at its very first
meeting wanted the RDA to update this program as the allocations appeared to be
inconsistent. For example, the program only categorizes traffic levels below 5,000 vehicles
ADT.
According to the program, the maintenance requirement for 2006 is
- Extensive Patching Rs 3,336 million
- Edge Metalling Rs 320 million
- Surface Profile Correction Rs 1,603 million
- Sand sealing Rs 819 million
No assessments have been made for other costs referred to earlier. These items alone total up
to Rs 6.1 billion, whereas only Rs 3 billion has been provided through the RTF for 2006.
This means the RDA is allocating around Rs 163,000 per lane km for a sub standard level of
maintenance. As per Table 21, 2% cost of an asset value of Rs 15 million works out to Rs
300,000 per lane km year. Therefore given that the present level of maintenance does not
include a total maintenance package, but only selected items for different roads, the present
level of maintenance requirement may be considered even as high as Rs 7 or 8 billion, which
is around 1/3rd more than what is provided in Table 21.
For provincial roads, even at present the suggested amount of Rs 1.6 billion is exceeded, since
the expenditure apart from the foreign funded projects is around Rs 3.6 billion (Table 6)
39
A 2% annual discounted rate has been used following World Bank sponsored research and published
in Road Maintenance Management, Robinson, Martinson and Snaith, p9.
Type of Road Road Length
kms
Total Value
Rs bn
Rate for
Regular & Periodic
Maintenance
(for 10 to 12 year
reconstruction cycle)
Total Annual
Requirement
Rs Bn
National Roads 11,760 Rs 276.1 bn @ 2.0 % p.a39
Rs 5.5 bn
Provincial Roads 15,743 Rs 81.9 bn @ 2.0 % p.a Rs 1.6 bn
Urban Roads 200 Rs 8.0 bn @ 2.0% p.a. Rs 0.2 bn
4,976 Rs 14.8 bn @ 5.0 % p.a. Rs 0.7 bn
Rural Roads 20,000 Rs 30.0 bn @ 5.0% p.a. Rs 1.5 bn
55,424 Rs 55.4 bn @ 5.0% p.a. Rs 2.8 bn
TOTAL 108,103 Rs 466.2 bn Rs 12.3 bn
43
almost all of which is being spent on maintenance and back log maintenance work. As for
urban roads, the Colombo Municipality alone is spending Rs 150 million per year on
maintenance and hence the current spending on maintenance of urban roads may be estimated
from Table 7 to be around Rs 2,000 million far in excess of .Rs 900 million provided in Table
21 for a maintainable network.
In the case of rural roads also, apart from the foreign funded rehabilitation projects amounting
to around Rs 2.1 billion (Table 8), the balance Rs 6 billion seem to be spent largely on
maintenance. This is almost twice as much as what is provided in Table 21.
Hence it is evident that Sri Lanka is currently spending only a fraction of the cost required for
maintenance of its road network in its present condition. The present level of maintenance
required at least for the national roads seems around 1/3rd higher than what has been
calculated in Table 21 which is the amounts needed to maintain the network once it is brought
to maintainable standard.
Overall, there seems to be expenditure around Rs 14 to 15 billion spent on all roads for the
present level of sub standard maintenance, which is higher than the prescribed level of total
maintenance spending once roads are in maintainable standard.
In keeping with the Governments’ policy to move towards a Road Fund, it is recommended to
expand the existing fund to cover all tiers of roads and to increase contributions to the fund
gradually to the required level by increasing around Rs 1 billion per year from the present 3
billion for the next 10 years.
The present maintenance allocation may be considered at around Rs 14 to 15 billion per
annum when considering spending on the entire network. However, presently in addition to
delayed maintenance even what is done is incomplete. For example, pedestrian facilities,
traffic signs and markings, street lighting are all maintenance expenditures that are not
incurred as much as they should be. As a result, congestion costs and accident cost increase.
As such, a doubling or trebling of this expenditure cannot be considered as being excessive.
However, this cannot be done when the road network is in poor condition. Therefore the
network should be rehabilitated urgently in order to reduce the huge burden on maintenance.
It is the only way in which we can prevent roads that are rehabilitated from deteriorating
quickly.
Another aspect is the performance of the road sector, in terms of speed of travel time and
safety. The TransPlan road database on the national road network shows that less than 2% of
the network has an IRI of less than 2 m/km. Over 50% of the network has an IRI of more than
5 m/km- which is considered most unsatisfactory. With the national network in such poor
standard the provincial and local authority roads are bound to have worse indicators. As such,
this case again points that the present level of maintenance effort falls far too short of the
desired outcomes from the road network.
44
It is assumed that the Fund would formulate the maintenance norms and norms for
input/output ratios, man to material ratios and other indices to ensure optimum utilization of
the contributions to the Fund. The fund is also required to setup performance indicators of
outcomes of maintenance spending. Moreover the must be clearly set out definitions on what
exactly maintenance activities are. Or else projects for rehabilitation and improvement may
also be funded through the road fund.
Incorporating into the Medium Term Budget Framework
Given that the present level of funding (i.e. between 2% and 2.5%) of GDP can be
maintained, then the allocations could be provided as follows
Table 23: Sector Allocations at different Investment Levels
Investment Level
At 2% of GDP At 2.5% of GDP At 3% of GDP
Maintenance Rs 12.3 billion Rs 12.3 billion Rs 12.3 billion
New Roads Rs 7.0 billion Rs 7.0 billion Rs 7.0 billion
Administration & other
support costs
Rs 0.7 billion Rs 0.7 billion Rs 0.7 billion
Rehabilitation Cost
(years to complete
rehabilitation)
Rs 35.0 billion
(14 years)
Rs 40.0 billion
(12 years)
Rs 45.0 billion
(10 years)
Rs 55.0 billion Rs 60.0 billion Rs 65.0 billion
Table 23 clearly shows that a realistic opportunity exists to bring all roads up to a
maintainable level within a foreseeable period, given that the present level of spending can be
maintained. This is achievable between 10 to 14 years for a spending level varying from 2 %
of GDP to 3% of GDP for the road sector. This maybe achieved in four consecutive 3-year
budgetary periods. Such programs have been successful in countries such as India and Japan
which have practiced 5-Year Development Plans The first program can be from 2006 to end
2009 (to coincide with the current MTBF and on going work) where it might be targeted to
develop approximately 1/5th of the most important roads at each level of the road network and
within the respective authorities. This would mean a total extent of over 20,000 kms
rehabilitated over 3 years. It should be noted that during this period a higher level of routine
maintenance may have to be incurred in keeping the road system motorable. A detailed cash-
flow program will have to be worked out in order to give effect to this approach.
This type of staged approach for the rehabilitation of roads would have a number of other
advantages as well:
• Provide time for the gradual capacity building, technical up grade, especially
of the provincial and local authorities to plan, design, supervise and monitor
road works.
• To attract by providing greater confidence in the continuity of opportunities
for construction for the local construction companies in order to invest in
45
quality personnel, plant and equipment to develop their own capacity to
execute an increase amount of road works.
4.3 Improving Effectiveness of Expenditure Allocations
Effectiveness of spending begins with selecting the most beneficial item for spending. Some
key options in this are;
- To spend on maintenance or on new constructions
- To spend on Project A or on Project B
- To spend on rehabilitation or on routine maintenance
At the moment there is no systematic planning in place to make such decisions. The primary
reasons why such decisions cannot be made are:
- Lack of information such as traffic levels, road condition, costs, standards etc.
- Lack of personally that are trained and experienced in planning work.
- Lack of institutional arrangements such as planning divisions, traffic surveys units etc
that are required
While the RDA is in the process of acquiring such, the information at provincial and local
levels is almost non existent. This was also evident in the report of the recently concluded
Road Master Plan study where the road based statistics had been prepared on samples, rather
than on an inventory. As a result no benefit cost analysis, feasibility or rational selection
procedure is applied for selecting projects or type of investment to make. Traditional
processes are followed often at the directions of the political leadership of a given agency.
The exceptions are only the foreign funded projects. Here too the situation is far from
desirable are as demonstrated in the manner in which some roads have been selected in some
of the recently concluded rehabilitation projects. In this case, low trafficked roads have been
chosen at the expense of higher trafficked and more deserving roads. As such even these
project-driven selection criterions has not been successful.
What is required is a permanent and dynamic planning arm in each agency. While the national
level would require persons with wider capacity, at the lowest level, it could be a technical
officer. The solutions for these problems are described below.
Selection of Projects
A policy decision is required to be taken at the highest level to provide funds only on the
basis of a Medium Term Investment Plan (MTIP) for the road network of that agency. If this
needs to be consistent with the 3 Year MTEF, then it could either be reduced to 3 years or
increased to 6 years. This means, each agency should have a portfolio of such projects picked
from this Medium Term Investment Plan (MTIP). The External Resources Department should
encourage donors to ‘pick’ projects from these portfolios rather than ‘propose’ or ‘select’
their own projects. Countries such as India practice this with much benefit to the country.
Guidelines when making Budgetary allocations for National Roads
46
No other ministry other than the Ministry of Highways should be provided with funds to work
on the national roads. The RDA should be the custodian of the National Roads MTIP and its
project portfolio duly ranked by order of priority. If the separate Ministry of Road
Development is to continue, its terms of reference may have to be reconsidered. There may
be scope for such a ministry to source additional funds for the road network development
belonging to the provincial and local authorities. However, the execution of such work should
be left to the relevant agencies and ministries and such a ministry may only be a facilitator.
Guidelines when making budgetary allocations for Provincial Roads
Similar to the national network, the Provincial Council and the respective PRDA or
equivalent agencies should take ownership for the MTIP for its own road network. As such,
all funds for this purpose should be channeled through the Ministry of Local Government &
Provincial Councils and the Finance Commission. Foreign funded projects should be
designed and implemented in close collaboration with the respective provincial roads agency.
However, it was noted that sourcing funds through several organizations causes delays and
poor utilization of funds. This could also be overcome to an extent by having a medium term
budget frame work for road sector allocations, so that each agency knows what funds it can
expect and prepare for implementation accordingly.
Guidelines when making budgetary allocations for Rural Roads
The spending on the rural road network needs most careful planning. Presently there are
numerous sources of funding from both central and provincial government. The following
guidelines may be necessary to improve the effectiveness of utilizing these funds.
1. Funds will be provided only to agencies that actually own roads. Ownership should
be on the basis of having gazetted these roads to that agency.
2. The Ministry of Road Development can perform as an ‘internal donor’ for facilitating
additional funds from centre to rural areas. In this case, the respective Pradeshiya
Sabhas can make a proposal for specific development projects from the funds
allocated to this ministry. This will also enable the Ministry of Highways to
concentrate on its national roads and forward the multitude of requests it now
receives for work on rural roads to the Ministry of Road Development for
consideration for funding.
3. It is important that such funds enter the budgets of the local authorities and that the
work is executed through them.
4. It is better if the Pradeshiya Sabhas can actually implement these projects as build-
maintain projects and thereafter include the maintenance of such projects to the road
fund.
5. The implementation of road projects from the Decentralized Budget (DCB) should
also be transferred from the Divisional Secretariat to the relevant Pradeshiya Sabha.
Guidelines when making allocations for Spending on Urban Roads
For urban roads, a similar program and MTIP should be designed. These councils should be
given the same consideration as Pradeshiya Sabhas as their incomes are not always adequate
to maintain roads in a satisfactory condition. It should also be noted that rural areas will also
develop only if the connected urban centers develop. The rural traffic ends up in urban centers
47
and unless the urban roads are in good condition, economic benefits will not flow to the rural
communities.
Moreover roads in almost all urban areas are deficient in terms of traffic management, street
lights, parking facilities, road signs and markings etc, which are all functional parts of
ensuring the economic efficiency of the road system. It is recommended that the budget line
has a separate component for these items.
As with other road agencies, the urban local government authorities should be asked to
develop their own 5-year development plan. This should be funded through the Ministry of
Local Government & Provincial Councils and the Finance Commission. They could also
submit proposals for funding from the central government from the Ministry of Road
Development. They should also be considered for foreign funding with donors picking up
prioritized projects through ERD.
As a general rule if any roads to be developed or rehabilitated the proposal
should be channeled trough the owner/custodian of the road; funds could then
be allocated to the respective agency. As a rule standard road cross sections,
maintenance standard could be standardized to select from those by agency
concerned hence uniform standard could prevail right trough out the country.
4.4 Improving Utilization of Allocations
Overall, the national roads appear to be utilizing around 75% of the capital allocations
provide. The RDA claims that this is mostly due to the inability of the Treasury to make
available the cash imprest when invoices are presented by the contractors for payment. As a
result, contractors delay in procuring material, thus delaying the scheduled completion of
projects.
The utilization rate for provincial rate for PSDG funds is similar at 78%. The reasons ascribed
for this variation are:
• Problems of cash flow.
• Inadequate capacity to formulate requests, prepare BOQ, tender documents etc. at
short notice.
• Inadequate capacity of contractors to complete projects on time.
The utilization rate of the PSDG funds was 54% in 2005, much improved from 7 to 12
percent in 2002 and 2003. In addition to the reasons given earlier for provincial roads, the
local authorities have the added problems of having to source such funding through the
Provincial Councils and the Commissioner of Local Government, which also causes delay.
This also demonstrates the problems associated with funds being channeled through a number
of agencies. In this case, the payments are released by Treasury only after quarterly progress
reports are submitted by the Provincial Councils and are approved for payment by the Finance
Commission.
48
Another stated reason for low utilization was that local authorities were not fully aware of the
amount or the time when such funds would be made available. Some Pradeshiya Sabhas
spoke of receiving such information almost at the end of the year. Another reason given is
that the contractors who often do not have the capacity to undertake such works, are unable to
keep to schedule and drag projects until the end of the year when they realize they have to
complete in order to get paid. This often causes a rush on payments towards the months of
November and December, resulting in some cases of carrying on payments to the next year as
continuing works.
It summary it could be stated that at the national level making cash imprest available is cited
as the biggest constraint, while at the lower levels, when funds are provided direct to the
implementing agency, the utilization is high. That is to also say, that when funds are
channeled through a series of agencies, such as in the case of local authorities, the utilization
decreases sharply. Utilization is also low, when it comes to new constructions. This is caused
mostly by acquisition delays and in the process of selection and mobilization of contractors.
4.5 Enhancing Sector Capacity
The institutional capacity of the roads sector requires urgent attention in order to effectively
rise to the challenge of increased spending provided and an ambitious development plan
setout earlier in the report. This cannot be over emphasized given that there is presently low
utilization of funds ascribed mostly to capacity problems particularly at the provincial and
local government levels.
The present budget allocations do not show any significant contributions for planning, human
resource development or research and development requirements in the road sector. With
much higher levels of funding in highways, it would be necessary to build up on an urgent
basis, the required sector capacities to ensure that higher levels of funding are effectively
utilized and the level of technological competence, planning and management capacities are
in place to facilitate this.
Sector capacity improvements are required in the following areas:
Human Resources Development
Presently, road sector agencies have very little provisions for training of personnel. Even most
road engineers have never taken highway construction or traffic courses as some of the
universities teach these only as optional subjects. Moreover, a significant proportion of those
who become engineers through continuing professional development also may not have
followed such courses of study.
In addition, middle grades such as clerical, technical officers lack basic computer and
communication skills. It would be most useful for a sector that has to undergo rapid
development to invest in its personnel especially in the next few years. Thus it is
49
recommended that each agency is provided an allocation for HRD equal to 0.5% (1/200th) of
the Treasury allocations for provincial and local government institutions and 0.1% (1/1000th)
for the RDA. The overall cost of this would be around Rs 50 million per annum.
Research & Development
It is noted that a Road Development Master Plan was prepared in December 2005. While it
gives important baseline information, the need for a dynamic planning system to be set up at
each level of road management cannot be over emphasized. This requires the compilation of
data bases, road inventories, traffic surveys and general capacity development in project
appraisal and assessment techniques which needs to be regularly a systematically updated on
an on-going basis. Availability of such critical resources will greatly facilitate the preparation
of the Medium Term Investment Plan (MTIP) suggested earlier and the selection of the most
important roads in a portfolio of road projects for funding. Such investment plans need to be
continuously updated with the changing investment priorities and other priorities of the
country. For this, the road agencies at all levels should have the required trained personnel.
Thus it is recommended that each agency is provided an allocation for Capacity Development
equal to 0.5% (1/200th) of the Treasury allocations for provincial and local government
institutions and 0.1% (1/1000th) for the RDA. A Further allocation of 0.1% (1/1000th) of the
funds allocated through the Ministry of Local Government & Provincial Councils for roads
may be provided to the research funding organizations such as the National Science
Foundation or National Research Council as grants for disbursement to reputed research
organizations for research and development programs on provincial, urban and rural roads.
The cost of this would be around Rs 60 million per annum.
SME Road Contractors Capacity
Most road construction work is carried out through contractors. In the provinces the
maintenance is also on contract, as was in the RDA up to a few years ago. The low capacity
of contractors working on local authority roads and even on provincial roads is a stated reason
for the low utilization for allocated funds. In this respect, it will be necessary to conduct
regular programs to develop the management and technical capacities of such contractors.
This may be a program that could be funded by a donor agency to begin with and made in to a
self financing program afterwards.
System for Road Investment Assessment & Selection Criteria
It is noted that a Road Development Master Plan has been prepared in December 2005. While
it gives important baseline information, the need for a dynamic planning system to be set up
at each level of road management cannot be over emphasized. This requires the compilation
of data bases, road inventories, traffic surveys and general capacity development in project
appraisal and assessment techniques which needs to be regularly a systematically updated on
an on-going basis. Availability of such critical resources will greatly facilitate the preparation
of the 5-year development plan and the selection of the most important roads in a portfolio of
road projects for funding. Such investment plans need to be continuously updated with
changing investment priorities and other priorities of the country. For this, the road agencies
at all levels should have the required trained personnel.
50
A good example of the inadequacy of having consultants make one-off development plans for
the sector is in the recently concluded Road Sector Master Plan, which envisages an
‘unconstrained’ development strategy with an investment of Rs 47 billion per year from 2006
to 2015. However, the projects formulated under the new policies under the ‘Mahinda
Chinthanaya’ have already led to increased investments surpassing these levels by as much as
27%.
51
5 PERFORMANCE INDICATORS
Performance Indicators are important measures of effectiveness and utilization of expenditure
in the road sector. In this section it is intended to define a set of primary indicators that could
be used for the current budget cycle.
Performance Measures are necessary for different stages of the spending on roads. These are
best studied under the following categories:
• Resource Allocation Indicators
• Resource Utilization & Efficiency Indicators
• Output Indicators
• Input- Output Effectiveness Indicators
• Outcome Indicators
5.1 Resource Allocation Indicators
These are indicators that measure the extent of the allocation of resources for the sector.
These do not measure if such resources are fully utilized or the efficiency of such usage in
terms of achieving the intended outputs and outcomes. These may be considered as guiding
indicators on the equitable and efficient allocations for preparation of budgets.
These indicators are
• Rs allocated per lane km per year for maintenance
• Rs allocated for maintenance as % of asset replacement value
• Rs allocated per lane km per year for rehabilitation
• Rs allocated for rehabilitation as % of asset replacement value
• Rs allocated per lane km for network capacity improvements (including new
constructions)
• Rs allocated for improvements as % of asset replacement value
• Rs allocated for the year per estimated vehicle km on the road network
• Rs allocated for year per estimated Passenger Car Unit (PCU) km on the road
network
• Rs allocated for year per Equivalent Standard Axle (ESA) km on the road network
• % of total allocations provided for institutional capacity development
• % of total allocations provided for traffic management
• % of total allocations provided for road safety improvements
• % of total allocations provided for research & development
52
5.2 Resource Utilization & Efficiency Indicators
These indicators measure the use of allocated resources, their utilization and efficiency of use.
They do not measure the outputs achieved from such inputs. These indicators are useful to
determine if the resources provided for the previous year are utilized and if there are
institutional capacity problems that prevent the utilization of the total allocation that is
provided. However, these indicators do not measure the effectiveness of the funds which are
utilized.
• Total expenditure incurred for the previous year as % of total funds allocated for that
year
• Average time for cash imprest to be received from treasury
• Average time for settling contractors
• % of funds from last year carried forward to current year
• % of projects completed on time
• Average project over run duration
• Amount spent on maintenance as % of funds allocated for maintenance
• Amount spent on rehabilitation as % of funds allocated for rehabilitation
• Amount spent for improvements as % of funds allocated for improvements
• Amount spent for traffic management as % of funds allocated for traffic management
• Amount spent for road safety as % of funds allocated for road safety
• Amount spent on research & development as % of funds allocated for research &
development
• Total amount spent for roads as % of total amount allocated for roads.
5.3 Output Indicators
These are indicators that measure the physical outputs that are realized as a result of the
application of resources. These should be measurable and may include the following.
• Lane kms maintained for the year
• Lane kms rehabilitated for the year
• New lane kms added to network during year
• Number of intersection improvements
• Number of intersection control systems rehabailitated
• Number of bridges improved
• Number of bridges rehabilitated
5.4 Input/Output Effectiveness Indicators
53
These indicators measure the effectiveness of the inputs in producing the required outputs.
These indicators do not however measure the contributions of the resources to the desired
outcomes. These include:
• Maintenance expenditure per lane km
• Expenditure for rehabilitation per lane km
• Expenditure for all road works per vehicle km carried on network
• Expenditure for all road works per PCU km carried on network
• Expenditure for all road works per ESA km carried on network
• Percentage of lane kms in network in maintainable condition
• Percentage of vehicle kms carried on network in maintainable condition
• Percentage of bridges in maintainable condition
• Percentage of intersections with appropriate control systems
5.5 Outcome Indicators
• Average Free Flow Speed of the network
• Network Free Flow Speed weighted by traffic flow level
• Average Speed on network
• Average Speed on network weighted by traffic flows
• Average Roughness of the network
• Number of fatal accidents
• Number of road closures hours/year
54
6 DATA COLLECTION FORMAT
In order to obtain data for implementing an outcome based budget allocation system, a draft
data collection form and set of accompanying instructions is shown in the following table for
budget proposals for the current budget cycle.
1. Project Proponent
2. Project Name
3. Classification
New
Ass
et
Im
pro
vem
ent
Rep
lace
men
t
Reh
abili
tatio
n
Mai
nten
ance
Tec
hnol
ogy
&
HR
Dev
elop
.
o Roads
o Bridges
o Intersection
o Traffic Management
o Road Safety
4. Objectives / Goals
5. Project Impact Area
6. Have Alternatives been
tested
•
•
•
7. Conformity to
Government Policy
Directions
•
•
8. Life of Project •
9. Project Commencement •
10.Conditions for
undertaking project
•
11. Environmental Issues
& Clearance Required
• Is it a prescribed project as per Gazette No: 722/22 of 1993?
• Other requirements
12. Costs @ Pre-Discounted Rate [Rs. (mn)]
Year 2007 2008 2009 2010
(a) Land Acquisition & Resettlement
(b) Civil Works
55
(c) Consultancy & Supervision
(d) Maintenance & Operations
(e) Training
(f) Variations & Contingencies
Sub Total of Funding Required
(g) Cost of Externalities
• Congestion
• Environmental / Social
• Others
(i) Total
TOTAL COST
13. Benefits @ Pre-Discounted Rate [Rs. (mn)]
(a) Travel Time
(b) Goods Travel Time
(c) Vehicle Operating Cost
(d) Accident Reduction
(e) Vehicular Emissions
(f) Regional Development
(g) Other
(i) Total
14. Non - Quantifiable Benefits [Rs. (mn)]
15. BCA @ 0 % Discount Rate [Rs. (mn)]
a) Design Life (years)
b) Total Cost for Design Life
c) Total Benefits for Design Life
d) BC Ratio (Benefits/Costs)
e) NPV (Benefits - Costs)
f) EIRR
56
1. Project Proponent: name of agency making the proposal.
2. Project Name: name by which the project is identified
3. Classification: the two-way dimensional classification of the type of project.
♦ New Assets: Investments that provide new and hither-to non-existant facilities.
♦ Improvements: Investments that develop or "make better" existing assets.
♦ Replacement/Rehabilitation: Investments that replace existing assets with identical assets in terms of
capacity and/or quality at the end of their economic design life.
♦ Maintenance: Normal recurrent expenditures—annual and periodic—required over the expected life
of an asset.
♦ Technology and Human Resources Development: Investments in research and development, in
training, and in studies/surveys to develop transport-related information and databases.
4. Objectives/Goals: The economic, social and environmental goals that are pursued in the project as
objectives should be listed here and ticked off against the appropriate column. These goals should
be set after considering the existence of any anticipated problems that need to be solved through
intervention by public investment.
5. Project Impact Area: A brief description of the geographical area that will be directly impacted by the
project during construction and the distribution of the direct recipients of the benefits. In large
projects, it is recommended that a map be attached.
6. Alternatives: All alternatives that are technically possible and are potentially capable of achieving
one or more of the objectives stated in item 4 above.
7. Government Policy Directions: How the proposed project relates to documented Government Policy,
strategic plans and investment plans.
8. Locality: the description of the Project Impact Area (PIA) in terms of administrative zoning.
9. Life of Project: the lifetime of the project over which benefits are anticipated.
10. Commencement of Project: the year (and possibly the month) when the project is to commence.
11. Environmental Issues & Clearance: If the project is a prescribed project under Gazette Extraordinary
722/22 of 1993. Also other clearance such as coastal, flora & fauna, archeological etc as may be
necessary.
12. Costs: the estimated total costs over the project life before discounting. The total annual and periodic
costs for the life time should be included. Consultancy and supervision costs include the cost of
administering the project, which should be apportioned on some basis. Training refers to specialised
training that needs to be a part of the project and required for its proper operation. A suitable
percentage may be added for variations and contingencies based on project experience. Cost of
externalities may also be estimated using unit values available for this purpose.
13. Benefits: Total benefits estimated over the project life before discounting. These maybe estimated
using approximate values and experience from previous detailed calculations.
14. Non-Quantifiable Benefits: A descriptive statement regarding nature and extent of such benefits not
included in item 13.
15. Benefit Cost Analysis at pre-discounted rates computed as; BC ratio (b) NPV and (c) EIRR, the
discount rate at which NPV is equal to zero.
57
7 SUMMARY TABLE OF CONCLUSIONS & RECOMMENDATIONS
Status Quo Present Issues Proposed Interventions
- Condition of Roads - Even though Sri Lanka has an impressive length
of road network of 108,103 kms its performance
in terms of speed and safety are not satisfactory.
Only around 2% of the national network is in
good or maintained condition, while over 50%
can be considered to severely lag behind in
maintenance.
- This results in lost economic opportunities,
increased congestion costs, loss of life and
accidents costs. The loss due to the
congestion costs is estimated at Rs 32
billion per annum, accident costs at Rs 12
billion per annum and lost economic
opportunities at Rs 270 billion per annum.40
-
- An urgent plan is required to reverse this trend by reducing the loss in
outcomes within the present level of funding.
- Funding Level - Total funding for 2006 is Rs 59.5 billion. The
funding level is 2.26% of GDP and expected to
increase to 2.47% in 2007, before reducing to
around 2.0% in 2008.
- Road construction needs a longer term
investment plan for a systematic
intervention.
- To set total budget allocations for road sector at around 2.0% to 2.5% of
GDP for 10 years. This would approximately be in line with the present
level of funding of between Rs 55-65 billion per annum at 2006 prices.
- Policy Framework - The Government strategy pertaining to the
manner of funding the road sector has not been
explicitly stated. The implicit strategy it has
followed can be gathered from the funding
arrangements in past years and particularly the
manner in which funding has been allocated for
the different road networks.
- The level of funding required for the road sector
is not known as there is no overall strategy for
the development of the entire road network
- The distribution of such funds to the different
road networks has not been determined
- The distribution of such funds by type of
investment namely maintenance, rehabilitation or
new roads remains ad hoc
- There are no instruments of coordination
between different levels of government or even
- The basic policy framework required for
the application of a high level of spending is
not in place.
- These issues need to be urgently resolved
and put in place in order to ensure that the
objectives of the government in allocating a
high level of spending for roads through the
budget would be realized.
- An urgent need exists to determine (a) a rationally determined spending
levels based on a development strategy; (b) a distribution formula for the
different road networks, (c) an investment strategy in distributing funds
between maintenance, rehabilitation and new construction and (d) the
effective delivery mechanism to ensure effective delivery and efficiency
in use of allocated funds.
40
Source: Kumarage, Amal S. LBO, May 2006
58
Status Quo Present Issues Proposed Interventions
between agencies under central government
which are provided funds for roads.
- -Spending Level - However, of the allocations for 2006, only
around Rs 14 to 15 billion (approximately 25%)
has been earmarked for maintenance.
- There is evidence that Sri Lanka is currently
spending less than what is required to achieve
the desired standards in maintenance of its road
network in present condition.
- However it is also noted that for the national
network, the funds spent for new construction
since 2002 have exceeded those spent for
maintenance by an average of approximately
70%.
- Given that there is a backlog of
maintenance, the present road maintenance
requirement appears around 1/3rd higher
than what is needed to maintain the network
once it is brought to maintainable standard.
- Since this level of maintenance funding is
not provided, the overall condition of the
network is still deteriorating.
- To first bring the network to maintainable condition, so that there would
be more funds available for new roads once the existing road network is
brought to optimum maintenance levels.
Greater performance monitoring is required at the provincial and local
authority roads level.
- Recovery of Funds - It is reported that in 2003, the Central
Government collected Rs 50 billion in Road
User Charges. It spending on roads was Rs 12
billion and even after adjusting for other
expenses, the Govt made a surplus of Rs 26
billion.
- The Provincial Councils is entitled to receive
Rs 1,683 million the central govt collects as
Provincial Traffic Fees, while the spending on
roads was Rs 494 million. However, these funds
are never received by the province since the
revenue amount is deducted from the block
grant.
- The local authorities do not collect direct Road
User Charges. Their source of revenues is from
property taxes, of which approximately 20% is
spent on roads.
- According to the estimates of the Road
Sector Master Plan, the road sector seems to
be a net revenue earner for both Central and
Provincial Governments. Hence, road
investments are in reality funded entirely by
road users. The inability to provide the
desired level of service even when payment
for it has been made is an issue with far
reaching social and economic implications.
- There is potential to gradually transfer the collection of RUCs to the
Road Fund.
- A brief study seems necessary to determine the exact amounts of RUCs
collected and to determine a formula for the short term distribution within
the present budgetary system and in the long term if transferred to a Road
Fund.
- Part of the RUCs should be made available to local authorities.
- The existing fund should be extended to provincial and local authority
roads after setting up norms and standards as well as addressing any
issues they might have.
- Source of Funds - Foreign Funds: 52% of funds for road sector are
foreign funds. However, this is not equitable
across the levels of the network. It is highest at
the national level at 62% and reduced to 23 %
for rural roads. Urban roads presently do not
receive any foreign funds.
- Rural and urban local authorities are not
able to fund major rehabilitations without
foreign funds, Hence networks remains in
deteriorated condition.
- Capacity enhancements is beginning at
provincial level with foreign funded
- To develop an integrated investment plan and source funding
accordingly, with responsibility with Treasury taking the responsibility
for raising the agreed funds for the entire sector.
- Each level of government also set targets to raise own funds through
property taxes or road user charges. This requires further study.
59
Status Quo Present Issues Proposed Interventions
- Treasury Funds: Treasury funds also deteriorate
at lower levels. While the national network
received 100% funds through Treasury, at the
rural level it is 72%. Once again urban roads
receive the lowest at 32%
projects, but remains poor at local authority
level
-
- Developing an
Integrated
Investment Plan
- Since the level of funding up to now was
grossly inadequate for even basic maintenance,
the Central Government had no leverage to
initiate developmental activities that could be
based on integration of the road networks.
- The low level of funding only resulted in crisis-
management of the road network at all levels but
most evident at the rural level with so many
agencies spending funds from time to time
desperately trying to keep the rural road network
from falling apart. .
- The increased funding opens up hitherto
closed doors for an integrated approach
towards managing the road network
- But with increased funding one of the strategies would be to provide for
additional funding in a manner that promotes holistic development.
- This could start with a sector wide allocation cutting across all three
layers of government.
- The allocations made could be tied in to motivational programs such as
criteria based or matching grants which are even at present well
understood at the provincial and local authority level.
- However, such programs have to be well designed and performance
indicators to monitor output and outcomes accordingly.
- Distributional formula based on road length, lane length, traffic volumes,
terrain, type of road surface and for rural roads, the number of households
and service establishments served may be considered in distributing these
across the different agencies.
- Design standards may also be tied in with this to prevent over designs,
the most common of which would be to provide metalled roads where
compacted earth roads or gravel roads are appropriate.
- Allocation of Funds
by agency
- This shows that the Treasury provides 92.8% of
the overall allocations for all roads. At the level
of the national roads, this is 100%. The lowest
level of Treasury funding is for urban roads at
31.6%. On the other hand, only 81.2% of these
allocations are made direct to the agency
managing the roads. Even though urban roads
get the lowest percentage of their requirements
from the Treasury, all of Treasury funds are
received directly to the particular council. On the
other hand even though rural roads get nearly
75% of their requirements from the Treasury, the
agencies managing the rural roads get only
26.4% of this.
- At the lower levels there are 7 central
government ministries that are spending
more than 100 million rupees per annum.
None of these agencies manage the roads
they spend on.
- In addition there are possibly another 10
central government agencies spending at
least 10 million a year for roads in rural
areas that are used as thoroughfares. Some
of these are roads owned by those agencies.
- The majority of funds for rural roads
amounting to over 75% are channeled
outside of the purview of the Provincial
Council or the relevant Pradeshiya Sabha.
This is because funds allocated to other
ministries are usually spent through the
- Funds should be provided only to agencies that actually own roads.
Ownership should be on the basis of having gazetted these roads to that
agency.
- The Ministry of Road Development can perform as an ‘internal donor’
for facilitating additional funds from centre to rural areas.
- It is important that such funds enter the budgets of the local authorities
and that the work is executed through them.
- Pradeshiya Sabhas can actually implement these projects as build-
maintain projects and thereafter include the maintenance of such projects
to a road fund for such roads.
- The implementation of road projects from the Decentralized Budget
(DCB) should also be transferred from the Divisional Secretariat to the
relevant Pradeshiya Sabha.
60
Status Quo Present Issues Proposed Interventions
District Secretary’s office or the Divisional
Secretary’s Office which come under the
central government.
- This causes problems of ownership and
gives rise to unnecessary dependencies on
external agencies not engaged in road
management.
- This also raises the problem of
sustainability as the legitimate owner does
not have funding to maintain the road and
the investment is short lived.
- Improving the
Efficiency of
Utilization of Funds
- RDA’s utilization of funds for capital works is
around 70%, while in the provincial councils the
PSDG is around 78%. PSDG funds given to
local authorities have the lowest utilization at
around 50-60%. Maintenance funds are almost
fully utilized, while funds for new constructions
have very low utilization.
- This means that actual expenditure in 2006 is
likely to be around Rs 45 billion at a utilization
rate of 75%, (consistent with past performance).
It will therefore be only in 2008 that spending
could actually reach the desired level of spending
of around Rs 60 billion in 2006 prices.
- When funds are provided direct to the
implementing agency, the utilization is high.
That is when funds are channeled through a
series of agencies, such as in the case of local
authorities, the utilization decreases sharply.
Utilization is also low, when it comes to new
constructions. This is caused mostly by
acquisition delays and in the process of selection
and mobilization of contractors.
-
- RDA Claims non availability of cash
imprest reduces the ability to fully utilize
funds allocated
- At the Provincial Level, utilization is
mostly due to capacity problems both
institutional and contractors
- At the Pradeshiya Sabha level the
problems are also similar to the provincial
level but more intense.
- New constructions may need to be carried
out in phases to avoid fund being tied up.
PMUs also set of for each phase.
For the national network, the cash imprest issue needs to be speedily
resolved so that all payments are promptly paid and that work that is
commenced does not stop half way.
At the provincial level, there is nned to introduce
- Improving the
Effectiveness of
Funding
- Specific application of government policies in
project formulation or in investment planning
cannot be observed at present.
- - Each agency need to be assisted and in turn required to develop and own
a Medium Term Investment Plan (MTIP)- (e.g. for 5 years) based on an
overall development strategy for its road network and an acceptable
61
Status Quo Present Issues Proposed Interventions
- The budgetary process also does not include
assessment of objectives or outcomes of
proposed projects in order to determine the
degree of subscription of a project for which
funding is sought, to these policies
criterion of prioritization.
- There should be a process of publishing such plans.
- Selection of projects for funding using any source of funding should be
based on the MTIP for each road agency.
- Foreign funded projects should also subscribe to such plans when
properly prepared.
- As a general rule if any roads to be developed or rehabilitated the
proposal should be channeled trough the owner/custodian of the road;
funds could then be allocated to the respective agency. As a rule standard
road cross sections, maintenance standard could be standardized to select
from those by agency concerned hence uniform standard could prevail
right trough out the country.
- Enhancing Sector
Capacity
- Local contractors at the provincial and rural
level have little capacity.
- There is a lack of technical skills particularly in
road construction and traffic management skills
at the provincial and local authority level.
- There is no funding for on-going R&D activity
on construction material, techniques, processes,
traffic models or databases on the road sector.
- Lack of capacity of local contractors
results in poor utilization of funds and
inferior quality and high maintenance costs.
- Lack of Human Resource Development,
particularly at the provincial and rural levels
does not attract or allow retaining capable
technical staff.
- Provincial and local authority agencies are
severely handicapped without databases,
road inventories etc that assist them in
planning and managing roads more
effectively.
- To separately allocate 1/1000th of funds provided by Treasury to each
agency for Human Resources Development- to facilitate on-going
programs to provide technical and associated skills for road agency staff,
particularly at the provincial and local authority levels.
- To separately allocate 1/1000th of funds provided by Treasury to each
agency for Research & Development to develop road inventories,
undertake research in construction techniques (e.g. concrete roads) or
construction materials and other areas that would improve the
effectiveness of spending for road services.
- To provide one-off program of assistance for SME in the field of road
construction and road maintenance to improve in efficiency.
- Ensuring
Sustainability
- With the proliferation of the number of
ministries and votes for spending on roads, most
of this spending is poorly planned, ad hoc and
with little or no targeted benefits.
-
- It is most likely that lead projects under the
‘Mahinda Chinthanaya’ would also suffer a
similar fate unless the question of continuity
and sustainability can be addressed
satisfactorily.
- Strengthen the planning function of each agency and ensure that all new
roads have matching grants for maintenance preferably in a road fund.
- The Road Fund intends to set up a process of disbursement and
monitoring of outcomes for disbursement made from the Fund.
- The efficiency of labour inputs may also need to be studied with excess
labor either offered a VRS or found alternate work on projects rather than
in maintenance work alone.
- This may need to be extended to cover all roads. Provincial and local
authority road could be drawn in on the basis of setting up a fund for all
future road rehabilitation and improvements.
62
Appendix I Data Collection41
Step 1: Meetings were held with the Finance Commission for (i) the identification of the
different heads under which funds channeled through the Finance Commission are provided
for provincial and local government roads; (ii) selection of two provinces as a sample for
collecting data at the spending/implementation end and (iii) identification of other sources of
funding of road construction and maintenance at the provincial and local government level.
The Southern and Uva Provinces were selected as two sample provinces as they represented
different socioeconomic conditions and road terrain. Moreover, these two provinces together
with the North Central Province were also included in the World Bank’s Road Sector
Assistance Project (RSAP) and its Rural Roads Pilot Component (RRP) which looks at
improving the planning, design and management of the tertiary roads, referred to as rural
roads. As this is an on-going project and given the complementary nature of the two projects
it was considered advantageous to select two of the same provinces.
Step 2: Meeting with the Project Implementing Agency, i.e. the National Budget Department
to collect the relevant national data and to appraise the senior officers of the intended program
of the project and to set time lines for submission of information and seek agreement for the
conduct of a workshop to discuss implementation strategies, prior to the commencement of
the next budget cycle planned for early June 2006.
Step 3: Meetings were held with the following Road Management Agencies.
National Roads-
• Road Development Authority
Provincial Roads-
Southern Province
� Chief Secretary and senior staff of the Southern Provincial
Council
� Southern Provincial Road Development Authority (SPRDA)
Uva Provincial Council
� Chief Secretary and senior staff of the Southern Provincial
Council
� Provincial Department of Road Development
� Uva Province Central Engineering & Construction Services
Urban Roads
• Colombo Municipal Council (Western Province)42
41
The data collection was carried out by the Transportation Engineering Division of the University of
Moratuwa, under contract to the World Bank. This work was undertaken by Messers Janaka
Weerawardena and Tissa Liyanage. 42
The Colombo Municipal Council was included due to its unique nature of being the central and most
developed municipality and the importance of its road network to the entire road network.
63
• Bandarawela Urban Council (Uva Province)
• Badulla Municipal Council (Uva Province)
• Hikkaduwa Urban Council (Southern Province)
• Ambalangoda Urban Council (Southern Province)
Rural Roads
• Bandarawela PS (Uva Province)
• Karandeniya PS (Southern Province)
• Elpitiya PS (Southern Province)
Appendix II Treasury Allocations for Road
Construction
The Treasury allocates funds for national, provincial, urban and rural roads annually through
its budget. This includes funds for new constructions, improvements and maintenance. These
allocations include foreign funds. All such funds are channeled through a Central Government
Ministry and in most cases the funds are utilized by one of the statutory bodies charged with
the construction and maintenance of roads either at national, provincial or local government.
According to the estimates prepared by Ms Malarmathy Gangatharan, Deputy Director,
National Budget Department the allocated spending for the roads sector in 2006 budget is Rs.
52,278 million rupees, made up of a foreign aid component of Rs. 30,748 million. There also
comprises of Rs. 9,818 million allocated for tsunami affected roads and a further Rs 3,886
million for roads in conflict affected areas and there are eight (08) ministries through which
these funds are distributed. There are foreign funds provided for 26 projects by the ADB,
JBIC, EDCF, Saudi Fund, Kuwait Fund, JICA, WB, Austrian Aid, UK, France etc. However
it is observed that several items of spending on roads from Treasury Funds is not accounted
for in this table as the spending is either included as a recurrent expenditure or is included
under an infrastructure development vote which is not specifically for roads.
64
Min
istr
y
Pro
vin
ce/
Pro
ject
s
Na
tio
nal
Ro
ad
Prov
incia
l R
oa
ds
Local
Au
thori
ty
Ro
ad
s
Ru
ral
Roa
d
Ma
haw
eli
Roa
ds
Est
ate
Roa
ds
Tsu
na
mi
Aff
ecte
d R
oa
ds
Co
nfl
ict
Aff
ecte
d
Ro
ad
s
To
tal
FA
Hig
hw
ays
Maintenance of Roads and Bridges 3,000 3,000.
Southern Transport Development Project 6,382 6,382 4,612
Outer Circular Highway 625.6 625.6
Colombo - Katunayake Expressway 935 935
Alternate Colombo - Kandy Highway 13 13
Road Network Improvement - ADB &
JBIC
3,370 3,370 2,008
Ratnapura - Balangoda - Bandarawela Road
Rehabilitation - EDCF
1,005 1,005 500
Batticaloa - Trincomalee Road Project (Kinniya
Bridge)- Saudi Fund
439.5 439.5 350
Reconstruction of Bridges Kuwait Fund 693 693 338
Construction of Manampitiya Bridge -JICA 132.5 132.5 100
Baseline Road Extension -Phase III 118 118 5
Road Sector Assistant Project - WB 3,635 3,635 2,900
National Highway Sector Project - ADB 10 10
Construction of steel Bridges - Austria 460 460 400
Widening and Improvements of Roads and
Bridges -SIRUP
4,370 4,370 3,800
Reconstruction of Damaged /Weak Bridges on
National Highway
270 270
Rehabikutation of Puttalam - Mannar Road (via
Marichchukkaddy)
125 125
project Preparatory Facilities, Surveys ,
Feasibility Studies and Land Acquisition
2,356 2,356 448
Improvement of Badulla - Kandy Road (Raja
Mawatha)
100 100
Rehabilitation of Tsunami Affected Road from
Kalutara to Jaffna
7,947 7947 6253
Sub Total 28,039 - - - - - 7,947 35,986 21,714
Ro
ad
Dev
elo
p Mage Neguma Rural Road Development
Programme
700 700 450
National Action Plan for Plantation Community 100 100 50
Sub Total 700 100 800 500
Loca
l G
ov
ern
men
t &
Pro
vin
cia
l
Provincial Specific Development Project
Western Province
300
436.5
736.5
Central Province 250 117.5 30 10 407.5
Southern Province 250 159 409
North East Province 220 197 417
North Western Province 215 205 20 10 450
North Central Province 210 107.5 30 40 387.5
Uva Province 230 45 30 10 315
Sabaragamuwa Province 220 162.5 10 392.5
Road Sector Development (Western,N.Western
,N.Central & Uva) - ADB
2,400 2,400 1,700
Provincial Road Improvement Project in Central
& Sabaragamuwa - JBIC
2,034 2,034 1,601
CAARP - Road Rehabilitation ADB 2,538 2,538 1,900
STAART - Western, Southern & North East -
JBIC
211. 211 174
Sub Total 6,329 1,430 110 80 211 2,538 10,698 5,375
N a Rehabilitation of Bridges in the North East UK 421.3 421.3 320
65
Min
istr
y
Pro
vin
ce/
Pro
ject
s
Na
tio
nal
Ro
ad
Prov
incia
l R
oa
ds
Local
Au
thori
ty
Ro
ad
s
Ru
ral
Roa
d
Ma
haw
eli
Roa
ds
Est
ate
Roa
ds
Tsu
na
mi
Aff
ecte
d R
oa
ds
Co
nfl
ict
Aff
ecte
d
Ro
ad
s
To
tal
FA
North East Road Rehabilitation Project - EU 240 240 232
Tsunami Affected Road Rehabilitation -WB 1,585 1,585 1,585
Trincomalee Integrated Infrastructure
Development Project - France
75 75 75
Projects such as NECORD, NEIP and NECCDEP 686.2 686.2 377
Est
ate
Infr
ast
r Construction of Roads & Bridges 150 150
Budget Proposal No.10 - "Infrastructure
Development in Estate Sector"
750 750
Reg
ion
al
Dev
elo
pm
en
t
Uva wellasa Development - Rehabilitation of
Rural Roads
196.5 196.5
Integrated Rural Development Project for North
Western Province
10 10
Infrastructure Development Galle
District/Township Development & Rural Road
Dev.
14.2 14.2
Southern Province - Rural Economic
Advancement Project - ADB
220 220 165.5
Matale REAP 10 10 8.5
Ag
ricu
ltu
re,
Irrig
ati
on
& Dambulla - Bakkamuna Galagawela Rd 425.7 425.7 395.5
Ru
ral
Eco
nom
ic Dept. of Up-Country Peasantry Rehabilitation 10 10
Sub Total - - - 460.7 425.7 900 1,660 1,348 4,794 3,159
Grand Total 28,039 6,329 1,430 1,271 506 1,000 9,818 3,886 52,278 30,748
