Proposal to the External Resources Department, Ministry of Finance, Sri Lanka) December 2008

Transcription

1 Proposal to the External Resources Department, Ministry of Finance, Sri Lanka) December 2008

2 ASIAN DEVELOPMENT BANK TA Loan 2080-SRI: Road Project Preparatory Facility (RPPF) December 2008

3 Recommended Maintenance Cycle

4 Additional Life Span Additional Life Span Additional Life Span Unit Operation & Maintenance Cost (Rs.) Rehabilitation 1 Rehabilitation 2 Rehabilitation 3 Original Life Span Time (Age)

5 Road Condition in Uva Province % of Length by Present Road Condition Type of Road Total Kms Good Fair Poor Metalled and Tarred (single Lane 2 to 4 m) D % 30% 50% Metalled and Tarred (intermediate lane 4 to 6 lanes) C % 30% 60% DBST Surface (Single lane 4 to 6m) % - - Total % 27% 52% Road Condition in North Central Province Total Type of Road Kms Metalled and Tarred (single Lane 2 to 4 m) D 722 Metalled and Tarred (intermediate lane 4 to 6 lanes) C 1,037 % of Length by Present Road Condition Good Fair Poor 60% 25% 15% DBST Surface (Single lane 4 to 6m) % - - Total % 23% 14% Road Condition in Eastern Province Type of Road Total Km % of Length by Present Road Condition Good Fair Poor Gravel/Earth Road (Single Lane 2-4 metres) % 13% 75% Metalled and Tarred (single Lane 2 to 4 m) % 12% 80% Total 1, % 12% 79%

6 The major portion of the provincial road network in most provinces is in poor condition. This should be interpreted as being roads that have long-expired their design life and is overdue on rehabilitation. Since funds for rehabilitation is scare these roads are being kept motorable with expensive maintenance techniques (sand sealing- premix programs etc). As a result, roads that are within the life cycle are denied regular maintenance funds Thus delaying routine expenditure leads to rapid deterioration of the better roads as well, reducing their life expectancy sharply. In a study of the cost between routinely maintained roads and roads under stop-gap maintenance strategy in Uva, the overall life cycle cost was found to be 19 times higher. This is consistent with international studies Politically (and even socially) the rationale is to ensure the non-motorabel roads are made motorable, even if it means that newly rehabilitated roads are denied funding regular maintenance until they too deteriorate to poor condition so that expenditure is justifiable.

7 Domestic Financing Foreign Financing Domestic Financing Sources Domestic Funds Foreign aid related domestic funds Foreign Financing Sources Foreign aid loans Foreign aid grants Reimbursable Foreign aid loans Fund Releasing Criteria Funding recommendations for approved Road Program Finance Commission Ministry of PCs & LG Notification of fund releasing Notification of fund releasing Central Government (Treasury) Fund Requesting Criteria (No specific criterion for foreign funds) Devolved Revenue Ministry of PCs & LG Finalized Next year Road Work Program Provincial Councils Next year Road Work Program Provincial Road Agency Rehabilitation & Improvements Periodic & Routine Maintenance Eg: CAARP STAART Eg: PSDG, Criteria & Block Grant based works Eg: RSDP

8 Domestic Funds: Block Grant: Recurrent expenditures of PCs are covered by these block grants. Other than the Western Province most provinces get the majority of their recurrent budget under block grants from the Central Government. For the road sector this includes salaries, overheads and an allocation for recurrent maintenance which in addition to other assets includes a significant portion for road maintenance. Example Uva Province Rs. 000 Recurrent Expenditure 2006 Actual 2007 Estimate 2008 Estimate Personal Emoluments 22, , ,268.0 Traveling Expenses 1, , ,000.0 Supplies 1, , ,250.0 Maintenance Expenditure 26, , ,725.0 Contractual Services , ,100.0 Transfers ,000.0 Other Recurrent Expenditure Total 53, , ,423.0

9 Provincial Specific Development Grant (PSDG):These are capital grants provided for identified and agreed development priorities in the sectors of infrastructure, health and education etc. The FC has authority to supervise the progress of the performance of the PCs in these projects prior to releasing these grants. PCs do not have provision to deviate from the grant utilization guidelines provided by the Finance Commission. But in provinces where the road network is poor these are used for maintenance work (eg, Uva, EP). Only small length of roads actually receive any capital investment for rehabilitation (eg. Uva-10 kms(0.1%) and NCP -25 kms(2%)). This means that provincial roads can only be rehabilitated once every 50 years of more!)

10 Central Government allocates more than 90% of the budgetary needs of the PCs with provincial revenue accounting for only about 10% of their total financial needs for both recurrent and capital expenditure. In year 2007, the total expenditure of all PCs was Rs. 105, 850 mn and only Rs.13,900 mn was collected by the PCs from devolved revenues. Annual Vehicles Revenue License Fees makes up around 20% of the earned income(2007).

11 Maintenance Allocation & Expenditure Trend (2004( ) Allocation = Height of the bar, Expenditure= Dark Portion of the bar Rs. mn UP NCP EP 2007

12 500.0 Capital Allocation & Expenditure Trend ( ) 07) Allocation = Height of the bar, Expenditure= Dark Portion of the bar Rs. mn UP NCP EP

13 Some Observations Varying Utilization No consistency in Maintenance funds Imprest issues Diminishing Values Total Allocation & Expenditure Trend ( ) 07) Allocation = Height of the bar, Expenditure= Dark Portion of the bar Rs. mn UP NCP EP

14 For an average replacement cost of Rs 18 million in 2008 prices, the maintenance cost at 2% p.a. works out to around Rs 360,000 per km per year. This is a much higher level of maintenance than what is experienced on the present roads. This includes preventative maintenance and maintenance of road signs and markings which are totally missing on the entire provincial road network at present. The approximate breakdown of this amount at present prices would be as follows: Weeding and clearing Sand Sealing (3 yr application) Pothole management Maintenance of signs and markings Emergency repairs/repair of structures Overheads Rs 30,000 per year Rs 200,000 per year Rs 50,000 per year Rs 30,000 per year Rs 20,000 per year Rs 30,000 per year Thus it should be borne in mind that the ongoing re-construction program will increase total maintenance costs in the short term when more and more re-constructed roads will get added to the network for which a proper maintenance regime should be applied. That will then increase routine maintenance expenditure from an average of Rs 100,000 per km to around Rs 360,000 per km as has been suggested herein.

15 350,000.0 Central Govnt. Budgetary & Actual Allocation/km( ) Allocation = Height of the bar, Expenditure= Dark Portion of the bar 300, ,000.0 Rs. 200, , , , Est Est Est UP NCP EP 2008 Estimation is done, assuming same 2007 Fund utilization rate for 2008 allocation

16 Fleet, 2007 Vehicle Type UP Omnibuses NCP EP Private Coaches 1, Dual Purpose Vehicals 4,952 4,780 2,216 Private Cars 3,830 3,241 1,286 Land Vehicles 6,395 7,132 9,800 Goods Transport Vehicles 7,873 6,698 3,867 Motor Cycles 36,304 70,766 64,090 Threewheelers 13,299 10,894 9, , ,810 92,091 Others Total

17 North Central 4.7% Uva 3.3% Central 6.7% Eastern 4.1% Northern 3.2% % of Fleet by Province,2007 Estimated Total Fleet in Sri Lanka = 2,222,803 Western 43.5% North- Western 13.7% Sabaragamuwa 5.9% Southern 14.9% UP, NCP and EP are having the lowest vehicle fleets in the country

18 Growth of Fleet ( ) 07) 120, ,000 80,000 No o. of Vehicles 60,000 40,000 20,000 Annual growth rate = 17% UP 42,513 50,672 64,074 74,376 NCP 69,744 81,898 97, ,810 EP 66,736 73,135 92,131 92,091

19 Earned Vehicle Revenue/km Rs 180, , , , ,000 80,000 60,000 40,000 20, Est Est Est Est. UP NCP EP All Island (Excl. Western) 2008 Estimation is done, considering 15-20% vehicle growth per annum and increasing license fee on January 2008

20 (Earned Vehicle Revenue+Recieved Central Gvnt. Funds)/km Vehivle Revenue/km = Darker Portion Recieved Gvnt. Fund/km=Lighter Portion 250, , , ,000 50, Est Est Est. UP NCP EP

21 Life Cycle Cost Lifecycle cost of a re-constructed road, which would be estimated at Rs 18 million for re-construction and life cycle of 12 years at 2% maintenance cost per year, which works out to a total cost of 1.24 times the cost of reconstruction without escalation. The total life cycle cost without providing for escalation is Rs 22.3 million. On the other hand providing 15% escalation of costs will increase this to Rs 30 million per km in 2008 prices. Year Reconstruct Cost 0 18 Without Escalation Maintenance With Escalation Without Escalation Life Cycle With Escalation Maintenance Cost 2.0% Escalation Cost 15%

22 Road Fund Methods by which this desired maintainable road network could be achieved: 1. Road Maintenance Fund Subscribed to by PCs (with License Revenues) and Donor Agency Year Reconstruct Cost Maintenance Life Cycle Reducing Contribution Without With Without With Donor Provincial Escalation Escalation Escalation Escalation Agency Govt Maintenance Cost 2.0% Escalation Cost 15% Maintenance Increase 1.32

23 It enables the PC to begin maintaining the roads from year of re-construction as opposed to the present system where an improved road would not have the required budget for maintenance. It also enables the road network to be developed according a strategic plan whereby the entire provincial road network. At the end of the period, the PC would be fully able to meet the maintenance cost, where it is expected that the full annual cost of maintenance of the provincial road network could be raised from the vehicle revenue licenses and the grants from the Central Government

24 Uva NCP EP Road kms Roads reported in good condition kms Roads re-constructed after Road kms to be re-constructed Cost of Rs 18 mn/km 24,642 14,040 17,082 Kms re-constructed per year Number of years required (approx) Reconstruction Cost per year (Rs mn) Donor Agency Contribution to Fund Total Life Time Cost by Donor per year Total Cost per province Rs mn 29,078 16,567 20,157 Cost in US $ (mn) Cost per year in US$ (mn)

25 2. Road Maintenance Fund Subscribed by Provincial Council and Central Government 3. Road Maintenance Fund Fully Subscribed to 3. Road Maintenance Fund Fully Subscribed to by Annual Revenue License Fees

26 Uva NCP EP Road kms Roads reported in good condition kms Roads re-constructed after Road kms to be re-constructed Cost of Re-construction (Rs mn) 24,642 14,040 17,082 Kms re-constructed per year Number of years required (approx) Reconstruction Cost per year (Rs mn) Donor Agency Contribution to Fund Total Life Time Cost by Donor per year Total Cost per province Rs mn 29,078 16,567 20,157 Cost in US $ (mn) Cost per year in US$ (mn)

27 Maintenance for Roads should be based on the current state of roads and provided as a km cost. It should not be included in a block grant. Maintenance funds should be Priority 1. There should be no cuts in this. There should be a clear distinction of capital projects. These should be only those that will include rehabilitation. Funds for this should be allocated only after full maintenance funding is provided. There are problems with imprest to be investigated There are problems with utilization to be investigated The desired level of maintenance funding of 2% (around Rs 360,000) per km can be provided from existing allocation and earned provincial revenues.

28 For this purpose for roads that are to be rehabilitated a Road Fund can be created so that those providing funds for rehabilitation (donor or PSDG) contributes life cycle cost to a fund. The province could undertake this on a increasing basis where over 8 t0 10 years it is fully borne by the PC using vehicle revenue license fees. For this purpose it is best to designate all vehicle revenue licensing income into the income of the road agency earmarked for maintenance.

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