Targeting Exercise

May 26, 2008 (LBO) – Sri Lanka is developing a scheme to pay fuel subsidies to bus operators that may cost the exchequer 7.0 billion rupees a year, officials said, after a steep rise in diesel pushed up fares. Sri Lanka has a practice of under-pricing diesel because authorities believe that inflation is a petroleum (or diesel) related phenomenon rather than a monetary one.

Alahapperuma said at the moment all and sundry including rich people and foreign diplomats who used diesel vehicles received the subsidy.

He said the government was hoping to target subsidies to the most needy. Private operators have raised fares by 27.2 percent but state-run firms which receive a subsidy are raising fares by only 17.0 percent.

About 2.0 billion rupees of the money would go to the state-run bus system, transport minister Dullas Alahapperuma said. The balance 5.0 billion rupees would go to privately owned buses.

But the bus operators, about 85 percent of whom are single-owner independents, would have to form themselves into companies to claim the subsidy, private bus operators’ association chief Gemunu Wijeratne said.

If and when the subsidy scheme goes into operation, private bus fares would also