By: Staff Writer

January 12, Colombo (LNW): The Indo-Lanka bus procurement deal, initiated in 2018 and finalized five years later, has come under intense scrutiny following a government audit report that alleges overspending of Rs. 3.01 billion.

The audit findings have triggered concerns about financial mismanagement and raised questions about the impact on Sri Lanka’s diplomatic ties with India.

The agreement, part of a $20 million Indian credit line, was intended to revitalize Sri Lanka’s struggling public transport system, where 52% of buses had exceeded their operational lifespan.

Under the deal, 500 buses were procured to serve urban, semi-urban, and rural routes, particularly in remote areas where commuters often had to walk 1–3 kilometers to access transport services.

However, the National Audit Office recently revealed an alleged overpayment during the procurement process, fueling public and media criticism.

Former Transport Minister Bandula Gunawardena responded by writing to the Indian High Commissioner recently urging an impartial investigation into the allegations. Copies of the letter were also sent to key government officials, including the President’s Secretariat and ministries of finance, foreign affairs, and transport.

Allegations of Overpayment and Procurement Irregularities

The controversy stems from the Cabinet-approved decision in 2018 to purchase 400 50-54 seater buses and 100 32-35 seater buses using $15.03 million from the Indian Line of Credit.

However, the procurement specifications were revised in 2020 to 500 32-35 seater buses and 100 42-45 seater buses to meet re-evaluated transport needs.

The National Audit Office reported that the 2023 procurement cost of Rs. 11.02 million per bus significantly exceeded the estimated cost of Rs. 5 million per bus in 2018, resulting in an overpayment of Rs. 6.02 million per bus.

The total excess payment amounted to Rs. 3.01 billion, with critics pointing to poor planning, inefficiencies, and lack of transparency in the procurement process.

Former Minister Gunawardena defended the process, highlighting the unprecedented economic challenges during the procurement period.

 He cited the Sri Lankan rupee’s depreciation (from Rs. 182 per USD in 2018 to Rs. 360 per USD in 2023), global inflation, and supply chain disruptions caused by the COVID-19 pandemic and geopolitical tensions.

While these factors contributed to higher costs, the audit report suggests that other inefficiencies or irregularities may have played a role.

Key Timelines and Decisions

2018: Cabinet approves the procurement of 500 buses using the Indian credit line.

2020: Procurement specifications are revised, and the Indian Exim Bank agrees to fund the revised purchase plan.

2021-2022: Indian Exim Bank pre-qualifies suppliers, and a competitive bidding process is initiated. Ashok Leyland Ltd. of India is awarded the contract in May 2022.

2023: The buses are procured at a cost of $26,662 (Rs. 11.02 million) per unit.

The delay in procurement, attributed to the pandemic and governance issues across multiple administrations, resulted in missed opportunities to renegotiate terms amid rising costs.

Broader Implications

Financial analysts have noted that while currency depreciation and global inflation contributed to the price increase, the absence of a detailed cost comparison in the audit report leaves room for speculation about potential irregularities. The findings underscore the need for transparency and robust financial oversight in managing foreign credit lines to prevent similar controversies.

As Sri Lanka continues to rely on international loans to address economic challenges, governance reforms are crucial to restoring public trust and ensuring efficient use of resources. Streamlining procurement processes, enforcing competitive bidding, and maintaining accountability are critical to avoid further financial mismanagement.

Gunawardena emphasized that such allegations, if unresolved, could harm Indo-Lanka relations and tarnish the credibility of both nations’ cooperative efforts. He called for an impartial investigation to clear doubts and uphold the integrity of the procurement process.

By: Staff Writer

January 12, Colombo (LNW): Sri Lanka will lift its four-year ban on vehicle imports for personal use starting February 1, 2025. This decision aims to boost government revenue through import duties, normalize economic activity, and address public demand.

However, the process will be carefully managed to protect the country’s foreign exchange reserves. Importers are required to sell vehicles within three months or face a 3% penalty fee. Additionally, higher customs duties will apply to minimize the strain on foreign exchange reserves.

Central Bank Governor Nandalal Weerasinghe revealed that the decision followed an economic analysis conducted in mid-2024. He noted that the long-standing restriction on vehicle imports had created a need for new vehicles as the economy stabilizes.

The central bank recommends allowing vehicle upgrades selectively, ensuring minimal disruption to the existing market while imposing additional costs on those seeking newer models.

Weerasinghe also highlighted the impact of currency fluctuations and new taxes. With a significant depreciation of the exchange rate and the imposition of an 18% VAT, the value of older vehicles could drop sharply if unrestricted imports resume.

For example, a five-year-old vehicle worth 5 million rupees might lose its market value due to new imports. To avoid a market flood and maintain balance, upgrades should only be permitted with added costs to deter unnecessary large-scale imports.

Taxes and exchange rate changes have significantly increased vehicle import costs. Excise duties, VAT, and luxury taxes have all risen since 2020.

The total price for some vehicles could now exceed a 45% increase compared to previous rates. For instance, taxes for petrol vehicles with engine capacities under 1,000cc have surged from 2 million rupees to an estimated 3.3–3.5 million rupees.

Larger vehicles with engine capacities above 1,000cc may see tax hikes of up to 1.5 million rupees.

Changes in luxury tax regulations will also widen the scope of taxation. Previously applied only to vehicles with engine capacities above 2,000cc, the tax will now extend to vehicles exceeding 1,500cc. This move further raises costs for higher-end vehicles.

Additional import restrictions aim to prevent market saturation. Importers must sell their stock within three months or face steep fines ranging from 3% to 46% of the vehicle’s value.

 Sri Lanka Customs will inspect 25% of imported vehicle stocks, and if over a quarter remains unsold, importers could face a three-year ban. Industry experts predict these restrictions will limit the volume of imports, even with the market reopening.

Delays in vehicle deliveries from foreign manufacturers are another challenge. Luxury vehicles, in particular, may require more than a year to arrive in Sri Lanka due to supply chain disruptions.

Given the high taxes, regulatory measures, and logistical delays, experts believe the vehicle import market will see only a gradual and limited recovery, preventing a rapid influx of new vehicles.

By: Staff Writer

January 12, Colombo (LNW): Sri Lanka’s tea industry is expected to see modest growth in 2025, despite facing a range of challenges.

According to a report from Forbes and Walker Tea Brokers, the country’s tea production is set to stabilize after several years of decline. However, the industry will still confront significant uncertainties, particularly related to global supply dynamics and the Sri Lankan rupee’s exchange rate.

After experiencing a drop in production in previous years, Sri Lanka’s tea industry is poised to face a shortage in Orthodox Large Leaf teas, largely due to a production shortfall in India in 2024.

The first quarter of 2025 is expected to bring some stability, with tea prices likely to remain buoyant as the country enters its Western quality season.

This period traditionally offers better crop yields, which should help maintain a positive outlook for the first quarter and possibly into the first half of the second quarter of 2025.

However, much of the year’s performance will depend on global supply conditions, as well as factors such as the exchange rate of the Sri Lankan rupee against the US dollar.

The government’s plans to ease import restrictions, including those on vehicles, could have a notable impact on the rupee, potentially influencing tea prices.

Despite these uncertainties, Forbes and Walker Tea Brokers have cautiously forecasted that Sri Lanka’s tea production in 2025 will reach approximately 280 million kilograms.

This projection considers challenges like climate change, rising costs for inputs and wages, as well as the effects of government policies and mechanization. These variables are expected to influence production levels, though the overall forecast remains optimistic, albeit cautious.

On the global stage, Sri Lanka’s key tea markets in India and China present potential for growth. However, factors such as economic instability and unpredictable weather conditions in these regions could disrupt the supply-demand balance and impact growth opportunities.

Reflecting on 2024, Forbes and Walker Tea Brokers highlighted a positive recovery in Sri Lanka’s tea industry, dubbing it “The Year of Reclaiming Change.” Strong demand for high-quality teas, particularly from the Western and Uva regions, contributed to this recovery.

Additionally, the appreciation of the Sri Lankan rupee provided some relief, while increased momentum in tea value, which started to build in late 2023, was evident across all elevations. Both high-quality and Low Grown teas saw steady demand, contributing to the overall positive outlook for the country’s tea exports.

In conclusion, while 2025 holds promise for Sri Lanka’s tea industry, it will be influenced by multiple factors, including global market conditions, climate change, and domestic economic policies. The industry’s cautious optimism reflects both the challenges and the opportunities ahead.

By: Staff Writer

January 12, Colombo (LNW): India’s IndiGo airline has officially become the largest foreign carrier operating out of Sri Lanka, with 54 weekly flights connecting Sri Lanka to India.

These flights, serving Colombo and Jaffna from four major Indian cities—Bangalore, Chennai, Hyderabad, and Mumbai—are a key component of IndiGo’s strategy to expand its global presence and contribute to bilateral relations between the two nations.

IndiGo’s operations reflect a broader commitment to enhancing connectivity between India and Sri Lanka. According to the airline’s Head of Global Sales, Vinay Malhotra, this expansion marks a significant milestone in strengthening the India-Sri Lanka relationship.

 By offering direct flights to more cities in Sri Lanka, IndiGo aims to stimulate tourism, foster economic growth, and provide greater travel options for passengers.

The Sri Lanka Tourism Promotion Bureau has also highlighted the importance of IndiGo’s growth, particularly the increased frequency of flights, including to Jaffna.

This expansion is seen as a major step in promoting the development of Sri Lanka’s Northern Province, facilitating cultural exchange, and boosting tourism.

Additionally, the role of Acorn Aviation, IndiGo’s General Sales Agent in Sri Lanka, is acknowledged for its long-standing efforts in promoting Sri Lanka’s tourism and aviation sectors.

IndiGo’s strengthened air connectivity will have economic benefits for both countries. For India, it offers easier access to Sri Lanka, a growing destination for Indian tourists, and could further boost tourism numbers.

For Sri Lanka, the increased Indian visitor influx—already showing significant growth in early 2024—is set to bolster the nation’s economy.

With this expanded network, IndiGo is positioning itself as a leader in international air travel between India and Sri Lanka, continuing its commitment to reliable, cost-effective service while helping both nations strengthen their cultural and economic ties.

The enhancement of connectivity between India and Sri Lanka is set to yield significant benefits for both nations. For India, this increased connectivity facilitates easier access to Sri Lanka, a popular destination for Indian tourists.

This could potentially boost tourism, fostering cultural exchange and mutual understanding. On the other hand, Sri Lanka will gain economically, with Indian tourists contributing significantly to its tourism revenue.

Sri Lanka saw a surge in tourism with 200,000 Indian visitors in early 2024, providing a substantial boost to the local economy.

Colombo, the vibrant capital of Sri Lanka, serves as a bustling hub for both business and tourism. The city is well-connected to the international airport and offers easy access to the island nation. Colombo itself is a city of contrasts, where modern skyscrapers stand alongside colonial-era architecture.

Travellers can explore a wealth of cultural and historical landmarks, including the Gangaramaya Templeand the National Museum. For culinary adventure lovers, Colombo’s diverse food scene offers a tempting array of flavours, from spicy curries to fresh seafood.

Jaffna, a city located in the northern province of Sri Lanka, is a destination that boasts a rich history and cultural significance. Its vibrant Tamil heritage is reflected in its traditions, festivals, and historical landmarks, showcasing the resilience and diversity of its people.

Visitors can explore iconic sites such as the Jaffna Fort, which serves as an architectural testament to the region’s colonial past, and the Nallur Kandaswamy Kovil, a revered Hindu temple that holds both religious and cultural importance.

By: Staff Writer

January 12, Colombo (LNW): In a major step toward modernisation, the Board of Investment (BOI) of Sri Lanka launched a significant initiative to digitise its operations, marking a pivotal moment in the country’s industrial development.

The move, which focuses on the automation of key functions at the Central Verification Division in Orugodawatte, will transform processes previously reliant on manual systems, enhancing efficiency, transparency, and reducing operational costs.

Digitisation and Enhanced Security with BOI’s Central Verification Division

The Central Verification Division of the BOI has taken the lead in the transition to a digital ecosystem by automating essential services such as the issuance of gate passes.

This digitisation aims to reduce human intervention and paper usage, resulting in smoother, faster operations. By incorporating QR codes into digital gate passes, the BOI enhances security while streamlining approval processes.

The system also integrates electronic payment solutions, offering 24/7 service availability and allowing for a significant reduction in reliance on human resources.

 As part of the broader plan to revamp service delivery, the new digital platform replaces traditional paperwork with seamless digital processes, from the collection of import and export fees to the verification of documentation.

This transformation is a vital step in modernising Sri Lanka’s industrial export infrastructure.The shift from manual processes that once defined the collection of verification charges and the management of export verification procedures is a welcome change.

The integration of digital identification tools and the automation of approvals, licenses, and verifications are expected to significantly boost the efficiency of operations.

The newly implemented system is a response to the challenges posed by outdated processes that previously hindered the division’s operations.

The Central Verification Division, established in 1993, has long been a cornerstone of import and export clearances, particularly for industries operating outside designated investment zones.

However, the reliance on manual methods had become an obstacle, prompting the adoption of this new digital solution.

At the launch, BOI Chairman Arjuna Herath emphasised the importance of this initiative for Sri Lanka’s economic growth, stating that industries under the BOI’s oversight contribute to 80% of the country’s industrial export revenue.

He reiterated the BOI’s commitment to improving infrastructure to support these industries. Renuka Weerakoon, Director General of the BOI, also expressed optimism about the digital transition’s potential to enhance the ease of doing business in Sri Lanka.

With the commencement of digital gate permits, the BOI has made its first major step in what is expected to be a comprehensive transformation of the country’s industrial services, ultimately benefiting both businesses and the economy.

January 12, Colombo (LNW): In a move aimed at regulating the import of vehicles, the Sri Lankan government has issued a special gazette notification outlining the new excise duties on vehicles imported from February onwards.

The gazette, issued by the Minister of Finance, who also holds the office of the President, introduces significant tax hikes, with excise duties set between 200 per cent and 300 per cent.

The new tax structure, which will vary depending on factors such as engine cylinder capacity and motor power measured in kilowatts, is expected to substantially increase the cost of vehicles.

According to the notification, the taxes will be applied progressively, impacting a wide range of vehicle categories.

Indika Sampath Merenchige, President of the Vehicle Importers Association of Lanka, has predicted that vehicle prices could rise by approximately 20 per cent as a result of these new taxes.

However, he cautioned that the final price could be even higher once additional taxes, including VAT, are taken into account.

This move by the government has sparked concern within the automotive industry, as it could have a significant effect on both importers and consumers.

The increased costs have been interpreted to be placing added financial pressure on individuals looking to purchase new vehicles, and leading to a shift in demand towards lower-cost alternatives or second-hand options.

Read Full Gazette: https://lankanewsweb.net/wp-content/uploads/2025/01/G.N-2418-43-10.01.2025-EX.SPL_.PRO-1.pdf