By: Staff Writer

January 12, Colombo (LNW): The Colombo Port is grappling with significant congestion due to a sharp increase in container volumes, exposing infrastructure inadequacies and inefficiencies in Customs operations, according to Sri Lanka Customs Spokesman Additional Director General Seevali Arukgoda.

Statistics from Sri Lanka Customs reveal that daily container traffic has surged from an average of 800–1,200 to over 1,500, occasionally exceeding 3,000. However, the existing facilities remain incapable of handling this growth, creating severe bottlenecks.

“The volume has increased, but infrastructure has not kept pace,” Arukgoda stated, highlighting that plans for a modern Customs examination yard in Kerawalapitiya—designed by the Asian Development Bank (ADB) in 2020 to meet demands until 2050—were halted after the land was repurposed by a previous administration. President Anura Kumara Dissanayake has now committed to reviving the project.

To manage the crisis, Customs has reduced physical inspections from 80% of containers to 35%, allowing 65% to be cleared without intervention. Yet, non-compliance remains high, with 55–65% of inspected containers containing undeclared, excess, or prohibited items. Arukgoda stressed the need for robust checks to prevent public safety risks, maintain standards, and curb revenue losses.

Efforts to combat corruption have led to the suspension of four Customs officers for inadequate inspections, though these measures have also slowed operations. External factors, such as delays caused by importers exploiting exchange rate fluctuations and insufficient staffing at agencies like the Sri Lanka Standards Institution (SLSI), have further exacerbated the situation.

“On a single day, out of 440 containers slated for examination, only 60 were for Customs. The rest required checks by other agencies,” Arukgoda explained. Delays are also worsened by restrictions on container transport during certain hours and extended testing periods by other authorities, leaving containers to occupy valuable yard space for months.

To alleviate congestion, Customs has temporarily rented private yards to store containers, with associated costs passed on to importers rather than the Government.

Deputy Minister of Ports and Civil Aviation Janitha Ruwan Kodithuwakku attributed the congestion to increased imports and exports driven by economic growth. He announced plans to improve infrastructure, including constructing a 200-meter road linking the Colombo International Container Terminal (CICT) and East Container Terminal (ECT). This road, expected to be completed within a month, aims to streamline inter-terminal transfers, reducing berth delays for ships.

Additionally, a special committee comprising Customs, Ports, and Department of Health officials has been formed to address operational inefficiencies. Initiatives such as incentivizing workers and establishing temporary inspection points, like the facility at Bloemendhal, are expected to expedite container clearance.

Kodithuwakku expressed confidence that these measures would resolve congestion within two months.

 Meanwhile, the Container Transport Owners’ Association (CTOA) reported that inefficiencies at the Sri Lanka Ports Authority (SLPA) and Customs have left 800–1,000 vehicles stranded at the port, with drivers waiting up to a week for container clearance. The Wharf Workers’ Association warned that these delays could drive up import costs by 20%, as late fees are ultimately passed on to consumers.

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.