Sri Lanka: Passenger Transport Services Improvement

Transport / Road transport (non-urban)

Focusing on bus transport services and with the purpose of developing a framework for a national and provincial route franchising system, which includes the complimentary bus terminal services, the consulting firm will undertake the tasks identified in the detailed TOR. Phase I of the TA will consist of an analysis of the current market structure and policy, regulatory and institutional frameworks related to the sector, and will include assessments of the operational and financial performance of the existing operators. On the basis of projected supply/demand analysis, the study will determine the optimal market, regulatory and institutional structures that will address the identified constraints and determine the reforms necessary to establish these structures. A detailed implementation plan and a regulatory framework will be drafted. Phase II of the TA will assist four provinces selected by Ministry of Transport Highways and Civil Aviation (MTHCA) in the implementation of the recommended regulatory and institutional framework structures through capacity building and training and will provide specific assistance regarding the drafting of franchise agreements.

Phase I Analysis

(i) Identify, review and analyze all existing and draft laws, regulations, decrees, policies, plans and institutional frameworks and arrangements related to the sector and the services provided by (i) private, (ii) public and (iii) public-private operators.

(ii) Review and analyze the existing market structure for all market segments, including market entry conditions such as issuance of licenses and permits and route assignments, and other factors affecting competition, including the components of the fare structure and its determination, public service obligation subsidies and driver and vehicle safety requirements.

(iii) Assess and evaluate the operational and financial performance of privately operated bus services, including urban, inter-and intraprovincial services.

(iv) Assess the operational and financial performance of publicly operated bus services, including urban, inter-and intraprovincial services.

(v) Where applicable, assess the operational and financial performance of bus services operated by public-private partnerships, including urban, inter-and intraprovincial services.

(vi) Conduct consultations with stakeholders, including a survey of public opinion on all existing services and establish ways to ensure public participation in the design of the institutional and regulatory frameworks.

(vii) For the inter-provincial services, conduct demand surveys for a minimum of ** percent [to be provided by PUC] sample routes and assess the supply level of those routes. Prepare outline demand/supply projections for the sample routes for the next 5-10 years.

(viii) For the intra-provincial services, conduct demand surveys for a minimum of 25 percent (or 15 routes which ever is higher) of four provinces selected by MTHCA and assess the supply level of these routes. Prepare outline demand/supply projections for the sample routes for the next 5-10 years.

(ix) Estimate the present and projected deficit financing requirements, including future investment needs. Evaluate the constraints of the existing structure with reference to its ability to attract and raise private investments and improve the quality, efficiency and equity of the services. Assess the capacity of local banks and other financial institutions to evaluate and fulfill the financing requirements for the private sector. Review how similar constraints have been solved according to international best practice in comparable country contexts.

(x) Determine the optimal market, regulatory and institutional structures that will address these constraints and meet the Governments objectives of improving the quality of the services, reducing the public financing requirements and attract private capital.

(xi) Determine the reforms necessary to establish these structures.

(xii) Estimate the economic benefits of implementing these reforms and the impact on the poor.

(xiii) Prepare an initial social analysis of the proposed reforms and investments in accordance with ADB's Handbook on Poverty and Social Analysis.

(xiv) Develop a detailed implementation plan for the recommended regulatory and institutional framework structures, including mechanisms for ensuring public consultation and participation, transparency and good governance.

(xv) Draft a regulatory framework defining the regulator's role, powers, appointment procedures and relationship with other central and/or provincial authorities, including the Public Utility Commission.

(xvi) Develop an implementation plan for the remaining elements of the recommended reforms, including a detailed analysis of the necessary public and private investments.

Phase II Implementation

3. Assist the four provinces selected by MTHCA in the implementation of the recommended regulatory and institutional framework structures through capacity building and training regarding: (i) analysis of demand composition and determination of adequate supply in the form of route franchises, including use and development of locally developed computer tools; (ii) drafting of franchise agreements; (iii) development of bidding procedures and evaluation mechanisms; and training in negotiation.

4. Elaborate a prioritized inventory of potential future public sector projects, including the capacity and training components identified in para. 3.