Sri Lanka’s vehicle ownership situation is one of want.
The country had roughly 905,000 registered motor cars for a population of over 22 million at the end of 2024, according to National Transport Commission (NTC) statistics. Motor bicycles dominate the fleet at 4.9 million, a telling indicator of how most households move around.
Private car ownership is effectively out of reach for a large majority of the population – the combination of vehicle import taxes, foreign exchange constraints, and financing costs puts a new motor car well beyond ordinary incomes.
In that context, public transport is an economic necessity and the backbone of that system is the bus. In 2024, buses accounted for 46% of all passenger traffic by mode share, up sharply from 30.2% in 2023, according to data compiled by the NTC. Yet the operators who run most of these buses are facing conditions that, by their own account, are unsustainable.
Private operators’ public burden
Sri Lanka’s bus network is a hybrid. The Sri Lanka Transport Board (SLTB), the State operator, ran a fleet of around 7,135 buses and carried approximately 946 million passengers in 2024.
Government policy stipulates that the private sector must operate 60% of scheduled bus trips, with the SLTB covering the remaining 40%. The private fleet of 20,062 buses does the heavier operational lifting across a network of 4,078 routes.
The private sector operated 14,790 buses in 2024, compared to the SLTB’s 4,581 average daily operations, and collectively moved over two billion passengers during the year – a 48.8% increase from 1.4 billion in 2023. Passenger kilometres by private buses rose even more sharply, from 23,779 million in 2023 to 35,187 million in 2024.
These operators do not enjoy the financial cushion the State affords its own fleet. The SLTB imports its buses tax-free and can draw on Treasury support when losses mount, which has historically been the norm.
Private operators, by contrast, work within the commercial economy: they finance buses through leasing, pay market interest rates, and absorb the full burden of import duties, Value-Added Tax (VAT), and maintenance costs.
The tax problem: Imported on unfair terms
United Transport Trade Union Alliance President Sampath Ranasinghe, speaking to The Sunday Morning, said that a bus purchased today for Rs. 50 million carried a tax burden of roughly Rs. 20 million, approximately 40% of the sticker price. VAT alone is 18%, and when layered with other levies, the total tax component approaches 45%. This compares to zero tax on buses imported before recent policy changes introduced, in part, as conditions attached to Sri Lanka’s International Monetary Fund (IMF) support programme, he claimed.
The VAT component creates a particular problem because operators typically cannot buy a bus outright. Buses are financed through leasing and the lease amount includes the tax portion.
“At current leasing rates of around 15% interest, operators are effectively paying interest on money borrowed to pay Government tax. The result has been a near-doubling of monthly lease instalments, from a range of Rs. 500,000–600,000 previously, to Rs. 1.2–1.3 million today.”
Lanka Private Bus Owners’ Association (LPBOA) President Gemunu Wijeratne, speaking to The Sunday Morning, stated that when operating costs rose and public transport weakened, passengers shifted to private vehicles.
“That shift produces a cascade of costs, more fuel imports, greater congestion, higher carbon emissions, and infrastructure degradation that far exceed the tax revenue collected on bus imports.”
Sri Lanka burns around nine million litres of petrol and diesel per day, according to Wijeratne, and the productivity of that fuel use is, in his estimation, only around 60%. A stronger public transport system would directly reduce that consumption.
The Government, however, has maintained the taxes on the basis that they form part of its IMF commitments. Ranasinghe acknowledged the constraints but noted, with some frustration, that the Government had shown willingness to negotiate other aspects of the IMF arrangement. On the bus tax, that flexibility has not been applied.
Operating costs and the fare ceiling
The tax on vehicle imports is only one pressure point. Operating costs have risen across the board. The NTC’s own Bus Operating Cost Index shows that total costs nearly doubled during the inflationary surge of 2022, reaching an index of 267.55 before partially retreating to 236.23 by late 2024. Fuel remains the single largest cost component in the index.
Spare parts and maintenance represent a compounding problem. Many components are imported and priced in dollars, meaning exchange rate movements feed directly into operator costs. As Ranasinghe explained, a part that previously cost Rs. 280 may now cost Rs. 350 – a rise of Rs. 70 per unit, across every component of every bus in a fleet.
“Engine oil prices rose by Rs. 300 per litre in a single week at one point. Tyre prices have increased by as much as Rs. 20,000 per unit. The fuel burden on long-distance routes is instructive. A Colombo-Kataragama return trip now consumes approximately Rs. 80,000 in diesel. That is the fuel cost alone, before crew wages, tyres, oil, insurance, or loan instalments are counted. An operator running that route must generate at least Rs. 80,000 in revenue before a single rupee flows to other costs or profit.”
Bus fares are regulated. The National Bus Fare Policy, in place since 2002, ties fare revisions to changes in the Bus Operating Cost Index, with permitted interim adjustments when fuel price increases exceed 4% per kilometre. Costs are rising on all sides while the revenue ceiling is fixed by a formula that responds primarily to diesel prices.
Operators with small fleets of one or two buses are, in Ranasinghe’s assessment, already at breaking point. Even those with larger fleets of 25 or 30 buses cannot sustain current conditions indefinitely.
An ageing fleet and falling demand on some routes
The private bus fleet has not been substantially renewed in nearly eight years. Most buses in operation are more than a decade old, in many cases pre-dating 2015, which means maintenance costs continue to rise as vehicles age.
New registrations of buses fell sharply in 2024, declining 79% from 685 in 2023 to just 146, even as overall vehicle registrations surged 167% following the gradual resumption of vehicle imports.
A normal Leyland bus now costs around Rs. 18 million, making fleet renewal very difficult for most operators. The irony is that the regulatory framework requires buses introduced through the NTC to be no older than 10 years, a standard that stands in some tension with the Government’s simultaneous inability to support fleet renewal.
Passenger volumes have also been uneven. While the overall bus modal share rebounded strongly in 2024, Ranasinghe noted that long-distance route patronage had been affected by household financial pressures. People are travelling less, he says, and any uptick in rail disruptions may shift passengers to certain corridors, such as Kandy and Badulla, but leaves many others unaffected. Operators on these routes are still working with depressed load factors.
The SLTB, a reference point, not a model
The SLTB’s financial data illustrates how differently the two halves of the sector operate.
The State carrier posted a profit of Rs. 5.6 billion in 2024, its highest in recent years, with total revenue reaching Rs. 100.9 billion against total costs of Rs. 95.3 billion. Operated kilometres rose 33% to Rs. 509 million in 2024. However, the SLTB does not pay taxes on its buses. Its wage bill is effectively backstopped by the State. Fuel costs alone consumed Rs. 52.1 billion of the SLTB’s operating budget in 2024, roughly 55% of total bus operating expenses.
Private operators collectively remit approximately Rs. 2 billion annually to the Government in fees, route permit charges, monthly log sheet fees (Rs. 3,000 per month per bus), and revenue licence renewals, on top of all commercial taxes.
Even a short-distance bus operator pays between Rs. 80,000 and Rs. 90,000 per year in regulatory fees alone, excluding income tax. The SLTB, for all its operational improvement, still depends on Treasury transfers in difficult years. Private operators have no equivalent backstop.
What can be done
Operators have not come to the Government empty-handed. They have proposed specific interventions. The first and most direct is the removal of VAT on buses used for public transport.
This was the position before the current tax regime, said Ranasinghe, and there is a clear economic rationale for restoring it, as taxing public transport raises the cost of the service while generating revenue that is likely outweighed by the economic costs of reduced mobility.
Where full tax removal is politically constrained by the IMF arrangement, operators are asking for targeted support. Ranasinghe called for subsidised leasing through State banks, preferably at 5–6% interest instead of the prevailing commercial rate of around 15%. The Small and Medium-sized Enterprises loan programmes that existed in earlier years offered this model; there is no structural reason it cannot be extended to bus operators.
A diesel subsidy specifically for public transport buses is another option, according to the owners.
“The QR code-based fuel management system now in operation allows the Government to track individual bus mileage and, by extension, fuel consumption by route. A Colombo-Kataragama bus has a known route and known fuel requirement. A targeted subsidy is administratively feasible in a way it was not a decade ago.”
Wijeratne also raised the question of electric buses. The sector has already held preliminary discussions with China on the possibility of importing electric buses. Fuel costs, engine maintenance, and spare parts costs make the transition attractive in principle. The Government could facilitate this through preferential import terms or financing, a pathway that would also serve its longer-term environmental commitments.
The stakes
The Government’s own transport policy acknowledges the need for a modern, efficient public transport system.
The opening of the Kadawatha Multimodal Transport Centre, plans for a nationwide e-ticketing system, and the proposed expansion of the SLTB fleet are all indicators of stated intent. But intent is insufficient if the private sector, which operates the majority of the country’s buses, is being pushed towards insolvency by the tax and cost structure it operates within.
All attempts by The Sunday Morning to reach the NTC, Ministry of Transport, and SLTB proved futile.