In Sri Lanka, bus transportation, which was a public service provided by the government, was supported by a general subsidy for twenty years, from 1958 to 1978. This period facilitated the development of a comprehensive network of bus services. In 1980, the general subsidy was brought to an end and two specific subsidies were introduced, one for school transport and one for rural transport. This publication examines these two subsidies along with the role of subsidized rural bus services, the distributional consequences of subsidies for bus transport on low-income populations and recommendations to solve the problems relating to this.