News

Central expressway going nowhere?

By Maheesha Mudugamuwa and Sarah Hannan

The Central Expressway project has stalled as a result of issues in funding and conditions imposed to release some of the funds, The Sunday Morning learnt. China, Japan, and Sri Lanka are involved in funding parts of the project.

The expressway was expected to be completed by 2020. Construction of the Central Expressway was to be carried out in four phases with the first phase being a 37 km-stretch from Kadawatha to Mirigama, the second phase a 40 km-stretch between Mirigama and Kurunegala, the third phase a 33 km-stretch between Pothuhera and Galagedara, and the fourth phase a 60 km-stretch between Kurunegala and Dambulla.

The second phase of the Central Expressway from Mirigama to Kurunegala was earmarked for completion by the last quarter of 2019.

However, well-informed sources told The Sunday Morning that there would be delays in completing the first, third and fourth phases.

The construction of the first phase of the project was undertaken by a Chinese company, but remained stalled for more than two years due to a delay in the release of funds (a loan amounting to $ 1.1 billion) by the Chinese Exim bank.

Road Development Authority (RDA) sources told The Sunday Morning that the delay in reaching an agreement with Japanese and Chinese banks had resulted in a delay in the whole project.

The first and second phases have been delayed as a result of the delay in funding. The second phase was now being constructed by a local consortium that was utilising the funds (through a loan) obtained from local banks at higher interest rates, forcing the RDA to withdraw funds allocated for other developments projects to pay back the loan interest, according to the sources.

Loans

According to the RDA, the work on the second phase of the expressway was undertaken by four consortia of 16 local companies with financing from Bank of Ceylon (BOC), People’s Bank, National Savings Bank (NSB), Sampath Bank, and HDFC Bank.

The total loan amount for the second phase of the project was around Rs. 137.10 billion.
Speaking to The Sunday Morning, Project Director of the Central Expressway Phase II V. Mohan said that at present, around 60% of the construction work was completed and that the rest would be completed by the end of this year.

“The funds were obtained from local banks and there is a three-year grace period to start paying off the capital amount. We had started paying the loan interest six months after the beginning of the project. There is around 2% in service interest and the loan interest is between 10-12%, which depends on the reports of the Central Bank. The loan is being granted for a period of 30 years, under the guarantee of the Treasury,” Mohan said.

When asked whether there was any difficulty in repaying the loan interest, Mohan said the interest was being paid by the Treasury and that necessary funds had already been allocated from the last year Budget and therefore, there was no such issue as at present.

However, only the second phase of the Central Expressway is being constructed at present, while the construction of the first phase, which began in 2015, was currently at a standstill due to lack of funds. However, the contractors had begun the construction on their own funds, but had only completed around 8% of the development during last four years, the sources claimed.

The first phase of the project stretching over 37.09 km from Kadawatha to Mirigama, with Metallurgical Corporation Of China Ltd., seems to have come to an abrupt halt due to a delay in the release of funds by China’s Exim Bank for the civil work that was to be directed through the Bank of Ceylon of Sri Lanka. The section was to be completed by end-2019.

Progress?

When contacted, RDA Director General Kamal Amaraweera said that the Chinese loan for the first phase of the Central Expressway had been finalised and that the construction work will soon be expedited once the funds were released by the bank.

Commenting on the third phase of the project, Amaraweera stressed that it was very unlikely that the construction of that stage of the expressway would commence within the year due to the other budgetary responsibilities.

Since only the second phase would be completed at the end of 2019, the RDA plans to improve the A1 road up to Mirigama, thereby facilitating the commuters to use the second phase of the expressway, from Mirigama to Kurungegala, the DG noted.

According to the RDA, the construction of the third phase from Pothuhera to Galagedara, stretching over 34.12 km, is set to be funded by MUFG Bank Ltd., with the contract scheduled to be awarded to Taisei Corporation, which forecasts a cost of Rs. 1.16 billion. Funding will also be received from Japan, for the amount of 1.2 billion Japanese yen. The construction work on this section is to commence by the end of 2019 and the expected year of completion is estimated to be 2022.

A senior official of the RDA who wished to remain anonymous said the authority would look for alternative options if it failed to finalise the agreement with the Japanese company.

The final section of the Central Expressway, earmarked from Kurunegala to Dambulla and which will stretch over 29.30 km, is speculated to be given to a Chinese contractor.

However, the delays on the first and third phases imply that the time frame to complete the fourth phase would be pushed back.