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Development of WCT at Colombo Port: Govt. calls Adani to Port

14 Mar 2021

  • Adani to get deal similar to Chinese CICT

  • Indian Govt. distances itself from WCT

  • Japanese Govt. remains silent

  • TUs object to WCT development plans

  Sri Lanka is putting the finishing touches on the terms and conditions of the agreement to be signed with Adani Group, an Indian multinational conglomerate, for the development of the West Container Terminal (WCT) at the Colombo Port, The Sunday Morning learnt. The WCT agreement is said to have similarities with the agreement signed between the Sri Lanka Ports Authority (SLPA) and China Merchants Port Holdings Company Ltd. (CMPH), a listed blue-chip company in the Stock Exchange of Hong Kong, for the development of Colombo International Container Terminals Ltd. (CICT) nearly a decade ago. Hence, for the Indian investor, Adani, the WCT would not be the same investment as the strategic East Container Terminal (ECT) investment that was promised by the previous Government, for which the Memorandum of Co-operation (MoC) was signed in 2019. However, it is learnt that it is probably a better option with additional opportunities despite the ECT’s strategic importance. The MoC for the development of the ECT was signed between Sri Lanka, India, and Japan at the heads of government discussions during 2017-2019, through the cabinet decisions taken on 30 May 2019. It provides for the formation of a Terminal Operations Company (TOC), of which 49% is jointly held by Japanese and Indian shareholders, while 51% is held by the SLPA. Under the terms of the MoC, the TOC was to develop the ECT based on a Japanese loan to the SLPA, guaranteed by the Government of Japan. Nevertheless, as per CICT’s 35-year build-operate-transfer agreement with SLPA, CMPH holds 85% of the partnership whilst the balance (15%) is being held by the SLPA. Being Colombo’s third container terminal with a three-million TEU capacity, it was constructed under the Colombo South Harbour Expansion Project. CICT commenced construction work of the terminal in December 2011. With an envisaged investment of $ 500 million, including the installation of state-of-the-art terminal equipment, it was the first-ever, single largest foreign direct investment (FDI) in Sri Lanka by a private entity. When evaluating the conditions of ECT’s MoC and CICT’s share agreements, The Sunday Morning learnt that Adani would have owned a minimum of 49% if Japan abstained from the development, therefore, receiving shares of the ECT. However, under the new agreement, which is yet to be finalised and speculated to have more similarities to CICT, Adani would own a majority of shares. However, the Indian High Commission in Colombo is maintaining a clear distance from the discussions between the Adani Group and the Sri Lankan Government on the WCT development programme, while the Embassy of Japan in Colombo has remained silent over the matter. Unlike Japan, India has openly expressed their unhappiness over the Sri Lankan Government’s decision to cancel the MoC agreement on the ECT development unilaterally. In such a backdrop, the trade unions at the Colombo Port that had been keeping relatively quiet on the Colombo Port’s terminal issue, following the Government’s decision to cancel the ECT deal, have once again raised their concerns over the proposed joint investment on the WCT. Speaking to The Sunday Morning, Janatha Vimukthi Peramuna (JVP)-affiliated All Ceylon General Ports Employees’ Union (ACGPEU) Deputy General Secretary G. Niroshan said the union had already written to President Gotabaya Rajapaksa, requesting him to withdraw the decision, reiterating that patriotism couldn’t only be shown to the ECT while another part of the Port was being handed over to a foreign party. Explaining further, he stressed that his union, together with those who are willing to save the WCT, would continue their opposition while gaining public support within the country. “We don’t want any part of the Port to be handed over to a foreign investor. We are not opposing investment, but the Colombo Port is not the right location to open up for investment, as the Government together with the SLPA can develop the Port without handing it over to any other country,” Niroshan said, adding that the workers opposed it because they know the ground situation and the effect this would have on the entire industry. He went on to say that there was no point in developing the ECT while the WCT is given to India. “We are facing this issue not because we want to develop the Port, but because we are in the middle of diplomatic issues. Since we have given Hambantota (Port) to China, we are forced to get India involved with the Colombo Port. Sri Lanka has become a puppet,” he stressed. The WCT is one of three terminals at the Colombo Port, along with the South Container Terminal (SCT) and the ECT. Each terminal is 1,200 m in length and possesses facilities to accommodate three berths each. The SCT commenced operations in 2013 under a public-private partnership (PPP) on a BOT basis with CICT and SLPA. CICT’s management is handled by China Merchants Holdings (International) Co. Ltd. The ECT, under CPEP implemented by the Mahinda Rajapaksa Government, is the second largest deep-water project of the Port. Of the planned 1,200 m terminal, 400 m was completed in 2015. The Colombo Port currently consists of three main parts. One of them is the Jaya Container Terminal (JCT) belonging to the SLPA. The South Asia Gateway Terminal (SAGT) is owned by Sri Lanka and international entities, while a majority of the shareholding in CICT is owned by China. This terminal is located adjacent to Port City Colombo. As a result, a terminal of sufficient capacity for the SLPA to dock large ships does not exist within the Colombo Port at present. The SLPA generated an income of $ 263 million in 2019 without revenue from private terminal operators. The income from private terminals is about $ 38 million in 2019 from the land lease, royalty, and dividends, according to the financial statement in 2019. As per statistics, in 2019, the SLPA-owned JCT handled 2.28 million TEUs out of the total container handling in the Port of Colombo, which amounts to 7.23 million TEUs. The JCT has two deep draft berths (14.25 m draft) in a 660 m quay wall, and the SAGT has three berths in a straight quay wall of 940 m (14.25 m draft). Apart from that, CICT reportedly handled 2.65 million TEUs for the 12 months ended 31 December 2020. Meanwhile, when contacted by The Sunday Morning, SLPA Chairman Gen. (Retd.) Daya Ratnayake said the terms and conditions of the new WCT agreement would be similar to the CICT agreement, as CICT was considered a guideline when forming the WCT terms and conditions. “We have completed formulating the agreement and we have taken advice from the Attorney General over certain clauses as well,” he said. When asked about the development work of ECT, Gen. Ratnayake said the SLPA would develop the terminal with its own funds. “If a necessity arises, we will obtain a bank loan from a local bank,” he added.     PHOTO © WIKIPEDIA


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