By Maheesha Mudugamuwa
The Japanese-funded, $ 2.2 billion Colombo Light Rail Transit (LRT) project, stretching from Malabe to Colombo Fort, may change tracks with a proposal being made to the Government to take a relook at the project plan and project cost.
However, The Sunday Morning learnt that the Government will have to incur a loss of around $ 100 million if the LRT project is suspended or if there is a delay as a result of renegotiations. The entire project is currently scheduled to be completed by early 2025.
In addition, there will be certain penalties from the Japan International Co-operation Agency (JICA) – the funder of the project – as Sri Lanka has already signed an agreement on the project, The Sunday Morning learnt.
“Right now, it is only the detailed design that is ongoing. The loan agreement has been signed and the detailed design consultancy was mobilised in April last year. International and local consultants are preparing the detailed design. There will be three construction packages including one utility diversion and depot package. The first thing that will go on tender will be the utility diversion,” Colombo LRT Project Consultant Dr. Dimantha De Silva said. He is also a senior lecturer at the Department of Civil Engineering at the University of Moratuwa.
The total consultancy cost of the project is estimated at around $ 140 million for seven years, including the feasibility review, detailed design, evaluation assistance, and construction supervision inclusive of all government taxes.
In addition, currently, a team comprising more than 200 local and international consultants are working on the detailed design of the project.
“We need to order the rolling stock now; otherwise, we won’t be able to get the trains by 2025. At the moment, the tender documents are being prepared to be ready by May or June this year,” he said, adding that the tender procedure would normally take around a year.
The feasibility study report of the project proposes a 15.7 km-long LRT system with 16 stations from Colombo Fort to Malabe via Battaramulla, involving an elevated railway track, elevated stations and train depot, the procurement of LRT trains, and the installation of electrical, communication, and signal systems. The project is expected to reduce travel time from Colombo Fort to Malabe to approximately 30 minutes.
The loan for the project was offered on high concession terms and conditions, including a 40-year repayment period for funds obtained for consultation services with a grace period of 12 years, a 0.1% interest rate per annum for civil work and equipment, and a 0.01% interest rate for engineering services.
The loan agreement was signed between Sri Lanka and Japan last March, and accordingly, Japan had extended a loan of around Rs. 48 billion to Sri Lanka for the LRT project.
However, at a meeting with Minister of Transport Service Management and Power and Energy Mahinda Amaraweera, a team of engineering experts had recently revealed that the total cost of the project could be reduced to about $ 1.5 billion from the current estimation of $ 2.2 billion. Furthermore, experts had noted that the project does not have to be on elevated tracks but could also operate on the ground, which would result in a reduction in the project cost.
The Minister had requested the team of experts to submit a proposal to consider the possibilities of reducing the project cost.
Speaking to The Sunday Morning, a transport sector expert, who wished to remain anonymous, alleged that the question was not about reducing the project cost, but why the cost was too high. He also stressed that the project should be completely renegotiated, including the project design.
Responding to the allegations made by the expert team, Dr. De Silva told The Sunday Morning that the cost of the project was $ 2.2 billion including expenses apart from the construction cost.
“The actual construction cost is only $ 1.4 billion. The remaining $ 800 million is inclusive of VAT (value-added tax), administrative, land acquisition, consultancy, escalation, interest, and contingencies. If the Government wants to reduce the price, they can do it by giving a concession. The VAT amount is close to Rs. 300 million and price escalation and physical contingency is another $ 300 million. Out of this $ 800 million, $ 600 million are extras which may or may not be a cost,” he said.
Explaining further, Dr. De Silva said: “When we are securing a loan, we need to have leverage on any price escalation and physical condition where extra costs may arise. Once we obtain or sign a loan agreement and commence the project, we can’t go back and request the increase of the loan amount if there’s a price escalation. That is why, although the construction cost is $ 1.4 billion, the total cost is $ 2.2 billion.”
According to Dr. De Silva, any price negotiations should be done during the tendering process and it was too early for any sort of negotiations.
“This is only a feasibility study and at the moment we are doing the detailed design. Once it is done, we will go for tenders and once the tenders float, we will know what the actual prices would be. If negotiations have to be done, it should be done at that time. We can’t negotiate now because the estimated cost is for the feasibility study,” he explained.
Japanese monopoly
On the other hand, according to a senior official of the Ministry of Passenger Transport Management, when the tenders open only for Japanese companies, there wouldn’t be an opportunity for competitive bidding.
Ministry of Passenger Transport Management Deputy Director P. Dissanayake told The Sunday Morning that the Ministry was looking at the possibility of amending the loan conditions to enable a competitive bidding process instead of permitting only Japanese companies to bid for the project.
“In the existing agreement, there is a Japanese monopoly as the contract would be designed by Japan and only the Japanese companies could enter the bidding process, which means the LRT would be constructed by a Japanese company,” Dissanayake said, pointing out that it was one major reason for the high project cost.
Explaining the bidding process and loan conditions, Dr. De Silva ruled out any Japanese monopoly, claiming the only condition for the loan granted by JICA was to disperse 30% of the total amount to purchase Japanese products.
“We can easily spend that 30% to purchase rolling stock components. There is no opportunity to overvalue the products as the market price was available; the Government could at any time demand the products at market price,” he said, pointing out that once the tendering process was done and proposals started to come out, the negotiations could begin.
Clarifying the opening of bidding only for Japanese companies, the project consultant claimed the bidding would come through JICA-registered companies and therefore, it should not necessarily be a Japanese company; other companies that have joint ventures could also bid for the project.
Elevated or on the ground
According to the feasibility study, most sections of the proposed LRT line are intended to be constructed over existing roads, and so are most of the stations.
However, questions have been raised over the difference of the amount of time saved. Comparing each elevated and on-ground section, the expert team claimed that only seven minutes could be saved and therefore, the line could be built on the ground.
On the other hand, Project Consultant Dr. De Silva stressed that the cost of acquisition would be much higher if the project goes ahead on the ground. Similarly, concerns with regard to the number of road crossings as well as the difficulty in finding proper lands in an urban centre have also been raised by him.
“No loan company will pay for lands, and if so, it should be the Government that has to pay for acquisition costs. The cost will be huge as we are going through the most valuable and congested areas. Since the railway line goes along the road, the acquisition cost is only $ 39 million. We are only acquiring (land) when required. Also, it (the elevated line) would expedite the work and we can complete the work by 2025,” he said.
“In countries like Singapore and Hong Kong, they have made a policy decision that any rail line that comes through urban areas would be elevated. So there is no question whether the LRT should be elevated or not; the LRT should be elevated within the urban area,” Dr. De Siva added.
However, as The Sunday Morning learnt, Minister Amaraweera had instructed the officials to take necessary action to launch the project without any delay and in the meantime to discuss the price renegotiations.
Elaborating that any changes to the LRT project should come through the Cabinet, Project Consultant Dr. De Silva also stressed that there shouldn’t be any delay in implementing the project as it was one of the projects that could be built by early 2025, thereby changing urban traffic patterns in Colombo by reducing congestion.