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West Container Terminal: Tweaking the finer points

28 Mar 2021

  • TUs warn of loss in revenue for SLPA if Adani gets WCT

  • Development of ECT in two phases

  A massive economic loss is predicted for the Sri Lanka Ports Authority (SLPA) in the future, once the operations of the West Container Terminal (WCT) at the Colombo Port commences under the Adani Group, an Indian multinational conglomerate, together with its local partner John Keells Holdings, according to port trade unions (TUs). They alleged that Sri Lanka would lose 66% of the Indian re-export market once the Adani Group begins its operations at the WCT, at the same port with the East Container Terminal (ECT). “Earlier, the Government said that Sri Lanka would lose the re-export market if the ECT was not given to India, which is not true. There was no such threat, although the Government tried to use that to justify their deal. The real threat has erupted now, as even though the SLPA retains the ownership of the ECT, the re-export businesses would definitely go to the WCT,” All Ceylon General Ports Employees’ Union (ACGPEU) Deputy General Secretary G. Niroshan told The Sunday Morning. Alleging that the Adani deal set for the WCT was a trap by the Government, the union leader urged the Government to revoke its decision and retain the ownership of the WCT under the SLPA. “There’s no terminal as yet at the WCT. To build a terminal, it would cost only $ 700 million. This can be earned from the ECT, as we have no immediate requirement of building the WCT,” he stressed. Comparing the income earned from the four terminals already in operation, Niroshan said the highest income is earned by the Colombo International Container Terminal (CICT) which is currently being operated by the China Merchants Ports Group, adding that the ECT’s income cannot still differentiate and SLPA received the fully income only from the Jaya Container Terminal (JCT). As alleged by port TUs, the reason behind the Government’s need to go for private investments for these terminals is due to the loan conditions for which Sri Lanka has agreed in 2006 with Asian Development Bank (ADB) when the country obtained a loan for the construction of the breakwater at the port. “There is a loan condition that says the SLPA should retain only one terminal while the rest of the terminals should be opened for private investments,” he said, adding that since the loan has now been paid off since it was obtained in 2006, the Government could take the responsibility of repaying the loan while releasing the SLPA, so it need not to be obliged by the conditions put forwarded while signing the agreement. Handing over the WCT for a joint development project to India and Japan was agreed upon by the TUs via a letter sent to the President. In the letter written to the President on 29 January, the unions had assured that they would withdraw from all union action if six conditions were met, including handing over the already completed section of the ECT to the SLPA, completing the construction work of the terminal with SLPA funds, completing the construction within three years, and acquiring control of the South Asia Gateway Terminals (SAGT) after the already existing agreement expires in 2029. If fulfilled, the unions agreed to support the Government in the development mechanisms of the WTC to get cabinet approval to take complete ownership of the ECT under the SLPA, and also to get approval for both the WTC and the ECT in the same cabinet approval process. The Memorandum of Corporation (MoC) for the development of the ECT was signed between Sri Lanka, India, and Japan at discussions held between the heads of the respective governments during the period from 2017-2019 as well as during the cabinet decisions taken on 30 May 2019. It provides for the formation of a terminal operations company (TOC), of which 49% will be jointly held by Japanese and Indian shareholders, while the majority 51% will be 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. The MoC was reached soon after China was given a controlling equity stake and a 99-year lease of the Hambantota Port, and concerns have since been raised as to whether this deal is also a result of escalating geopolitical competition between regional powers. According to the SLPA, the Colombo Port Expansion Project (CPEP) is being implemented in an area encompassing about 600 hectares. There will be three terminals: South Container Terminal (SCT), ECT, and WCT, each 1,200 m in length and possessing facilities to accommodate three berths. The SCT commenced operations in 2013 under a public-private partnership (PPP) under a build-operate-transfer (BOT) basis with the CICT and SLPA. The CICT management is handled by China Merchants Port Holdings Co. Ltd. The ECT, under the 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 WCT agreement is said to have more similarities with the agreement signed between SLPA and China Merchants Port Holdings, a listed blue-chip company in the Stock Exchange of Hong Kong, for the development of CICT nearly a decade ago. Hence, for Indian investor Adani, the WCT would not be as similar an investment as the strategic ECT investment which was promised by the previous Government, for which the MoC was signed in 2019, but may be a better option with additional opportunities despite ECT’s strategic importance. On 15 March, Adani Ports and Special Economic Zone Ltd. (APSEZ) announced that it has received a Letter of Intent (LoI) from the Ministry of Ports and Shipping and the SLPA, acting on behalf of the Government of Sri Lanka, pursuant to approval from the Sri Lankan Cabinet of Ministers, for the development and operation of the WCT in Colombo. The WCT will be developed on a BOT basis for a period of 35 years as a PPP. The WCT will have a quay length of 1,400 m, alongside a depth of 20 m, thereby making it a prime transhipment cargo destination to handle ultra-large container carriers (ULCC). When contacted by The Sunday Morning, Secretary to the Ministry of Ports U.D.C. Jayalal said the LoI had already been sent to the investors and at present, both parties are evaluating the agreements. “There’s a BOT agreement that the parties need to sign and we are currently working on it. Once the BOT is initiated, we give them some time to sign the agreement,” he added. When asked about the division of shares between John Keells Holdings and the Adani Group, the Ministry Secretary noted that the relevant parties would decide on their shares and that the SLPA would hold 15% of the shares, similar to the CICT agreement. Commenting on the ECT development, Jayalal said the procurement process for the ECT has already commenced. “The development will be carried out under two categories: Infrastructure development and equipment development,” he said. When queried about the financial allocations for the development, the Ministry Secretary said the necessary finances would be allocated by the SLPA.

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