• Highways, housing, power, agriculture, water supply and sanitation projects delayed
• Some projects put on hold; incur losses with cost overruns
• Two committees appointed to identify priority projects and how to proceed

The ongoing economic crisis has put many infrastructure development programmes on hold, with most small- and large-scale projects now at a standstill due to funding constraints, The Sunday Morning learns.

Highways, housing, power, agriculture, water supply, and sanitation projects are facing delays.

The delay in completion of some projects has resulted in losses to the taxpayer, amounting to millions of dollars, due to cost overruns and price escalations, according to officials.

Some projects have been put on hold by mutual agreement and some have been halted by the funding parties – such projects are not currently incurring losses caused by cost overruns and completion delays. However, certain other projects have been put on hold due to the lack of funds on the part of the Government and they are incurring losses due to cost overruns.

Speaking to The Sunday Morning, Treasury Deputy Secretary R.M.P. Rathnayake said the general recommendation of the Treasury was to review all projects again and see whether the projects were in line with the country’s current development needs.

“We have appointed two committees, one chaired by the Secretary to the Prime Minister and another one chaired by one of the deputy secretaries to understand the priorities of these projects and how we can proceed on priority projects. The committee chaired by the PM’s secretary is reviewing mega projects. They review each with the relevant line ministries, stakeholders, and the Treasury and give recommendations to the line ministries on how it should progress,” he said.

Accordingly, the Treasury Deputy Secretary explained that the two committees were currently reviewing projects individually to see how the cost escalations could best be accommodated, if possible.

“Some of the components of the projects that we have initially agreed and approved may not be required due to this economic crisis. Some of the components can be revised and modified and some can be removed. In those scenarios they have to come up with a revised action plan and the budgetary provisions for those action plans, once shared with the Treasury, can be granted through the budgets,” he said.

Rathnayake explained that Sri Lanka could not start bilaterally-funded projects as they had been halted by the lenders: “We can’t disburse the money so automatically those projects will be on hold. There also we have advised them to come to a mutual agreement with the contractor and wherever possible to revisit the scope. If they feel those projects are not priorities at this moment, they can come up with a different implementation arrangement.”

 Highway constructions slow down

 Of the mega development projects hit by the crisis, highways are the worst affected as almost all projects have now come to a standstill without funds or investments.  

Except for sections I and III of the Central Expressway, all other projects have now been suspended due to lack of funds, The Sunday Morning learns.

“The only option we have now is applying the Build, Operate, and Transfer (BOT) method for projects and those who are willing to invest on such types of projects are welcomed for highway development,” Road Development Authority (RDA) Director General L.V.S. Weerakoon said.

He told The Sunday Morning that no investments were coming in for highways due to the ongoing crisis.

“In a committee chaired by the Secretary to the Prime Minister and another committee chaired by one of the Secretaries, Kamal Padmasiri, it was decided that some projects be halted and some be suspended. Accordingly, the Ruwanpura Expressway and Central Expressway Section IV have now been suspended. Other sections of the Central Expressway have been put on hold but there is no date for recommencing those projects. We act according to the decisions given by the two committees,” he explained.

When asked about the cost overruns, late payments, and price escalations, Weerakoon stressed that most projects had been suspended and put on hold on mutual agreements considering the current economic crisis and therefore, for those projects, cost overruns were not a cause of concern.

“We have halted the ‘I-road’ project for a year. Most contractors have understood the situation and are not asking for claims,” he added.

Irregularities halt highway projects 

Nevertheless, most of the highway projects have been delayed for many years before the crisis hit due to a number of irregularities, The Sunday Morning learns.

As highlighted in a report issued by the National Audit Office (triennial audit for the year of 2021 issued on 4 August 2022 on Foreign Funded Projects), the Elevated Highway Project from New Kelani Bridge to Athurugiriya and the Port Access Highway Project have been delayed since 2016 due to various reasons.  

In addition, the OPEC-Funded Western Province Road Development Project implemented for the upgrading, improvement, and widening of 27 km of pre-selected national highways in the Western Province and the Improvement of Colombo National Highways Project implemented for the upgrading 65.45 km of 13 key national roads in Colombo suburbs, along with the reconstruction of Narahenpita-Nugegoda Bridge projects have been delayed since 2017 and 2013 respectively.

The estimated costs of both projects are $ 24.87 million, equivalent to Rs. 3, 232.5 million, and $ 94.99 million, equivalent to Rs.12,347.37 million, respectively.

It is also stated that for the Port Access Highway Project, allocations amounting to Rs. 6,508 million and Rs. 5,858 million had been provided by the General Treasury for the year 2019 and 2020 for the utilisation of foreign loans and, out of the total allocation, an amount of Rs. 2,182 million and Rs. 4,302 million, representing 33% and 73% of the allocations for the year 2019 and 2020, had not been utilised by the project, due to delays in contract awarding and slow progress of the contractor.

Furthermore, the audit report highlighted that the Ruwanpura Expressway Project had been delayed for more than six years. Accordingly, it is stated that the estimated cost of the project of Rs. 286,000 million was to be financed by the local banking system under the supervision of the Secretary to the Treasury.

The project commenced its phase 1 activities from the Kahathuduwa to Ingiriya section – a length of 24.3 km – on 3 May 2021 and it was expected to be completed within two-and-a-half years. However, the construction work of 2 km in the Kahathuduwa interchange and the 47.6 km road length from Ingiriya to Pelmadulla has still not commenced.

The report further stated that although activities of the project commenced in 2016, out of the total 76.40 km only 24.3 km has been awarded for construction, the 2 km in the Kahathuduwa interchange and the 47.6 km road length from Ingiriya to Pelmadulla could not be commenced even as at 31 December 2021 – a lapse of six months from the commencement of the project.

In addition, the Environmental Impact Assessment (EIA) Report for phase II (47.6 km from Ingiriya to Pelmadulla) has not been approved by the Central Environmental Authority (CEA) even as at 30 December 2021, it is stated.

It is learnt that the situation with regard to the Central Expressway Project is similar, as the project has been delayed for years due to various reasons, including issues pertaining to the selection of investors.

Section I of the CEP, funded by China, has now been put on hold. Section II is already completed, while section III was commenced with local finances, according to the RDA DG.

 Urban development

 Unlike for highways, urban development projects including large-scale housing projects and office complexes have seen delays since March last year, according to Urban Development Authority (UDA) Additional Director General Mahinda Withanaarachchi.

He told The Sunday Morning that almost all mega development projects of the UDA had now been put on hold due to the unavailability of funds.

“All housing projects have been put on hold. We may get claims and contractors are always trying to put higher claims, but we are negotiating,” he stressed.

He noted that a mega development project costing around Rs. 25 billion had also been put on hold due to funding issues. “Sethsiripaya stage III developments have been put on hold,” he said, adding that apart from the claims, the price escalations would have to be endured by the UDA when resuming the projects.