• Kadawatha-Mirigama stretch to restart
• Govt.’s 15% share unknown
• Only $ 51.5 m disbursed; $ 438 m shortfall
• Costs up from Rs. 158 b to Rs. 450 b 

The long-delayed Central Expressway Project (CEP) Section I from Kadawatha to Mirigama will finally recommence under the patronage of President Anura Kumara Dissanayake on Wednesday (17), according to the Government Information Department.

However, controversy surrounds the project as the source of the Government’s 15% share of the total project cost remains undisclosed.

Road Development Authority (RDA) Chairman T. Paskaran and Treasury Deputy Secretary A.K. Seneviratne both admitted that they had no idea where the Government’s share would come from.

Reliable sources told The Sunday Morning that discussions had been held weeks ago to explore the possibility of covering the Government share through new borrowing. 

Yet, even as the project is set to commence this week, the RDA has no clarity on the financial source.

Paskaran confirmed that the Export-Import (Exim) Bank of China would provide $ 500 million after renegotiating the previously-agreed loan but acknowledged that the Government must also contribute $ 500 million.

The source, a senior State official, said that the Treasury was providing funds to the RDA but admitted to having no knowledge of the funding mechanism.

The original 2019 credit facility was for $ 989 million, but only $ 51.5 million was disbursed before Sri Lanka’s 2022 sovereign default halted construction when just 36.38% of physical work had been completed. 

After lengthy negotiations, the Exim Bank agreed to resume funding, but only $ 500 million – down from the $ 938 million balance – and in RMB rather than USD, leaving a $ 438 million shortfall for the Government to fill.

Section I’s cost estimate has repeatedly escalated, rising from Rs. 158 billion to Rs. 194 billion by 2020, partly due to loan delays. It is learnt that some local construction firms have urged the Government to cancel the contract with Metallurgical Corporation of China Ltd. (MCC) and call for open tenders, claiming that this will reduce costs and speed up completion. The proposal, however, has been ignored.

The Kadawatha-Mirigama stretch is critical, with interchanges at Gampaha, Mirigama, and Veyangoda serving as gateways to the central provinces.

Treasury Deputy Secretary Seneviratne stated that if the Government had first committed to foreign funding but later opted for local funding, it would be possible, but admitted he had no idea about the mechanism being used for CEP Section I.

“If they have agreed on local funding, then Local Government or bank funds will be utilised,” he said.

Meanwhile, the National Audit Office (NAO), in its latest report, has raised concerns over the Central Expressway Project – Section I (CEP-1). 

The construction contract for Package 1 was awarded at Rs. 12,586 million, which is 28% higher than the engineer’s estimate of Rs. 9,834 million, while Package 2 was awarded at Rs. 145,799 million, exceeding its estimate of Rs. 118,977 million by 23%. 

Both contracts were granted as unsolicited proposals, bypassing the competitive bidding process required under Sections 3.1 and 7.9.2 of the Government Procurement Guidelines.

The project’s original cost estimate of Rs. 158.39 billion is now projected to rise to Rs. 450.35 billion by September 2026 due to currency depreciation and rising prices, yet Cabinet approval for the revised estimate had not been obtained as of 31 March 2024, and no revised work programme had been submitted. 

In October 2023, the Government made a special advance of Rs. 500 million to the contractor to avoid contract termination, which auditors warned could create future liabilities.

Financing delays were also noted – although the Exim Bank of China agreed to fund $ 989.44 million (Rs. 134,628 million), only $ 51.57 million (5%) had been disbursed by end-2023, forcing the Government to pay $ 3.1 million (Rs. 622.95 million) in commitment charges up to 31 December 2022. 

Mobilisation advances remain largely unrecovered: for Package 1, Rs. 755 million (local) and $ 7 million (foreign) had been released with no recovery by end-2023, while for Package 2, $ 161 million had been advanced but only $ 10 million recovered, reflecting slow project progress.