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LRT project: SL Govt. yet to terminate loan

LRT project: SL Govt. yet to terminate loan

11 Dec 2022 | By Maheesha Mudugamuwa

  • NAO flags contradictions
  • Consultants demand termination cost

 

Two years after the proposed Colombo Light Rail Transit (LRT) project was controversially terminated unilaterally by the Sri Lankan Government, Sri Lanka is yet to take any action to terminate the loan agreement with Japan International Cooperation Agency (JICA), the National Audit Office (NAO) revealed.

In the Special Audit Report on the Unilateral Termination of the Light Rail Transit System Project (from Colombo to Malabe) by the Government of Sri Lanka issued recently, the NAO revealed that the Department of External Resources had informed JICA that the loan amount would be utilised for another development project.

However, the NAO has stated that it has not observed any discussion being held with the Government of Japan in order to identify and implement an alternative project.

The Ministry of Finance had informed the Government of Japan that the LRT project would be terminated with the objective of providing infrastructure through the budget to uplift priority areas of the economy for long-term stability, it is stated.

The audit office further revealed that after the unilateral termination of the project, JICA had not given any assurance that it would proceed with the concessional conditions on the settlement of the loan, as stipulated in the initial agreement.

“In case of such conditions of convenience or concessionary rates on interest being disregarded, there would be a risk for the loan to be settled expeditiously/at a higher rate of interest,” the NAO revealed.  

According to the NAO, a sum of Rs. 5,060.47 million had been obtained by Sri Lanka as of 31 December 2021 in respect of the project, from the loan of Rs. 43,037 billion allocated in package 01 of the project out of the total loan amount.

In addition, as a result of the unilateral decision taken by the Government of Sri Lanka, the main consultant – Oriental Consultants Global Co. Ltd. – has made a claim of Rs. 5,169 million (inclusive of the outstanding amount of Rs. 604 million payable to the consultancy firm and the sum of Rs. 167 million demanded by the consultancy firm as expenses relating to the termination of the project).

The NAO has also observed that the Government of Sri Lanka incurring a higher cost would be unavoidable if the consultancy firm were to seek justice from the International Court of Justice, as provisions governing the loans relating to the unilateral termination of a project had not been mentioned either in the general terms and conditions of the JICA or in the loan agreement of this project.

Furthermore, the NAO has stated that the unilateral termination of the project based on the present economic crisis and Covid-19 pandemic is observed as being illogical given the grace period of the loan of 12 years.

“As the project, which would have been implemented by utilising the loan without commitment charges under a lower interest rate (0.1%) and a 40-year (including the 12-year grace period) repayment period, had been unilaterally terminated by the Government of Sri Lanka, it was also observed as a denial of an opportunity to develop infrastructure facilities of Sri Lanka under concessional terms,” it is stated.



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