GIBF-Shipments

India, Japan to sign agreement with Sri Lanka for Colombo's East Container Terminal

July 19

The Sri Lankan cabinet is expected to meet today to ratify a tripartite deal with India and Japan for the operation and maintenance of the much-delayed East Container Terminal (ECT) at Colombo’s deep-draughted South Harbour.

Whereas the host nation will retain a controlling 51% of the equity in the 2.4m teu capacity greenfield terminal, the residual portion of the stake will be shared between India and Japan in a percentage yet to be finalised.

The move is bound to alter political equations in the Indian sub-continent, as it is seen as an effort to counter-balance the handing over of the nine year old Magampura Mahinda Rajapaksa port at Hambantota, on the south-eastern tip of the island, and 15,000 acres of land around the port, to China in December 2018 on a 99-year lease.

Sri Lanka had fallen into the debt trap during the days of the Rajapakse government when it took huge loans at stiff interest rates from the Chinese to build infrastructure like roads, airports and city skyscrapers; and later did not have the wherewithal to repay them.

At the time of the forced handover of Hambantota to China, Sri Lanka had accused India of not showing sufficient interest in either Hambantota or the East Container Terminal when these had been offered to the Congress-led coalition government in the early years of the ongoing decade. The current move to bring India into the picture is also seen as a desire on Sri Lanka’s part to reduce the almost overpowering influence of the Chinese even in Colombo, where they operate one of the three terminals in South Harbour.

The harbour, which has a draught of 18.5 metres that can accommodate even the largest modern containerships, was constructed in a U-shape to accommodate three terminals each with a container handling capacity of 2.4m teu.

At the moment, only one of the three terminals, the Colombo International Container Terminal (CICT), majority-owned by China Merchant Holdings, is in operation, and contributes a substantial portion of Colombo’s container throughput, which is made up of 70% transhipment cargo intended for India, Pakistan and Bangladesh. The Sri Lanka Ports Authority (SLPA) retains 15% of the equity.

The other two box facilities in operation, the state-run Jaya Container Terminal (JCT) and the privately owned South Asia Gateway Terminals (SAGT), are in the inner harbour, and suffer from limited draught (14.25 metres alongside). They can only take vessels of up to 12,000 teu, and cannot accommodate the latest-generation boxships, which have to compulsorily call CICT.

Colombo crossed the 7m teu mark in 2018, with CICT contributing 2.60m teu, the state-run Jaya Container Terminal producing a throughput of 2.32m teu, and the privately owned South Asia Gateway Terminals handling 2.1m teu.

There has been no progress at all in the past four years at the East Container Terminal (ECT), where the concessionaire was not finalised and the box-handling equipment not ordered, after a quay crane contract with ZPMC of China was cancelled in 2017 on grounds of corruption.

There has been a clash of ideologies, with President Maithripala Sirisena wanting the SLPA (Sri Lanka Ports Authority) to operate the terminal, while Prime Minister Ranil Wickremesinghe would prefer the private sector to come in with further strong growth in transhipment cargo predicted for the ongoing year, throughput is getting frighteningly close to the installed capacity of 7.4m teu, although another 1m teu could arguably be squeezed out by maximising the terminals, according to Rohan Masakorala, ceo of Shippers’ Academy Colombo.

Notwithstanding the signing of the ECT deal with India and Japan, since it will take at least two years for the terminal to come on stream, Sri Lanka could find the Port of Colombo becoming prey to severe congestion towards the latter part of the ongoing year itself.