A strike action by Port workers was called off today, July 3 following assurances that the three gantry cranes which had arrived at the Colombo Harbour would be unloaded as per their demands. The Unions want the cranes, which had been ordered by the government to replace three older cranes of the Jaya Container Terminal (JCT), to be installed instead at the East Container Terminal (ECT).
Informed sources speaking on condition of anonymity told Counterpoint that the cranes are ‘eminently unsuitable for and sub-optimise the usage of the deep-draft terminal,’ which is the ECT, and which has a depth of 18 meters to accommodate the larger ships. The other two terminals, JCT and the South Asian Gateway Terminal (SAGT) can handle smaller ships that can carry 12,000 to 13,000 containers, as they only have a depth of 15 metres, allowing in ships with 14.25 metre draft. While ships in the 1990’s had a capacity to accommodate 5000 containers, that has increased by almost five times today, causing ships to be much larger.
Therefore, “the ECT must be equipped to handle Ultra-large Container Ships and these cranes cannot do that,’ the source explained. But these three new cranes would greatly enhance the capacity, productivity and the operational capability of the JCT, more than its current ability, the source further said.
Statements released to Media by Union leaders following talks with the Prime Minister, indicate that all of the Union leaders want the cranes to be installed at the ECT. It then begs the question, whether the Union action is to prevent the ECT being operated as the Public Private Partnership (PPP), industry sources told Counterpoint.
The Sri Lanka Ports Authority had begun work on the ECT during Mahinda Rajapaksa’s presidency, and a third of the terminal, (440 meters of quay and a backup yard) at a cost of around US$ 85 million had been completed. However, later governments had failed to operationalise the Terminal, and it had lain idle for nearly six years, Counterpoint learns. In May of 2019, the then government signed a Memorandum of Corporation (MoC) with India and Japan to develop the Terminal. According to that agreement the Sri Lanka Ports Authority was to have 100% ownership of the Terminal. Sri Lanka would also retain 51% of the stake in the operation of the terminal with India and Japan sharing the rest of the 49%. Japan’s component was to be in the form of a 40 year soft loan, with a 0.1% interest and a ten year grace period. However, paying back a loan for that length of a period may not be that viable, a source added.
According to industry experts, if SLPA were to operate the ECT, it would add a huge debt to the government. However, if developed as a viable public private partnership (PPP) along the lines that SAGT and the Colombo International Container Terminal (CICT), operated in Colombo by the China Merchants Group, it would place no additional burden on the Government’s debt.
“A PPP would mean that the SLPA retains 100% ownership of the property at all times but leases it out for the concession period of 35 years,” the source explained. Ports must have the ability to finance themselves and not put the country further in debt.
While both the CICT and the ECT have a depth of 18 metres to handle the bigger ships, CICT is currently the only deep-water terminal in South Asia. China also controls the entire Port of Hambantota, operates ports in Pakistan and Myanmar and is also actively pursuing investment in Bangladesh, “thus creating a potentially strategic string of pearls around India,’ the source pointed out.
There had also been a decision to extend the JCT, as wharf length needs to be increased to accommodate the three new cranes, if replacing the 3 old ones, as had been the original intent.
Meanwhile, Colombo enjoys the largest volume of transhipment from India, which accounts for at least 65% of incoming and outgoing cargo.
If Sri Lanka plans to change the terms of the MoC, say industry sources, it would have to ensure that India’s feathers are not ruffled, and Sri Lanka losing that business.
The strike action by the Unions, sources say resulted in at least 10 ships lying idle in the port on July 2, with a loss of revenue to the country. Usually operational costs per hour for the large container ships is around $ 10,000, Counterpoint learns, while the loss for shipping lines that were affected by the strike could run into tens of millions of dollars. Furthermore, such actions could also result in shipping lines taking their business to other ports, they said.
Meanwhile, President Gotabaya Rajapaksa has appointed a five member committee to look into concerns regarding the development of both the JCT and the ECT, a late evening press release from the Presidents Media Division states.
The committee which is required to submit its findings within 45 days of its appointment has been tasked with looking into the Procurement procedure and related concerns with regard to the development of JCT(V), Assessment of the compliance to the Cabinet Decision and the observation of the Minister of Finance connected with the Cabinet Decision dated 26th July 2017 on Enhancing deep berth capacity and modernization of Jaya Container Terminal (JCT) of the Sri Lanka Ports Authority, Examine as to why JCT (V) was not developed prior to ordering of required machinery, Examine the cost implication of the unsolicited procurement actions and shipment of them prior to the building of the terminal., Agreements entered by the Government of Sri Lanka with other Governments with regard to Colombo Port and in particular ECT, Financial implications and cost – benefit analysis of ad-hoc decisions taken by Sri Lanka Ports Authority, Line Ministry and the Government with regard to the first three concerns mentioned above, Identify those who are responsible for the above and recommend actions against them and Recommend the way forward to develop the above mentioned two terminals to get the maximum benefits for Sri Lanka for the development in Trade, Shipping and both in domestic and foreign investments.
The committee is headed by Secretary to the Ministry of Ports and Shipping, M.M.P.K. Mayadunne. Others on the committee are Secretary to the Ministry of Industrial Export and Investment Promotion, M.P.D.U.K. Mapa Pathirana, Secretary to the Ministry of Roads and Highways, R.W.R. Pemasiri, Secretary to the Ministry of Power and Energy, Wasantha Perera, Chairman of the Sri Lanka Ports Authority, Gen. (Retd) R.M. Daya Rathnayake.
