Colombo, May 31 (newsin.asia): The Sri Lankan President Maithrpala Sirisena had told the cabinet earlier in the week that he would inquire from the Indian Prime Minister Narendra Modi about the companies that might participate in the Sri Lanka- India- Japan Joint Venture to build and run the Colombo port’s East Container Terminal, cabinet minister Mano Ganeshan said.
“When asked about the companies which might do the project, the President said that he would find out when he goes to Delhi,” Ganeshan said.
The minister, who went to Delhi with President Sirisena, Rauff Hakeem and Arumugan Thondaman to attend the swearing-in of the Indian Prime Minister, said that Sirisena would be having a brief meeting with Modi on Friday before returning to Sri Lanka.
MoC On East Terminal
On April 28, Sri Lanka, Japan and India had inked a Memorandum of Co-operation (MoC) to operate a container terminal in Sri Lanka’s Colombo Port.
The embassy of Japan told www.economynext.com that the terms were to be hammered out later.
Companies from Japan, India and Sri Lanka are expected to set up a terminal operating company to run the so-called 1,200 metre East Container Terminal, of which about 400 meters length had already been built by the state port agency. But money is required to buy cranes.
Sri Lanka Ports Authority (SLPA) is expected to hold a 51% stake in the operating company and companies representing the other two countries will hold 49%.
But the companies which would participate are not yet identified.
Japan is expected to provide 0.1 percent yen loan for cranes to be paid back in 40 years.
Economynext says that concerns have been raised on who will repay the loans, and also the loans taken to build the civil works.
The Lankan government says that the three governments concerned will work out details of the operating arrangements at joint working group meetings.
Sri Lanka had previously given two terminals in Colombo to China’s China Merchants Ports, and Sri Lanka’s John Keells Holdings, where settling loans was the responsibility of the operating company during the concession period.
The operating company had to pay royalties to SLPA on top of it.
After the end of a 30 or 40 year concession period, the entire terminal reverts to the SLPA.
Economy Next said that according to industry analysts say the deal has to be structured in such a way that fees equal to debt repayments comes to SLPA to settle the loan and any exchange risks are also passed on to the terminal operating company, so that taxpayers do not have to pick up the tab.
Sri Lanka’s current administration abandoned a plan to get a private company with Indian participation through an orthodox concession agreement without explanation after getting bids from top shipping and container firms in the world.
Prime Minister Ranil Wickremesinghe wanted the East Terminal contract to given to two Indian companies in view of the fact that 75% of the business of the Colombo port comprised Indian trans-shipment.
Minister Mano Ganeshan felt that since 75% of the Colombo port’s business is with India, and the profitability of the port will be badly affected if India withdraws its business after developing deep water ports on its own shores, it will be wise to retain India’s goodwill. He also pointed out that it is out of Colombo port’s profits that the SLPA is funding the loss making Hambantota port.
But the President was opposed to giving the East Terminal to India on the grounds that he is against handing over to other countries vital national strategic assets like ports and airports.
The government then decided that the East Terminal will be run by the SLPA. But the SLPA needed to buy modern cranes and other latest equipment for which it needed funds.
Be that as it may, political sources said that the Sirisena government may tread cautiously on this matter because Presidential elections are expected at the end of the year. Handing over yet another terminal to foreign entities might evoke nationalist opposition.
But on the other hand, all parties realize that India cannot be alienated, especially now, when Prime Minister Narendra Modi is in an exceptionally strong position in India. It is also expected that given Japan’s participation, nationalist opposition will be less or manageable, or perhaps even non-existent.
At any rate, any further developments on the deals with India and Japan in regard to the East Terminal will be discussed in the cabinet, Minister Ganeshan said.