• Adani Group was never formally proposed by India 
• ECT could be developed by SLPA using around USD 485 million
• The majority of transshipment arrives from Indian ports 

The Gotabaya Rajapaksa Government got itself in a governance and geopolitical-level quagmire following the announcement to hand over the Eastern Container Terminal (ECT) of the Colombo Port to India’s Adani Group. Going against its own assurance that the ECT will not be given to a foreign party, the Government once again angered Port trade unions as well. Following the announcement Port trade unions launched several protests and work-to-rule campaigns and in response to mounting pressure, Prime Minister Mahinda Rajapaksa stressed that the GoSL had no intention or plans to sell or lease any section of ECT to foreign countries and that operations will be solely conducted by SLPA. But a Cabinet paper is yet to be released on this regard. However, supporters of the previous regime claim that people have been misled into believing that an agreement was signed to sell the ECT back then when it was only an understanding between Sri Lanka, India and Japan to establish a joint-venture company to develop ECT. 

Colombo South Harbour and ECT

The Colombo Port earned the hub port status in the South Asian region primarily due to its strategic location in the Indian Ocean. The New South Harbour was developed in 2012 as a major public investment to cater to the increasing demand of handling seaborne container cargo and to overcome limitations of water depth and water basin size restrictions of the existing port. Official records show the capacity of Colombo International Container Terminal (CICT) and South Asian Gateway Terminal (SAGT) as 2.85 million twenty-foot equivalent units (TEUs) and 2.05 million TEUs in 2019. Apart from that transshipment cargo volumes are critical in attracting mainline vessels. During the past two decades transshipment containers have formed 75% of container traffic and most have come from the Indian subcontinent. On the other hand, South Indian ports such as Cochin Vallapardam and Kerala Vizhinjam are competing to be transshipment hubs. 

The development of the Eastern Container Terminal will enhance operations in the Colombo Port. In the meantime, the construction of the West Terminal is reportedly being discussed.

The ECT can be developed by the SLPA and it could be done with USD 485 million without obtaining a loan. Besides there is around USD 250 million in the reserves and once operations begin, the income could be reinvested to develop the terminal
- General Secretary, Ports, Commerce Industries and Progressive Workers Union Shamal Sumanaratne 

GOVT. in a difficult situation 

“The location of the Colombo Port is convenient for transshippers,” opined Palitha Athukorala, National Seafarers Union President. “The transshipment that reaches Colombo is around 70-75% and the majority of goods come from Indian ports. The Ports Authority can definitely develop the terminal, but India is now resorting to a hand twisting tactic. During the Maithripala Sirisena regime a Memorandum of Understanding was signed between Sri Lanka, India and Japan. There’s competition between China and India and by getting the Terminal, India will then have a foothold here. On the other hand Sri Lanka cannot annoy her big brother since the UNHRC matter will be taken up in March and Sri Lanka needs India’s support for that as well. Therefore the government is now in a difficult situation,”added Athukorala. 

Port Trade unions continue ‘work to rule’

On October 22, 2020 subject Minister Rohitha Abeygunawardana presented a Cabinet Paper highlighting the requirement for an investor to develop the ECT. The paper also noted the interest shown by India’s Adani Group and its preparedness. It further proposed the possibility of appointing a committee to explore the possibility of involving Adani Group into the already agreed Memorandum of Understanding between Japan, India and Sri Lanka during the former regime. 

Following the release of this cabinet paper, action was taken by 23 Colombo Port Trade Unions demanding written assurance from President Rajapaksa that the ECT will remain under the purview of the Sri Lanka Ports Authority (SLPA). However, in response to the strikes that took place, Prime Minister Mahinda Rajapaksa not only denied the release of such a cabinet paper, but also gave a reassurance to the trade unions that such proposals wouldn’t be entertained either. 

But a week after India’s External Affairs Minister S. Jaishankar’s visit to Sri Lanka, President Rajapaksa announced that 49% of the investment to develop ECT would come from Adani Group and other stakeholders. Following the announcement Port Trade Unions submitted several proposals to the committee appointed to review proposals regarding ECT.

Trade union action was launched including several protests demanding that the ECT could be operated under the purview of SLPA. “Until we get written assurance from the Government we are continuing ‘work to rule’,” said Shamal Sumanaratne, General Secretary, Ports, Commerce Industries and Progressive Workers Union. “The ECT can be developed by the SLPA and it could be done with USD 485 million without obtaining a loan. Besides there is around USD 250 million in the reserves and once operations begin, the income could be reinvested to develop the terminal. Although there was an MoU signed during the former regime, the Rajapaksa regime couldn’t disregard it at once,” said Sumanaratne. 

Even though Prime Minister Rajapaksa announced that SLPA will solely conduct ECT operations Sumanaratne said that they would continue with work-to-rule campaigns until the Cabinet paper is released. He further said that transshipments are important for shipping lines and  do not necessarily affect the operations at the Port.
In response to a query on the exchange of the West Terminal at 85% stake to India instead of ECT, Sumanaratne said that there is nothing as a West Terminal. “These are only proposals. There is even a plan to develop three more terminals in the Northern jetty. We fought for the terminal that is already there,”  he said. 

The Ports Authority can definitely develop the terminal, but India is now resorting to a hand twisting tactic. During the Maithripala Sirisena regime a Memorandum of Understanding was signed between Sri Lanka, India and Japan. There’s competition between China and India and by getting the Terminal, India will then have a foothold here
- National Seafarers Union President Palitha Athukorala

The Colombo Port lives on transshipments 

“The Colombo Port commenced container handling back in 1973 in a small scale,” recalled an experienced ports engineer who spoke on conditions of anonymity. “Then Japan built the Jaya Container Terminal in 1980. What we find from statistics is that the Colombo Port lives on transshipment. Local cargo is almost flat. It was during Lalith Athulathmudali’s time that a plan was expedited to move into transshipments. So now the Port includes about 75% of transshipment and around 25% domestic cargo. Most transshipments come from Africa, Australia, Singapore and the Indian subcontinent. Out of the transshipments from the Indian subcontinent around 60-65% comes from India,” the source said. 

“When India sends a container they send it via Colombo to other ports. But the Indian total container load has a transshipment volume. Back then it was around 40%. India was sending about 35% to Colombo and when we unload it, it’s recorded as two movements - one incoming and one outgoing,” the source further said.
“Going via Colombo Port is also cheap, there’s quick handling of cargo and water depths are deep. India has around 200 odd ports and out of them 12-13 are bigger ports. Container-wise the biggest Port is the Mundra Port on the northern shores of the Gulf of Kutch which is also owned by Adani Group. But if you take global rankings, the Colombo Port lies at the 24th place while India lies at 34th.” the source added. 

The source further said that the depth of Colombo’s South Harbour is 18 metres and can dock the biggest ship in the world. “The old terminal was 11 metres deep and between 2000-2001 it was expanded to 15 metres. But because the basin is small and it was difficult to maneuver big ships, we did a feasibility study and developed the South Harbour. But the actual issue is money. It’s a huge development process. But according to my understanding around USD 450 million would be sufficient. But a Sri Lankan contractor cannot build it because proper equipment needs to be utilised. The money could be obtained from a local bank. However the tender process is quite tedious unless the Government gives special powers to SLPA to select a contractor. Therefore if the Government agrees to hand over development work to SLPA it could help by providing a loan,” the source went on. 

Yahapalana Govt. never proposed to sell ECT

“In May 2019 the Ranil Wickremesinghe-Maithripala Sirisena Government signed a Memorandum of Cooperation to work with India and Japan on a minority stake,” said Samagi Jana Balawegaya Parliamentarian Dr. Harsha De Silva. “This was to create a jointly-ventured Terminal Operations Company where Sri Lanka would have 51% stake and India and Japan to have 49%. There was no sale of anything. But there was a condition that no terminal operator from the South of India would be eligible for the project. The idea was to stop any company from cannibalising the operation. The subject minister at the time had wanted to obtain a loan, but the finance minister Mangala Samaraweera had pointed out that if it is a joint venture company they could also handle the equipment.”

Dr. De Silva

Dr. De Silva further said that the Adani Group was never formally proposed from India. “The suggestion to hand over proceedings to the Adani Group came only after the change in government. Ports are networks where cargo operators, terminal operators and shipping lines work together. All successful ports get together with other ports to create a collaborative partnership for success.” said Dr. De Silva. 

“Apart from that the Rajapaksas also promised that they would never partner with any foreign company to develop the terminal,” he added. “They also said that they will take back Hambantota terminal as well as they are not in the business of “selling assets”. But now they seem to be doing the opposite and what they are doing is completely opposite to their mandate.” said Dr. De Silva. 

Drawing examples from previous transactions, he added that Mahinda Rajapaksa did a deal for CICT where the SLPA had 15% stake and 85% was given to China Merchants Port Holdings Company Limited (CMPH). “Chandrika Kumarathunga did a deal for SAGT where a shareholding of 85% to 15% was introduced and the latter was being held by the Government. If you look at the Colombo Port the Sri Lanka Podujana Peramuna and Sri Lanka Freedom Party has given around 85% to private parties,” he added. 

“No one in the past has sold or leased assets this way. One of the examples is the sale of 50 acres of land for the Port City project. The title and sovereign deeds were given by Mahinda Rajapaksa. When the Government changed in 2015 they extended the project, negotiated the agreement and gave it on a 99 year lease. The Army Headquarters and Galle Face was sold by Mahinda Rajapaksa. But I challenge anyone to show (with proof) if the predecessor government sold anything of significance between 2015-2019. As such various media institutions have been falsifying facts to show that the MS-RW Government sold the ECT. But that’s absolutely false.” opine Dr. De Silva. 

The suggestion to hand over proceedings to the Adani Group came only after the change in government. Ports are networks where cargo operators, terminal operators and shipping lines work together. All successful ports get together with other ports to create a collaborative partnership for success 
-Samagi Jana Balawegaya Parliamentarian Dr. Harsha De Silva

Final decision pending 

When contacted, Secretary to the Ministry of Ports and Shipping U.D.C Jayalal said that the project committee is discussing the proposals that have been submitted. In response to a query on the total cost of developing the ECT, Jayalal said that approximately USD 590 million is needed. “Altogether it would cost around USD 710 million. But we are in the process of clarifying some matters and will come to a conclusion this week.” he said. 

Cabinet spokesperson Keheliya Rambukwella too said that it is quite likely that operations of ECT would be given to the SLPA at the time this edition went to press.  

India requests GoSL to expedite MoC as planned 

A statement released by the Indian High Commission stated that the Government of India expects to implement the trilateral Memorandum of Cooperation signed in May 2019 for the development of ECT. The statement elaborated GoSL’s commitment that has been conveyed several times in the past including at leadership level. It states that all sides should continue to abide by existing understandings and commitment. 

Adani Ports acquisitions

Known to be India’s largest private ports operator, Adani Ports and Special Economic Zone Limited has so far acquired operations in 10 domestic ports in six maritime states including Gujarat, Goa, Kerala, Andra Pradesh, Tamil Nadu and Odisha. These include the Mundra Port which is the largest commercial port in India, Dahej Port (Gulf of Khambhat), Hazira Port (Surat), Vizhinjam Port (Kerala), Kattupalli Port (North Chennai) and Dhamra Port (Odisha). In addition to that the Group also operates the Tuna Terminal (Kandla Port, Tuna), Mormugao Terminal, Ennore Terminal(Tamil Nadu) and Vizag Terminal(Visakhapatnam).