Hambantota Port – sustenance questionable?
The Hambantota Port was constructed and commissioned about three years ago. Reports stated the cost of construction of phase I as US$361 million with about $300 million coming from China Exim Bank as a commercial loan. Further $148 million was spent to meet the cost of rock blasting in channel, cost escalations, new office building and other design changes as reported in a local newspaper quoting the Ports Chairman.
There appears to be no mention about other preliminary costs such as land acquisition, Kataragama main road diversion with service diversion costs financed from Ports Authority funds which must have run into several billions of rupees. The resulting cost of port phase I should be around $560 million while the loan portion has to be paid back.Expansion of the port as phase II by further excavation into land progresses at $800 million or more as reported, being more Chinese Exim Bank loan.
What is the contribution to the country`s economy from this project? The Ports Chairman had stated in a Sunday newspaper in May this year that for loan repayment this year Rs. 7 billion is required while total earnings of the port amounts to Rs. 100- 150 million this year. What happens when actual expenses are deducted from earnings of the year and what funds are available to repay the loan?
The Hambantota Port undertakes vehicle loading/unloading, fuel bunkering as primary operational activities at present. An MOU seems to have been signed to have a shipyard and if so earnings will go to this shipyard company. All above mentioned revenues would not help the port to become a profit making venture.
The Colombo Port has a history of about 140 years after becoming a sheltered port with breakwaters. This port has oil handling, bunkering, break-bulk and bulk cargo handling, vehicle handling (until transferred to Hambantota), container handling (from around 1980) and a major shipyard. Colombo Port revenue was found to be made up as roughly 60 per cent from container operations, while all other cargo handling including vehicles and oil brought in less than 25 per cent, navigational revenue about 12 per cent when analysed about 10 years ago.
Feasibility study reports of the Hambantota Port, one by SNC Lavalin of Canada and other by Ramboll of Denmark, showed the port viability primarily on container handling. The Colombo Port analysis given above illustrates this. Hence with the Colombo South Harbour having capacity for about 20 years to the future, the sustenance of Hambantota Port is doubtful having invested over $1200 million being mostly commercial loans. Shipping trade in the Indian sub-continent is a matter to be watched.
Some reiterated for nearly two decades that nearly 200 ships bypass Sri Lanka daily and that Hambantota must be developed to attract them. Are we realizing that or adding another burden to the country by this project?