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Cranes for ECT: India insists on strict adherence to tripartite agreement
The Sri Lanka Ports Authority’s plans to install three cranes at the unused East Container Terminal (ECT) at the Colombo Port were scuppered by India and Japan, reminding the Government that any development there must be within the terms of a tripartite agreement signed last year.
Now, amidst trade union protests, the SLPA has expedited talks with India to finalise a joint venture for the ECT so that the terminal can finally be engaged. This is despite the Government preferring to run the facility—the deepest in the Colombo port—through the SLPA.
Sri Lanka, India, and Japan in May 2019 entered into a memorandum of cooperation (MoC) to jointly develop the ECT. It was agreed that the SLPA would retain full ownership of the terminal while holding a majority 51 percent stake in the joint venture company. It was decided to buy and install six ship cranes and 18 electric rubber-tired gantry cranes for operations.
However, the SLPA is now saddled with three cranes, all much smaller than what the ECT deep water facility needs. They were ordered by the last administration at US$ 25mn (Rs 4.6bn) for a separate terminal that it then failed to build.
The equipment recently arrived and is idling on a barge because the SLPA has been forestalled from installing it on ECT. It is the only place where these cranes could be of some use as Colombo Port has now reached full capacity.
Port unions are demanding that the SLPA must not “sell national assets to foreigners”. They want the cranes installed—despite not being of the required specifications for such a deep water facility—and the ECT run under the SLPA. However, the MoC entails international obligations that India, in particular, is keen to enforce.
“Development of Colombo Port has significance for promoting commerce in our region,” an Indian High Commission spokesperson said. “Around 60 percent of transhipment from Colombo Port is linked with India Therefore, its development in tripartite—Sri Lanka, India and Japan—would be a win-win situation.”
India’s Adani Shipping has approached John Keells Holdings (JKH) to be its joint partner in the company that is expected to be set up to manage ECT, authoritative sources said, adding that this was part of a Government-to-Government formula that has “well-established precedents”.
JKH has indicated willingness. The process, however, is at an early stage and industry sources question why the opportunity was not being opened out to other Sri Lankan companies through an open tender, as due process required.
To be operational, the ECT needs significant additional investment, including at least 12 cranes the size of those at the Chinese-run Colombo International Container Terminals (Ltd). While it currently has a pier of 440m of quay length, an additional 880m of berth is required. Around 50 hectares of land must be filled to create a yard. Multiple other equipment must come on along with rubber tired gantry cranes, trucks, administration buildings and repair facilities. The facility’s total project cost is around US$ 650mn of which just around US$ 80mn has been deployed.
“The cranes that are now on the barge are suitable to handle ships of three generations ago,” an industry source said. “They do not merit sitting on ECT.”
The new cranes have their origin in a 2017 Cabinet paper put up by then Ports Minister Mahinda Samarasinghe. The proposal, however, was to induct a new, fifth terminal at Jaya Container Terminal (JCT 5) and to bring three cranes for use therein. While JCT 4 can currently handle just one 330m vessel, an extension would have enabled it to accommodate two of the same size.
In October 2018, after following procurement guidelines, a Cabinet-appointed negotiating committee approved both the construction and purchase of cranes. Contracts were signed with China Harbour Engineering Corporation (CHEC) to extend the pier and with Shanghai Zhenhua Heavy Industries Company Ltd (ZPMC) for the cranes.
“They are not large cranes,” a source close to SLPA said. “They work 20 containers on a ship across and are not meant for a deep draft berth like ECT.”
But a Cabinet reshuffle in December 2018 saw Minister Samarasinghe replaced by Sagala Ratnanayake who, in turn, appointed his brother, Kavan, as SLPA Chairman. “They decided to order the cranes without proceeding with the civil works,” the source said. “This is illegal because Cabinet approved both components. And where do you put the cranes when they come in?”
This situation, he said, has now come to pass, he pointed out. “India now maintains that the SLPA can’t start the ECT project without it,” he continued. “Even doing so with small cranes would be against the spirit of the understanding. And even old rubber-tired gantry cranes that the SLPA decided to transfer from the Unity Container Terminal to ECT are stuck at the Bandaranaike Quay for the same reason.”
The SLPA wants the problem resolved and the ECT, which could have been commissioned as early as 2015, operational. Timelines have been given to both India and Japan.
“ECT needs to be put to use,” said a senior shipping source. “The Colombo Port received a reprieve in the form of COVID-19. We were going to lose volume because we are at about 85 percent capacity—which is 15 to 20 percent beyond the point at which additional capacity should have been built.”