China’s engagement in Freight Service Supply centre in Colombo
A South Asian Freight Service Supply centre is to be set up at the Colombo Port area to meet the increasing container handling demand following the commencement of partial operations at East and West Container Terminals in 2023, according to a Ports and Shipping Ministry’s cabinet memorandum.
As per official estimates, the container handling capacity of the port is expected to increase up to around 10 million from current 7 million Twenty-foot Equivalent Units (TEUs) after the commencement of the preliminary operations of the two terminals.
The expansion of supply service facilities with the customs’ service limits near the South Asian Gateway Terminal (SAGT) and the East Container Terminal (ECT) will become essential with the anticipated increase in container handling demand in two terminals, Ports Minister Rohitha Abeygunawardena told the Business Times.
The China International Container Terminal (CICT), a listed company in Hong Kong, has submitted a project proposal expressing its interest in this project as it has already taken over the container handling and service supply operations. The Minister noted that the Cabinet of Ministers has taken a decision to further assess the project proposal with the aim of implementing it on a Public Private Partnership (PPP) basis by appointing a negotiating committee on his recommendations while considering the observations made by the Treasury.
The proposed ‘In-House Container Freight Service Station’ of the Sri Lanka Ports Authority (SLPA) will be built at a 5.3 acre site at the Battenburg and Bloemendhal area in Colombo located in close proximity to the Unity Container Terminal of the SLPA.
CICT will implement the project under Build, Operate and Transfer (BOT) system with an investment of US$150 million plus $25 million for capital investment for Phase 1 of the project, the cabinet memorandum revealed.
A 35-year lease agreement will be signed with the SLPA to set up a state-of-the-art Service Supply Centre as a Public Private Partnership Project (PPP) under BOT basis within the Colombo Port area.
Sri Lanka will get the ownership of 30 percent of shares and out of it 15 percent will be owned by the SLPA, according to the memorandum.
According to Treasury observations, this land transaction is not much beneficial for the country as it is handed over to CICT on a 35 year lease basis under BOT system and the return on public investment is minimal due to low percentage of 30 percent share holding of the state.
According to the BOT agreement, CICT will have to pay land lease rent as per the value estimated by the Assessor’s Department and the rent will be increased by 3 percent per annum.