News
Garbage project in crisis: US$ 10m to be paid to Chinese firms
The Aruwakkalu sanitary landfill’s Chinese contractors have closed down project offices, heavily trimmed local staff and sent many of their Chinese employees back because the Urban Development Authority (UDA) has fallen back on US$ 10mn worth of payments up to March this year.Work is continuing, but slowly. The contractors are holding talks with the Urban Development Ministry for a solution which, if not forthcoming, could lead to a suspension of the project on June 12.
The landfill is being built by a consortium between China Harbor Engineering Company Limited (CHEC)–the builders of the Port City– and the Southwest Municipal Engineering and Research Institute of China (SMEDRIC).
Three offices were closed down and ten staff quarters relinquished to save on rent, said Chandana Gunawardana, the main contractor’s Deputy Project Manager. The consortium is now looking for a payment schedule from the UDA.
Over the past year, interim payments were approved but not disbursed, causing the main contractor to pump money into the venture. “We have every intention of completing the project,” Mr Gunawardana said. “Unfortunately, we have a huge cash flow problem.”
The project contract was signed as far back as December 2017. But construction was hit by the COVID-19 pandemic that broke out in 2020. Heavy rainfall in November 2021 which inundated the leachate treatment plant and damaged its equipment added to delays. And the site is yet to receive power supply.
Meanwhile, the Urban Development Ministry is to present a Cabinet paper next week seeking an extension of the project up to December this year within the total estimated cost of US$ 130mn (Rs 47bn).
The memo will seek Cabinet sanction for the release of US$ 10.74mn (Rs 3.8bn) and Rs 61mn to the Ministry to settle outstanding payments to CHEC; and approval to pay the balance contract amount of US$ 25.01mn (Rs 9bn) and Rs 211.02mn within this year.
The building of the landfill in Aruwakkalu went ahead despite strong opposition by environmentalists and residents of the Puttalam district. The project includes transfer stations at Kelaniya and Aruwakkalu (industrial facilities where municipal solid waste is temporarily held and sorted before heading to a landfill) and a new railway line to Aruwakkalu for transport of waste.
At present, nearly 90 percent of the project is completed. Four locomotives and 94 containers (to move garbage) have already been imported. Up to now, the contractor has been paid US$ 65.47mn and Rs 1.4bn.
The draft Cabinet paper reveals that interim payments must contractually be made within 56 days. However, no disbursements were made this year and “the contractor has already informed us that the contract will be suspended by them on 12th June 2022 in accordance with the conditions of contract”.
At a subsequent discussion, however, the contractor wanted assurance that the dues would be settled by July 30 this year. Failure to do so could cost the Government significantly more in terms of mobilisation and demobilisation expenses as well as site maintenance.
The Ministry has suggested that financial provisions available under the Action Plan of Metro Colombo Solid Waste Management Project in 2022 are used over the next six months to pay CHEC.
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