Facing protests, Lanka scraps India port deal, offers another project

In a setback for India, the Rajapaksa government in Sri Lanka, which is facing the threat of nationwide agitations against port privatisation, has cancelled an agreement signed by the previous regime in 2019 for India and Japan to develop the strategic East Container Terminal (ECT) at Colombo port with Adani Group as an investor.

In a reconciliatory move, Sri Lanka has offered India another undertaking to develop the West Container Terminal (WCT) at the same facility on a Public Private Partnership model along with Japan. However, official sources in the Sri Lankan government acknowledged that India is not keen on an alternate arrangement and views the decision as “unilateral”. The Indian High Commission in Colombo has called on “all sides” to “abide by the existing understandings and commitment”.

The decision to let the Sri Lanka Ports Authority (SLPA) develop the ECT was signalled last month by Prime Minister Mahinda Rajapaksa in the Lankan Parliament where he said that the government “has not decided to hand over the management of the East Container Terminal, in whole or in part, to any foreign company”.

External Affairs Minister S Jaishankar had tagged the ECT as a priority project for India during his visit to Colombo last month. Sources said President Gotabaya Rajapaksa stood by the agreement despite strong opposition from trade unions at the Colombo port trade unionists.

At a meeting last month with representatives of port trade unions, Gotabaya Rajapaksa had said that the plan was to develop the ECT as an investment project with 51 per cent ownership held by the Sri Lanka government and 49 per cent as investment by the Adani Group and other stakeholders.

According to estimates, over 70 per cent of business at Colombo port is from ships in transit to the Indian coast, making it important for Sri Lanka, too. Incidentally, the Adani Group is also building a transhipment port at Vizhinjam near Thiruvananthapuram in Kerala, which is being developed primarily to wean away India-bound trans-shipment traffic from Colombo.

Adani Ports and Special Economic Zone Ltd (APSEZ), a group company of the Adani Group, is India’s largest private port operator. It has rights to operate 11 strategically located ports and terminals in the country, up from just one port in 2011. Adani effectively handles over a quarter of all cargo passing through the country’s ports. The group did not comment on queries mailed to it in the evening.

The ECT project was considered important for India, mainly for security reasons as the China Merchants Port Holdings Company holds 85 per cent stake in the Colombo International Container Terminal (CICT), which is near the ECT.

An SLPA official told that, the WCT offer is better commercially as it would give 85 per cent stake to the developers. “The WCT project is almost the same if they (India) consider the security aspect and the necessity to have a terminal for India in Sri Lanka… And WCT is not smaller in size or depth compared to the East Terminal. It is just that the development of ECT has been partially completed by us while the WTC work has to begin from scratch,” the official said.

Last Thursday, 23 trade unions at the Colombo port, backed by over 220 unions across the country, announced an agitation against the project being given to “foreign” companies. When President Gotabaya Rajapaksa assured the protesters that only 49 per cent stake was being given, they cited his own poll manifesto that found fault with the 2019 agreement.“The President stood by the agreement until the last moment but the support gained by port trade unionists was posing a threat to his position as aggressive nationalists and civil society groups extended support to the port workers. The President was becoming unpopular,” said a senior minister of the ruling Sri Lanka Podujana Peramuna (SLPP) party.

Nalaka Godahewa, the former Chairman of SLPA and the current state minister of urban development, told The Indian Express that Sri Lanka wasn’t “pushing India away” from the deal. Godahewa, who also heads ViyathMaga, a network of academics, professionals and entrepreneurs that played a key role in negotiations between the unions and the government, said: “We volunteered to talk to find an agreeable ground to ensure that any decision would respect Indian interests as well. It is a win-win solution now,” he said, referring to the WCT proposal.

Source: The Indian Express