India’s largest private ports company APSEZ has signed a 35-year lease with Sri Lanka's state-owned operator of major commercial ports SLPA (Sri Lanka Ports Authority) to develop and run the West Container Terminal at Colombo under a Build, Operate and Transfer (BOT) model, an official told Sputnik.
The signing ceremony to seal the contract was held virtually on Thursday.
The Adani Ports and Special Economic Zones Ltd. (APSEZ) is a subsidiary of Adani Enterprises, the Indian business conglomerate backed by billionaire Gautam Adani.
As per the terms of the lease agreement, APSEZ will develop and manage operations at the Colombo port terminal in partnership with its local partner John Keells Holdings PLC.
In a disclosure to the Colombo Stock Exchange on Thursday, John Keels Holdings said that work during the first phase of the terminal will commence early next year and would be completed within a span of two years.
While Adani will have a 51 percent stake in profits from the port operations for the next 35 years, the Sri Lankan company will have 34 percent ownership in the lease venture.
The Sri Lankan Ministry of Ports and Shipping and the SLPA awarded a letter of intent to run the operations of the container terminal in March, as per a company statement.
The Indian company said that it intends to reach an operational capacity of 3.5 million twenty-foot equivalent units (TEUs) over the next three decades. The quay length at the proposed container terminal will be around 1,400 metres with a depth of 20 metres.
At least 45 percent of the trans-shipments originating from or destined to India pass through the Colombo port, which currently has five functioning terminals — Colombo International Container Terminal (CICT), Unity Container Terminal, East Container Terminal (ECT), South Asia Gateway Terminal and the Jaya International Terminal.
The West Container Terminal is one of the three proposed terminals slated to come up in the future.
The Sri Lankan government of President Gotabaya Rajapaksa had in February this year scrapped a government-to-government contract signed between his predecessor, and the Indian and Japanese governments to develop the ECT. It was done in the wake of protests by local trade unions and opposition objecting to “foreign ownership” of the strategic asset.
In fact, Sri Lankan Minister of Ports and Shipping Rohitha Abeygunawardena has said that the government would own a “100 percent” stake in all Sri Lankan ports after 35 years.
At the time, the Indian foreign ministry accused Sri Lanka of “dishonouring” their international commitments and said that discussions were underway to make Colombo understand the “importance of adhering to international commitments”.
Sri Lankan Foreign Secretary Jayanath Colombage termed the awarding of West Container Terminal contract to the Indian company as a “compromise”, meant to make up for the decision to boot India and Japan out of the government-to-government contract to operate the East Container Terminal.
India’s ‘Security Concerns’ Over China’s Influence in Sri Lanka
Another of the Colombo port terminals -- Colombo International Container Terminal (CICT) -- is being developed by Beijing’s state-backed China Merchants Port Holdings, a Hong-Kong headquartered company.
During the visit of Chinese President Xi Jinping to Sri Lanka in 2014, Beijing also proposed to develop a Special Economic Zone (SEZ) comprising the land reclaimed from the sea.
In May this year, the Sri Lankan parliament approved the Colombo Port City Economic Commission Bill in bid to formalise the SEZ plan, evoking a sharp response from New Delhi.
“We have been closely following recent developments from our security perspective. We have also noted the concerns that have been raised in Sri Lanka regarding several aspects of the framework for the Colombo Port City."
"We expect Sri Lanka will remain mindful of our excellent bilateral cooperation, including for mutual security in our shared environment, which includes the maritime domain,” an Indian Foreign Ministry spokesperson said in June, addressing queries on potential security implications for India from an increased Chinese presence in Sri Lanka.
‘Pushback Against China’
Former Indian Navy officer Seshadri Vasan, who currently heads the Indian think tank Chennai Centre for China Studies (C3S), told Sputnik that the awarding of the WCT contract to India should be viewed as a “pushback” against Beijing’s rising influence in Sri Lanka, which shares close cultural and economic ties with New Delhi.
“The port project was possibly offered as a face-saver to the Indian company. The Sri Lankan government wanted to pacify India, while at the same time it doesn’t want to antagonise China,” says Vasan.
He says that the involvement of an Indian company in Colombo serves India’s and “economic as well as strategic interests”.
“Given the fact that a huge amount of our container traffic passes through Colombo, it is only in India’s interest that we have a presence there."
"On the other hand, it also serves to negate China’s advantage in potentially controlling merchant vessels coming from and bound for India,” explains the Navy veteran.
The think-tanker also reckons that the Sri Lankan government must have been under “tremendous pressure” from China in snatching away the contract for developing ECT in February this year, noting that China has disputes with both Japan (East China Sea) and India (Ladakh border standoff).