Sri Lanka opts out of port deal with India

04 Feb 2021 Editorial Team

In what is being seen as a setback for India, the Sri Lankan government, which is facing the threat of nationwide protests against port privatisation, backed out of an agreement signed by the previous regime in 2019 for Japan and India to develop the East Container Terminal (ECT) at the Colombo port with Adani Group as an investor.

As an alternative to the ECT project, Sri Lanka offered India another undertaking to build the West Container Terminal (WCT) at the same facility on a Public Private Partnership model along with Japan.

The ECT was tagged as a priority project for India by External Affairs Minister S Jaishankar during his visit to Colombo last month.

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

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

The ECT project was deemed important for India, primarily due to security reasons as the China Merchants Port Holdings Company holds 85% stake in the Colombo International Container Terminal (CICT), which is near the ECT.

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