Major shipping lines have expressed interest in partnering with the Sri Lanka Ports Authority (SLPA) to run the East Container Terminal (ECT)—but its agreement with the Adani-run West Container Terminal (WCT) prevents it from doing so.
The agreement blocks the SLPA from directly or indirectly allowing a third party to operate any new facilities in the Colombo Port for seven years from the effective date of the WCT contract or until the total throughput of the port exceeds 5.5 million TEUs over a period ofsix consecutive months, whichever happens sooner.
The effective date of a contract is when it comes into effect and when the obligations within the agreement need to begin to be fulfilled.
One of the expressions of interest—an unsolicited proposal—was submitted by Maersk and APM Terminals (as consortium lead), in partnership with Mitsui & Co and Ocean Network Express. While other shipping lines have also come forward, the SLPA will neither call for open tenders nor entertain any private parties for ECT, said its Chairman Admiral (Rtd) Sirimevan Ranasinghe.
The other reason, the SLPA Chairman said, was the “exclusivity clause” in the Colombo West International Terminal (CWIT) build-operate-and-transfer agreement, which prevents the entry of any new third party to the Colombo Port till the terms of the contract are fulfilled.
Clause 4.1 of the WCT concessions agreement reads, “The Port Authority and the Government have represented and undertaken that the East Container Terminal shall be developed, equipped, operated and maintained solely by the Ports Authority.”
CWIT is expected to be fully operational by 2027. Shipping industry analysts have long urged the Sri Lanka Government to renegotiate clause 4.1. “This clause is a travesty considering WCT also got so many tax breaks,” said one expert, who requested anonymity.
The ownership of WCT is split between Adani (51%), John Keells Holdings (34%) and SLPA (15%). Profits are tax-exempt for 25 years, while equipment is exempt from border taxes. Up to 20 expatriate employees too will get tax exemption on salaries. The commercial terms for WCT are similar to those agreed upon between the China Merchants Port-run Colombo International Container Terminal and SLPA. The latter does not, however, have an exclusivity clause.
