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India is looking to strike a hard bargain with Sri Lanka and would want a government-to-government agreement for a terminal presence in Colombo port — a regional transhipment hub through which a large portion of India’s export-import cargo containers are transhipped — for strategic and security reasons.
On February 1, the Sri Lankan cabinet scrapped a tripartite memorandum of cooperation (MoC) signed in May 2019 with Japan and India to jointly develop the East Container Terminal (ECT) at Colombo Port in the wake of strong protests from port unions.
Sri Lanka, instead, is believed to have offered the proposed West Container Terminal (WCT) project to India and Japan.
But, India is insisting on the sanctity of the agreement on ECT and want Sri Lanka to “give in writing” its offer to allow India take WCT, a government source briefed on the matter said.
‘Tender route risky’
If there is no government-to-government agreement, the WCT has to be put to public tender, as per Sri Lankan government rules and procedures in which many global terminal operating giants including a State-owned Chinese firm would be keen to participate. With aggressive bids, they may walk away with the deal.
This could scuttle India’s efforts to have a presence in Colombo port forever as both ECT and WCT would then be no longer available.
“The public tender route to gain a presence in Colombo is a highly risky proposition for India,” a port industry source said.
Secondly, India wants a similar equity arrangement as in the case of Colombo International Container Terminals Ltd where China Merchants Port Holdings Company Ltd holds 85 per cent stake, and other similar terms and conditions for WCT.
Operational autonomy
This would give operational autonomy and freedom to carry on the terminal business, without being subjected to government audit and public procurement rules.
While both ECT and WCT would be similar capacity terminals, WCT has an added advantage in terms of deeper depth at 20 metres.
The only point in ECT’s favour is that it can be put to operations faster by installing ship-to-shore cranes as the berth is partly built.
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