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Current Affairs

Adani port deal

Date: 11 October 2021 Tags: Miscellaneous

Issue

Adani group, John Keells Holdings and the Sri Lanka Ports Authority (SLPA) have signed a deal to together develop the Colombo West International Container Terminal (CWICT).

 

Background

The Colombo port is located at a strategic location amidst one of the busiest shipping routes in the world.

 

Details

  • The port currently has five functional terminals and can handle 5 million TEU of containerised cargo.

  • The agreement is in form of Build-operate Transfer and will be valid for 35 years. The Adani group will have majority, 51%, stakes, while John Keells would hold 34%, and the SLPA, 15%.

  • The investment is worth $700-million and is the largest such investments in Sri Lanka’s port sector. It is expected to enhance reputation of Colombo port.

 

Start of deal

  • The deal has origination in 2019 when a tripartite agreement was signed between India, Japan and Sri Lanka to jointly develop East container terminal at the same port.

  • This deal was supposed to give advantage for India as it was located adjacent to China-backed Colombo International Container Terminal (CICT).

  • The China Merchants Ports Holdings has majority of 85% stakes in CICT. The lease is worth 35 years.

 

Reason for India’s interest

More than 70% of business generated in Colombo ports is due to India. The port acts as transshipment port for all cargo bound for India.

 

The fall of 2019 agreement

  • In 2021, the government of Sri Lanka unilaterally removed India and Japan from the project citing pressure from port union and nationalist group.

  • The deal was opposed citing foreign interference in national assets. The Sri Lankan government decided to develop ECT with its own investments.

  • The sudden cancellation of deal was shocking for India and Japan. Both the government showed displeasure and diplomatic strain developed.

 

The compromise

The Sri Lankan government offered the West Container Terminal project as a compromise between the entities. Japan has not yet decided on its participation.

 

The advantages

  • The investment by India in ports and logistics sector is seen as a milestone in developing regional ties.

  • Technology and investment could modernize the port in line with the modern demands. There will also be enhancement of business.