By Sulochana Ramiah Mohan
The government of Sri Lanka will have to pay Chinese contractors of the Colombo Port City Project a staggering Rs.40 Billion (Around USD 300mn) as damages, if they terminate the project, Ceylon Today learns.
In a sequel to the indefinite suspension of the Colombo Port City project, the China Communications Construction Company Ltd,. (CCCC) which has suffered a staggering loss of USD 7.2milion a month, has demobilized the three main sand dredgers and shipped them back to China last week, Ceylon Today learns.
The Chinese contractors told Ceylon Today they have also retrenched 80% of the staff – nearly 700 in number, direct and outsourced employees, by giving them prior notice with an additional one month's pay as per the labour laws of Sri Lanka.
About 40 Chinese engineers and staff have also left the country to date.
"We have demobilized staff and machinery on the Port City Project and the three dredgers, the main equipment in the land reclaiming project, were shipped back from the site to China," Chinese officials said.
China Harbour Engineering Company Limited (CHEC), the contractor of the CCCC, told Ceylon Today that they cannot work on the breakwaters, which is the main part of the land reclamation project, without those machines.
Claiming that it had cost USD 1 million per dredger to ship them back to China, they said the dredgers had been idling too long in the sea and were shipped back to be used in other projects. The official ventured that should the Sri Lankan government grant approval at a later date to restart operations, they will need an indefinite time to get those dredgers back and commissioned once again.
The loss sustained in halting the project has cost the contractors nearly US dollars 7.2mn from March 6 (the date of suspension of the project) to March 31 taken together with the loss sustained for the whole month of April would amount to an aggregate USD 15mn. This will be communicated to the Lankan government, he said.
The last dredger was shipped out to China before the Sinhala/Tamil New Year while the other two dredgers were shipped out last month.
The Chinese company has also returned all locally hired vehicles, excavators and trucks that were used for the project.
"Once the procedures are approved, we will return because that provision is there. However, the government will have to absorb all the additional expenditure and losses we have sustained so far," the Company said.
CHEC Port City Colombo, a subsidiary of CCCC, contracted to undertake all land reclamation and infrastructure works for the project. The Port City went through the cabinet's prerequisite review process before the government signed the agreement with CCCC.
The Chinese company felt optimistic when the government granted permission for it to attend to the work of preventing sea erosion of the built-up sand banks, but now say that it is nearing completion and the systems would thereafter be de-commissioned.
Asked how long they could hold on with work ceasing on the project, officials said it depended on the government and should the government announce termination of the project, 'we will take legal action as a last resort'.
The final cost will be calculated with effect from the date of the termination of the project.
According to the CHEC, the Technical Evaluation Committee (TEC) for the project, comprising16 government agencies, approved the project.
The 108 hectares that is leased to China contractors of the total 233 hectares reclaimed land will also be monitored by the Urban Development Authority (UDA) and follow the master plan that is given to the government of Sri Lanka, they reiterated.
The project master plan includes sundry buildings and hotels but China will offer the land to international land developers from various other countries which could include India, Sri Lanka and others from the Asian region for various projects and so proceed with some facets of the master plan. On the aspect of Urban Development Authority (UDA) clearance, the officials said that the UDA will have to approve construction plans once the reclaimed land has been prepared for commercial construction work to begin.
It is learnt that the port city will be constructed in such a way that the public road could be converted to a Formula One racing track. There are no readymade tracks for such sports.
The Chinese officials state that their company was informed that the aforesaid EIA licence had been issued by the Coast Conservation and Coastal Resources Management Department on or about September last year and the company wrote to Sri Lanka Ports Authority (SLPA) expressing several concerns regarding the several conditions specified in the said EIA licence. Thereafter the Chinese company was informed that the licence has been granted for Sand Mining by the Geological Survey and Mines Bureau (GSMB).
However, though the obligations to obtain the necessary applicable licences and permits was in the hands of GoSL, the relevant authorities, without calling for verifications, suspended the project and this has perplexed the foreign investor.
Since the investment proposal and the key terms included in the proposed Concession Agreement entered into between the Project Company and the SLPA which was approved by the Cabinet of ministers which also granted approval to the secretary to the Ministry of Highways, Ports and Shipping to enter in to the said agreement, acting for and on behalf of the government of Sri Lanka, all rights obligations and liabilities of the SLPA under the Concession Agreement shall have full force and effect as rights, obligations and liabilities of the GoSL, they stated.