Adani group mulls alternative plan to invest in Colombo port

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The Adani group is considering an alternative proposal to invest in Colombo port’s West Container Terminal (WCT), two people aware of the development said, after several rounds of discussions between the Sri Lankan, Indian and Japanese governments to revive its investment in the East Container Terminal (ECT) seemed to come to naught.

Talks between the Adani group and the Lankan government come even as New Delhi is seen as sticking to its position that Sri Lanka honour the commitment given to the governments of India and Japan on developing the ECT.

In February, Mint reported that the Lankan government was in talks with private investors involved in a three-way pact between New Delhi, Colombo and the government of Japan to operate the ECT. The talks were aimed at overcoming the impasse over cancellation of the pact to operate the ECT by the Lankan government earlier this month.

The pact was signed in 2019, with India and Japan holding 49% stake in ECT. But in February, Sri Lankan Prime Minister Mahinda Rajapaksa said the east terminal would be operated by Sri Lanka Ports Authority, causing friction in ties. News reports say that the Lankan government’s move followed intense protests from port employees’ unions, with other unions also joining the campaign demanding the cancellation of the pact with India.

The Sri Lankan cabinet had instead approved a proposal to develop the WCT in conjunction with India and Japan, a decision that India was not keen to consider at the time.

“The Adani group is now considering the merits of investing in the WCT,” said one of the two people cited above, both of whom spoke on condition of anonymity.

The Colombo port is a key trans-shipment hub for goods coming to India and acquiring a terminal here would be a significant development for the group, which operates 12 ports along India’s west and east coasts, representing 24% of India’s port capacity.

In recent years, the group has been keen to expand its port operations and container terminal network within India’s neighbourhood and the Colombo port is among the busiest harbours for container traffic in the region.

The Gautam Adani-led conglomerate had last year signed an agreement to develop a $275 million container terminal at Yangon port in Myanmar, which is expected to feed in traffic into its own upcoming trans-shipment hub at Vizhinjam, Kerala.

A spokesperson for the Adani group did not respond to queries from Mint.

The Indian government is keen that Sri Lanka sticks to its original commitment of handing over the ECT for development by India, Japan and its nominees. A person familiar with the matter pointed out that the pact for developing the ECT was an “international commitment on the part of the Sri Lankan government”. If this was not adhered to, “what is the guarantee that the WCT project will not hit the same hurdles?” the person cited above said.

“Given that almost 60-70% of trans-shipment involves goods to India, it is essential that we have a presence” at the Colombo port, the person said. It was not only India, Japan was also of the view that Sri Lanka should keep to its international commitments, the person said.

According to former foreign secretary Kanwal Sibal, the Adani move to consider the WCT option potentially weakens the negotiating position of the Indian and Japanese governments “on an issue which has important commercial and geopolitical aspects”.

Source: Live Mint

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