Colombo Terminal Project

International Apr 04, 2021

The flames of turmoil have been lapping up from all directions and the recent news from Colombo only adds oil to it. The decision of Sri Lanka to go back on the agreement it had gotten into with India and Japan in 2019 has not been good news for the Modi Government 2.0.

The Sri Lankan Government was forced to renege the tripartite agreement of 2019 as a response to the growing pressure from around 23 trade unions throughout the country. According to the trilateral Memorandum of Cooperation (MoC) of May 2019 Sri Lanka owned 51% and India and Japan owned 49% stakes in the development of the East Container Terminal (ECT) at Colombo port.

PM Mahinda Rajapaksa said the ECT will fully come under the state-run Sri Lanka Ports Authority (SLPA). Soon after, a cabinet meeting approved a proposal, as a compensation bid to India, to begin the development of the West Container Terminal (WCT) at Colombo Port in the form of Public Private Partnership with India and Japan.

Reason for revocation of the 2019 agreement:

Seniors leaders of Sri Lanka Podujana Peramuna (SLPP) party said that the Sri Lankan President was under immense pressure to revoke the trilateral agreement. President Gotabaya Rajapaksa had initially stood by the agreement and had tried to resist the pressure from the trade unions. However, according to a senior cabinet minister, the opposition was so strong that he was becoming unpopular among the Sri Lankans.

The government finally conceded to the demands of the trade unions because of the significant support of many other sections joined in protesting privatization.

Possible role of China:

Certain reports allege that China instigated the civil society groups and trade unions against the ECT and demanded cancellation of the 2019 agreement.

China not only has a strategic interest but a commercial one too to avert Indian participation in the ECT. China Merchants Port Holdings Company Ltd, a Chinese shipping company has an 85% stake in the three million TEUs-capacity CICT, a joint venture terminal with the SLPA.

India’s Reaction:

India’s initial response to Sri Lanka’s decision was that as it was a tripartite agreement, the island nation should not have taken a unilateral decision. Some sources say that India is considering the WCT proposal and discussing it with Japan while expecting Sri Lanka to reconsider its decision. The Sri Lankan government rules out future issues, however, it is still unclear whether India would accept the proposal.

Some sources say that India is considering the WCT proposal and discussing it with Japan while expecting Sri Lanka to reconsider its decision.

Impact on the Indo-Sri Lankan relations:

The ECT project was undoubtedly an important one for India, supported by the External Affairs Minister S Jaishankar’s visit to Colombo in January. If India ends up taking offence from the expulsion of it from the agreement, it can definitely make things difficult for the island nation on the economic and geo-political fronts. The pandemic had left hurt the Sri Lankan economy badly and an economic isolation will not be good for the nation in the long run.

This article has been written by Ruchira Sarma for The Paradigm

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