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By Maheesha Mudugamuwa
The Colombo Light Rail Transit (LRT) Project, funded by Japan International Co-operation Agency (JICA), has been converted into an urban construction nightmare with the new authorities planning to remodel the already implemented project into a public-private partnership (PPP).
With the announcement of the new decision last week, questions have been raised by urban transport sector experts as to whether the remodelling of the project is a case of political point-scoring overriding commercial sense and technical reality, as it came to light a few months after the new Government came to power.
The experts fear that remodelling the project would further delay the construction of the proposed LRT and as a result, the country would have to continuously incur billions of rupees in losses which arise through heavy traffic congestion, especially in Colombo.
The 15.7 km LRT system, which was 16 stations from Colombo Fort to Malabe via Battaramulla, involves an elevated railway track, elevated stations, a train depot, the procurement of LRT trains, and the installation of electrical, communication, and signal systems. The project is expected to reduce travel time from Colombo Fort to Malabe to approximately 30 minutes.
The loan agreement was signed between Sri Lanka and Japan last March. Accordingly, Japan had extended a loan of around Rs. 48 billion to Sri Lanka for the Colombo LRT Project. The loan for the project was offered on high concession terms and conditions, including a 40-year repayment period for funds obtained for consultation services with a grace period of 12 years, a 0.1% interest rate per annum for civil work and equipment, and a 0.01% interest rate for engineering services.
Revisiting the project
In January this year, Secretary to the Ministry of Urban Development, Water Supply, and Housing Facilities Dr. Priyath Bandu Wickrama wrote to the Project Director of the LRT Project, expressing his concerns over the project funded by JICA.
In his letter copied to the secretaries of the President, Prime Minister, and the Treasury, he raised eight concerns regarding the project and asked the Project Director for explanations on or before 10 February 2020.
By the time Dr. Wickrama sought explanations stating that the project needs to be revisited, the Colombo LRT Project Management Unit (PMU) had already completed the basic design of the project while the detailed design and rolling stock tender were also being completed.
The PMU in its lengthy explanation to Secretary Dr. Wickrama, as seen by The Sunday Morning, has stated that the land acquisition for the project is already in progress as the lands in depot areas have been identified and sent to the Valuation Department for valuation purposes.
Discussions regarding the school buildings affected along the trace have also been carried out with the Chief Secretary, provincial/zonal directors, and principals.
In the meantime, a bill is being prepared by the Legal Draftsman’s Department regarding the institutional structure for the regulation, operation, and maintenance of the project.
In addition to the key activities, many other activities related to the project such as awareness programmes are also progressing.
High cost
A major concern raised by the new Government is the high cost of the project.
However, in its response to the Secretary, the PMU has explained the estimated cost of the project.
Accordingly, the preliminary base cost for the project, estimated during a feasibility study, is $ 1,374 million, and including price escalation, contingencies, and interest, Sri Lanka and JICA have estimated the loan amount to be $ 1,850 million.
However, the loan amount is set as the maximum amount that could be disbursed by JICA for the project and the interest is calculated on the disbursed amount and not on the loan amount.
The PMU has further noted that the more accurate cost estimate could only be prepared during the detailed design stage and also the actual cost would be dependent on market factors and bid conditions at the time of procurement.
Further clarifying the allegation of the high cost per linear kilometre, the PMU has stated that the division of the total cost by the length of the road was not the correct yardstick to conclude that the cost is high, as in an LRT project, the cost per linear kilometre varies significantly on several factors, including the total length, distance between stations, the percentage of elevated length, and headway.
In response to Dr. Wickrama’s suggestion to restructure the consultancy service for the design and supervision of the LRT on a lump sum-based contract instead of a time-based one, the PMU has explained that changing the conditions of a contract in an international consultancy contract for the convenience of the client after 10 months of execution was disputable.
However, when contacted by The Sunday Morning, Dr. Wickrama said the Government didn’t want to opt for a loan for a project that could get private sector investment.
“This is a decently viable private sector investment project. The Government decided to go for a PPP model. The Treasury has requested JICA to take that loan off and, if possible, to give it for some other purpose,” he explained.
Elaborating further, Dr. Wickrama noted that the Government would terminate the loan and remodel the project.
“We will call for international requests for proposal to get an investor for this monorail. We are not going to cancel it (the project), but we are looking to remodel it and carry it out as a PPP,” he continued.
When asked whether the Government wanted to go for a Chinese investment, the Secretary noted that the Government did not have such a plan.
As learnt by The Sunday Morning, the Government will have to pay more than $ 100 million as compensation to JICA as well as another Rs. 1 million as a penalty fee if Sri Lanka opts for the cancellation of the project nearly a year after it was signed.
Furthermore, it is learnt that the proposed PPP model was not suitable for the Colombo LRT, which had been communicated to the present Government by an international financial agency. Nevertheless, the Government has already decided to remodel the project and seek international investors for the PPP model, The Sunday Morning learnt.
