Colombo Port: Adani Begins Construction Of $700 Million Container Terminal Project

India's infrastructure behemoth Adani Group has commenced construction of the Colombo Port's Western Container Terminal (WCT).

" We have started the dredging work" Harikrishnan Sundaram, the chief executive officer of Colombo West International Terminal Pvt. Ltd, said while addressing the Colombo International Maritime & Logistics Conference.

Sundaram also confirmed that contract for jetty work had also been awarded and work was expected to begin in the next two to three weeks.

The project was delayed due to reluctance on part of few contractors to be engaged due to the economic crisis in Sri Lanka and currency challenges, he added.

“Dredging commenced in the morning,” Upul Jayatissa, managing director of the state-run Sri Lanka Ports Authority (SLPA), told Reuters.

The first phase of the project is still expected to be completed in the second half of 2024, Sundaram said.

"The full project will be completed by 2025-end.” Jayatissa said.

Phase 1 would add a capacity of 1.5 million 20-foot equivalent units (TEUs) to Colombo Port. Upon completion of both the phases, Colombo port will get an expanded capacity of 3.5 million 20-feet foot equivalent units (TEUs) capacity terminal. The total estimated investment of project is over Rs 5,000 crore

Adani Ports and Special Economic Zones Ltd. (APSEZ), a subsidiary of Adani Group, will partner with John Keells Holdings PLC, Sri Lanka’s largest diversified conglomerate, and with the Sri Lanka Ports Authority (SLPA) as a part of the consortium to execute the WCT project. While Adani group (via APSEZ )will own majority stake of 51 per cent in the terminal, local partners John Keels Holding PLC will hold 34 per cent while the Sri Lanka Ports Authority (SLPA) will have the balance 15 per cent equity.

Colombo Port is particularly significant for India, as it handles roughly 40 percent of transshipped container cargo bound for the Indian market.

In March 2021, APSEZ received a Letter of Intent (LOI) from the Ministry of Ports and Shipping of Sri Lanka and the Sri Lanka Ports Authority, for the development and operations of WCT in Colombo, Sri Lanka.

Project Details

The WCT is being developed on a Build, Operate and Transfer (BoT) basis for a period of 35 years as a public-private partnership. WCT will have a quay length of 1400 meters and alongside depth of 20 meters, thereby making it a prime transhipment cargo destination to handle Ultra Large Container Carriers.

Upon completion, the project is expected to boost WCT’s container handling capacity and further consolidate Sri Lanka’s locational advantage as one of the world’s top strategic nodes along the busiest global transhipment route.

The Colombo Port is already the most preferred regional hub for transhipment of Indian containers and mainline ship operators with 45% of Colombo’s transhipment volumes either originating from or destined to an Adani port terminal in India.

The Sri Lankan government has already notified that the terminal will be entitled to a 25-year tax holiday under its Strategic Development Projects Act. The tax holiday will start from the earlier of the first year of profits or two years after starting commercial operations.

This will Adani group's second international project after Myanmar.

Adani group currently operates a string of seven container terminals across its 12 ports that Adani operates along the Indian coastline handling an annual volume of over 6 million TEUs.

Eastern Container Terminal (ECT)

A memorandum of understanding signed with India and Japan on the development of the Eastern Container Terminal (ECT) in 2019, was withdrawn following the protest by Sri Lankan trade unions and some political parties.

The ECT is now being constructed by SLPA and will be completed in December 2024.

Colombo Port has emerged as a strategic battleground for India and China.

Another terminal, Colombo International Container Terminal (CICT), is controlled by Chinese with Chinese firms holding 85 per cent of the stakes.

In 2011, a consortium led by the state-owned enterprise (SOE) China Merchants Port Holdings Company signed a 35-year build, operate and transfer agreement to develop the deep water South Container Terminal, later called the Colombo International Container Terminal (CICT), at Colombo Port.

To help tide over economic crisis that hit the island nation, India has extend about $4 billion including swaps and multiple credit lines amid an acute shortage of dollars and essentials.