By Maheesha Mudugamuwa
Uncertainty looms over the construction of the long-delayed Central Expressway once again, as the Government has decided not to encourage debt-funded projects considering the present financial situation of the country.
Prior to calling for new bids, the Ministry of Highways had obtained Cabinet approval to receive technical proposals for the elevated highway from the New Kelani Bridge to Athurugiriya, and discussions were ongoing with the China Harbour Engineering Company (CHEC).
Furthermore, a proposal received for the construction of the Central Expressway Project’s (CEP) Section III from China and Section IV from the UK was about to receive Cabinet approval.
With the change of tracks, the CEP, which is moving at a snail’s pace, would face a definite delay of three months due to the new bidding process that began last week. In addition, it will see a further delay of around three months for the evaluation of the documents, it is learnt
Moreover, once the evaluation process is completed, it will take another few more months for the construction work to commence, and if the Government does not receive a BOT (build-operate-transfer) project, then again, the project would be delayed by another year, a highly informed source attached to the Road Development Authority (RDA), who wished to remain anonymous, told The Sunday Morning.
Last week, in a letter addressed to the Ministry of Highways and the Board of Investment (BOI), Secretary to the President Dr. P.B. Jayasundara instructed the Ministry and the RDA to call for fresh proposals for the stretch from the New Kelani Bridge to Athurugiriya and also to accept bids for Sections III and IV of the Central Expressway.
It is stated that the Government will not encourage debt-funded projects, annuity (a series of payments made at equal intervals) payments to meet revenue shortfalls, or guaranteed traffic as these options are not affordable.
Furthermore, the letter states that several parties have submitted letters of intent or interest to the BOI for the two initiatives on a BOT basis, most of which were largely of an unsolicited nature.
Dr. Jayasundara has also instructed the Ministry of Highways and the RDA to issue a detailed Request for Proposal (RFP) for the New Kelani Bridge to all parties who submitted letters of interest to the BOI or the Ministry and who were present at the meeting convened on the matter.
As learnt by The Sunday Morning, the RDA had already received proposals from several local and foreign companies for all three projects, and proposals will be accepted within the next three months.
BOT share in highways
Meanwhile, questions have also been raised over the practicality of the BOT-based projects in Sri Lanka, especially for the Central Expressway.
As explained by subject matter experts, when it comes to BOT-based projects, the investor expects considerable revenue and therefore, the applicability of the BOT method for the CEP is questionable, as the traffic in the highway – once completed – would not be enough for the investor to cover up expenses.
It is also learnt that the Government has suggested several other investments such as the construction of housing complexes within the project in order to make the BOT method viable.
However, the RDA official noted that they doubt whether worthwhile investors would invest in such a massive project without any contribution from the Government.
“If the Government’s debt capacity is shrinking, there are other ways to implement projects. Especially when it comes to the CEP, the question is whether the Government provides a sovereign guarantee or not,” the official stressed.
With all these concerns hanging about, the success of the projects still remains a question, the official added.
The previous Government failed to complete a single highway during its tenure, and although it has been a year since Gotabaya Rajapaksa was elected as President, the highway projects are yet to raise their heads. A serious concern is that if the projects are delayed further, it is doubtful whether the incumbent Government would be able to complete the projects during their tenure as well.
In contrast, the BOT is recognised as an apt solution for the proposed elevated highway extending from the New Kelani Bridge to Athurugiriya.
Change of plans
As emphasised, the proposal for the elevated highway has been channelled through the BOI as an investment project by the CHEC for which the Ministry of Highways provides technical support. The total value of the investment is said to have been around $ 800 million.
The CHEC, which is also the engineering contractor of the Colombo Port City Project, had submitted the investment proposal for the construction of the elevated highway as part of the Port City development project and is also said to be connected to the Colombo Port City, The Morning learnt.
The development of the four-lane elevated highway, which is 17.3 km in length, was proposed in 2015 in an attempt to improve the road network for the heavy influx of vehicles entering Colombo city limits. Phase I (6.9 km) of the project has been planned from Orugodawatta to Rajagiriya and Phase II (10.4 km) from Rajagiriya to Athurugiriya.
When contacted by The Sunday Morning, Secretary to the Ministry of Highways R.W.R. Pemasiri confirmed that the CHEC investment proposal came through the BOI. He said the Ministry was directed to provide the technical assistance.
According to the Secretary to the Ministry, Cabinet approval had been granted to receive the technical proposal from the CHEC.
However, the Expressions of Interest (EOIs) have been called by the previous Government for the same project as a public-private partnership (PPP) which was to be funded by the Asian Development Bank (ADB).
The long wait
Similarly, the RDA was to finalise awarding the construction contract for the long-delayed Sections III and IV of the CEP when President’s Secretary Dr. Jayasundara issued a different directive.
In August, the RDA was to finalise the documents that would be submitted to the Cabinet to get the approval to proceed. Furthermore, the funding was said to be finalised in a way which would be more favourable to Sri Lanka.
The Cabinet of Ministers has already granted approval to consider the technical proposal from the British consultancy specialist Roughton for the construction of CEP’s Section IV. Roughton was said to be the management consultant of the CEP’s Stage IV and it will be partnered with a local contractor. Several proposals received from local construction companies are currently being evaluated by the authority to award the construction contract.
The projects were a few approvals away to begin construction work, and as told to The Sunday Morning, the RDA is awaiting Cabinet approval to immediately begin the construction of Sections III and IV of the CEP.
Initially, the Government’s plan was to complete the construction of the CEP at the end of 2019 under four sections. The construction of the 37.3 km stretch from Kadawatha to Mirigama under Section I was delayed due to financing issues on the part of Sri Lanka to activate an already committed loan by China.
The construction of Section III was delayed by almost four years as the two parties, Sri Lanka and Japan, could not agree on the agreement conditions. However, soon after the new Government came into power in November, Section III of the CEP was opened for fresh biddings by cancelling the ongoing discussions between Japan and Sri Lanka. Section IV was to be constructed by China, but no agreement has been signed as yet for its construction.
During the past two years, The Sunday Morning has been reporting the consequences faced by the people as a result of the delays in providing compensation for lands identified and an overall delay in completing projects, along with its impacts to the national economy.
Moreover, once the evaluation process is completed, it will take another few more months for the construction work to commence, and if the Government does not receive a BOT (build-operate-transfer) project, then again, the project would be delayed by another year, a highly informed source attached to the Road Development Authority (RDA), who wished to remain anonymous, told The Sunday Morning.
Last week, in a letter addressed to the Ministry of Highways and the Board of Investment (BOI), Secretary to the President Dr. P.B. Jayasundara instructed the Ministry and the RDA to call for fresh proposals for the stretch from the New Kelani Bridge to Athurugiriya and also to accept bids for Sections III and IV of the Central Expressway.
It is stated that the Government will not encourage debt-funded projects, annuity (a series of payments made at equal intervals) payments to meet revenue shortfalls, or guaranteed traffic as these options are not affordable.
Furthermore, the letter states that several parties have submitted letters of intent or interest to the BOI for the two initiatives on a BOT basis, most of which were largely of an unsolicited nature.
Dr. Jayasundara has also instructed the Ministry of Highways and the RDA to issue a detailed Request for Proposal (RFP) for the New Kelani Bridge to all parties who submitted letters of interest to the BOI or the Ministry and who were present at the meeting convened on the matter.
As learnt by The Sunday Morning, the RDA had already received proposals from several local and foreign companies for all three projects, and proposals will be accepted within the next three months.
BOT share in highways
Meanwhile, questions have also been raised over the practicality of the BOT-based projects in Sri Lanka, especially for the Central Expressway.
As explained by subject matter experts, when it comes to BOT-based projects, the investor expects considerable revenue and therefore, the applicability of the BOT method for the CEP is questionable, as the traffic in the highway – once completed – would not be enough for the investor to cover up expenses.
It is also learnt that the Government has suggested several other investments such as the construction of housing complexes within the project in order to make the BOT method viable.
However, the RDA official noted that they doubt whether worthwhile investors would invest in such a massive project without any contribution from the Government.
“If the Government’s debt capacity is shrinking, there are other ways to implement projects. Especially when it comes to the CEP, the question is whether the Government provides a sovereign guarantee or not,” the official stressed.
With all these concerns hanging about, the success of the projects still remains a question, the official added.
The previous Government failed to complete a single highway during its tenure, and although it has been a year since Gotabaya Rajapaksa was elected as President, the highway projects are yet to raise their heads. A serious concern is that if the projects are delayed further, it is doubtful whether the incumbent Government would be able to complete the projects during their tenure as well.
In contrast, the BOT is recognised as an apt solution for the proposed elevated highway extending from the New Kelani Bridge to Athurugiriya.
Change of plans
As emphasised, the proposal for the elevated highway has been channelled through the BOI as an investment project by the CHEC for which the Ministry of Highways provides technical support. The total value of the investment is said to have been around $ 800 million.
The CHEC, which is also the engineering contractor of the Colombo Port City Project, had submitted the investment proposal for the construction of the elevated highway as part of the Port City development project and is also said to be connected to the Colombo Port City, The Morning learnt.
The development of the four-lane elevated highway, which is 17.3 km in length, was proposed in 2015 in an attempt to improve the road network for the heavy influx of vehicles entering Colombo city limits. Phase I (6.9 km) of the project has been planned from Orugodawatta to Rajagiriya and Phase II (10.4 km) from Rajagiriya to Athurugiriya.
When contacted by The Sunday Morning, Secretary to the Ministry of Highways R.W.R. Pemasiri confirmed that the CHEC investment proposal came through the BOI. He said the Ministry was directed to provide the technical assistance.
According to the Secretary to the Ministry, Cabinet approval had been granted to receive the technical proposal from the CHEC.
However, the Expressions of Interest (EOIs) have been called by the previous Government for the same project as a public-private partnership (PPP) which was to be funded by the Asian Development Bank (ADB).
The long wait
Similarly, the RDA was to finalise awarding the construction contract for the long-delayed Sections III and IV of the CEP when President’s Secretary Dr. Jayasundara issued a different directive.
In August, the RDA was to finalise the documents that would be submitted to the Cabinet to get the approval to proceed. Furthermore, the funding was said to be finalised in a way which would be more favourable to Sri Lanka.
The Cabinet of Ministers has already granted approval to consider the technical proposal from the British consultancy specialist Roughton for the construction of CEP’s Section IV. Roughton was said to be the management consultant of the CEP’s Stage IV and it will be partnered with a local contractor. Several proposals received from local construction companies are currently being evaluated by the authority to award the construction contract.
The projects were a few approvals away to begin construction work, and as told to The Sunday Morning, the RDA is awaiting Cabinet approval to immediately begin the construction of Sections III and IV of the CEP.
Initially, the Government’s plan was to complete the construction of the CEP at the end of 2019 under four sections. The construction of the 37.3 km stretch from Kadawatha to Mirigama under Section I was delayed due to financing issues on the part of Sri Lanka to activate an already committed loan by China.
The construction of Section III was delayed by almost four years as the two parties, Sri Lanka and Japan, could not agree on the agreement conditions. However, soon after the new Government came into power in November, Section III of the CEP was opened for fresh biddings by cancelling the ongoing discussions between Japan and Sri Lanka. Section IV was to be constructed by China, but no agreement has been signed as yet for its construction.
During the past two years, The Sunday Morning has been reporting the consequences faced by the people as a result of the delays in providing compensation for lands identified and an overall delay in completing projects, along with its impacts to the national economy.