- Port expansion to resolve capacity challenges
Sri Lanka faces a growing challenge as ships are being turned away due to the shortage of berths at the Colombo Port, resulting in income losses from unreceived anticipated revenue.
Sri Lanka Malaysia Business Council (SLMBC) Executive Council Member Tuan Ghouse Arfin said that ships being turned away had become a problem not only to Sri Lankan importers, but also to the Sri Lanka Ports Authority (SLPA).
“It has resulted in losses to the shipping agents and the Government, as they will not receive the income anticipated,” he said.
Commenting on the ongoing issue, where Minister of Transport, Highways, Ports, and Civil Aviation Bimal Rathnayake had stated that up to 30 ships had decided to disembark from the Colombo Port, Arfin spoke of the costs incurred by importers in the process.
“We usually pay about Rs. 35,000 for local transport for a container carrying goods for domestic use, but now we are required to pay about Rs. 70,000-100,000. The importers will generally pay this to the main shipping agents and the SLPA, but they will now forego these amounts from the importers. Furthermore, we incur Rs. 15,000 additionally as demurrages or held up charges,” Arfin said, commenting on the issues faced by importers as a result.
However, Pettah Importers’ Association President G. Illamanathan commented that importers of essential foods did not suffer the brunt of the consequences. “They prioritise the import of essential foods, therefore containers carrying food items are allowed into the ports,” he said.
Sri Lanka’s ports currently face significant operational challenges. The Customs Department, which previously managed an average of 1,200 containers daily, is now grappling with an influx of 2,000 containers per day on average.
This surge in volume has been exacerbated by delays along the Red Sea and ongoing infrastructure projects within the port, including the construction of an elevated highway, according to the Deputy Minister of Ports and Civil Aviation Janitha Ruwan Kodituwakku.
The congestion has created a ripple effect across the entire logistics chain. Containers requiring inspection are stalled along two paths within the port, leading to delays in Inter-Terminal Trucking (ITT) and disrupting the efficient movement of goods. Ships awaiting berth often face long delays, with some opting to turn around and head to alternative ports.
Strategic expansion plans
Sri Lanka is embarking on an ambitious mission to expand its port infrastructure, aiming to double its container handling capacity and strengthen its position as a key transshipment hub in the region.
The country’s ports are poised for a transformative phase, with projects such as the East Container Terminal (ECT) nearing completion and plans underway for the development of West Terminal 2 and the North Port, according to Kodituwakku.
The Government’s goal is to increase the Colombo Port’s capacity from the current 7.2 million Twenty-foot Equivalent Units (TEUs) to approximately 15 million TEUs by the end of the year.
“The Adani Port project will commence in February, together with the ECT, we expect these initiatives to add another 7-7.5 million TEUs to our annual capacity. By the end of this year, we believe the port will be capable of handling around 15 million TEUs,” Kodituwakku stated.
While Colombo still lags behind Singapore, which manages 35 million TEUs annually, Sri Lanka aims to achieve at least half of Singapore’s capacity, thereby reinforcing its reputation as a transshipment hub of choice.
The expansion projects are not limited to Colombo. Feasibility studies for the West Terminal 2 and North Port are currently underway, ensuring the country is prepared to meet future demand.
Kodituwakku emphasised the importance of planning ahead to avoid capacity bottlenecks. “We will evaluate container and cargo movements in the region, compare them with other shipping hubs such as Bangladesh, India, and Singapore, and prepare for the next 10-15 years,” he said.
This forward-thinking approach aims to balance infrastructure development with economic viability, ensuring capital expenditures are efficiently utilised.
“We cannot afford to have idle capacity. Our goal is to expedite these projects and align them with future demand trends,” Kodituwakku added.
Mitigating congestion
The Ports Authority has launched several initiatives to address the ongoing issues. One such measure involves clearing unused areas within the port to create new parking slots for 200-300 trucks. Additionally, efforts are underway to expedite the inspection and clearance of containers.
“Containers were previously held for four to five days before being cleared. We now inspect and clear them on the same day,” Kodituwakku explained.
Road connectivity between terminals is also being improved. A new road linking the Colombo International Container Terminal (CICT) and the ECT is expected to alleviate congestion significantly. While these measures offer temporary relief, the full resolution of berth shortages hinges on the completion of the ECT and the operationalisation of other planned terminals.
Impact on shipping and trade
The congestion has had tangible impacts on shipping and trade. Ships delayed at Colombo often reroute to other regional ports, primarily in India. However, Kodituwakku downplayed the long-term significance of these diversions.
“Our strategic location ensures that this is only a temporary issue. While some ships have turned around, the numbers are not significant enough to cause lasting damage,” he noted.
Sri Lanka’s location gives it a competitive edge over neighbouring ports, as ships traveling to alternatives such as India’s transshipment hubs face additional travel time.
“Once we expand our berths and develop our ports, the ships will return. We have an advantage owing to our strategic location. They cannot afford the extra one or two days of travel to other locations,” he added.
Transshipment operations account for 80% of the activity at Sri Lanka’s ports, underscoring the country’s critical role as a regional logistics hub. Unlike direct import and export activities, which constitute only 20% of operations, transshipment involves the offloading of containers in Sri Lanka for reloading onto other ships destined for final delivery.
“Sri Lanka’s small domestic market means our primary focus is on connecting global shipping routes. This is a niche we excel in and our strategic location makes us indispensable for transshipment operations in the region,” Kodituwakku explained.
Financial implications
Customs Spokesperson Seevali Arukgoda explained that the exact losses could not be quantified by Customs. The Deputy Minister also maintained the same.
While the exact financial losses from the delays have not been quantified, the overall impact appears manageable.
Kodituwakku explained that on average Colombo Port handled 350 ships per month. With only 20-30 ships reportedly diverting to other ports, owing to the shortage of berths to accommodate them, Kodituwakku emphasised that the loss was negligible in the grand scheme, particularly given the long-term growth trajectory of Sri Lanka’s port infrastructure.
However, importers and exporters have not been entirely insulated from the fallout. The responsibility for additional costs incurred due to delays typically falls on the shipping lines, which must honour their contractual commitments.
Path forward
As Sri Lanka prepares to scale up its port operations, the Government is also focused on addressing systemic inefficiencies.
The completion of the ECT is a top priority, with efforts underway to accelerate its timeline. The project’s timeline has been advanced to achieve at least 70% operational and functional capacity by July, which was initially planned for completion by the end of next year.
The Government is also conducting feasibility studies to identify future capacity needs and prepare for the next wave of growth. “We need to evaluate container movements and prepare for the long term. This kind of strategic foresight is essential to avoid repeating the mistakes of the past,” Kodituwakku said.
Beyond the immediate challenges, Sri Lanka’s vision extends to transforming its ports into a global shipping powerhouse. The addition of the Adani Port as well as the operationalisation of West Terminal 2 and North Port are expected to double the country’s capacity.
These projects aim to position Colombo as a competitive alternative to regional heavyweights such as Singapore.
In parallel, plans are being drawn to develop other ports, ensuring that Sri Lanka’s maritime infrastructure remains robust and versatile. “If we are serious about becoming a transshipment hub, we need to think beyond Colombo and start planning for additional port development,” he emphasised.
Global competitiveness
To achieve its goals, Sri Lanka must also address broader challenges such as streamlining Customs processes, enhancing ITT efficiency, and ensuring seamless coordination between terminals and ports. Investments in technology, automation, and workforce training will be crucial in this regard.
Given the rising container volumes reaching the Colombo Port, Arukgoda commented on the issues faced by Customs.
“Unfortunately, they have done little to address the increase in container volumes. They rely heavily on daily container clearance, expecting containers to be released within a day to make room for incoming ones. However, that is not practical. They should have contingency plans for increased volumes, including enhancing storage capacity, which has not been done,” he said.
“We have to be competitive not just in terms of capacity but also in terms of efficiency. The global shipping industry is evolving rapidly and we must keep pace to remain relevant,” Kodituwakku remarked.
Sri Lanka stands at a crossroads in its maritime journey. With its strategic location, robust expansion plans, and commitment to long-term planning, the country has the potential to become a leading transshipment hub in South Asia. However, realising this vision will require meticulous execution, strategic foresight, and a relentless focus on overcoming existing challenges.