• Most pledged funds only after finalising debt restructuring

Mega-scale road development projects will face further delays, as ongoing discussions between the Government and possible investors on resuming construction have proved to be unsuccessful thus far, The Sunday Morning learns. 

It is learnt that resuming construction within this year (2023) will be almost impossible given the current difficulties faced in sourcing appropriate foreign investment.

A senior official attached to the Ministry of Highways, who wished to remain anonymous, told The Sunday Morning that the authorities were struggling to source funds to maintain existing roads and complete the partially constructed roads which were causing inconvenience to the public. 

According to the official, a number of road development projects that had been commenced under the Government’s iRoad Project and National Road Development Programme too had come to a standstill. Construction on these projects are waiting to be recommenced in order to complete the partially built roads through funds pledged by the Asian Development Bank (ADB) last week. 

The ADB has agreed to provide $ 53 million in assistance to continue the upgrading of Sri Lanka’s rural road network until the debt restructuring takes place, according to Minister of Transport and Highways Dr. Bandula Gunawardena. In the meantime, the ADB has also approved a $ 350 million special policy-based loan to provide budgetary support to Sri Lanka for economic stabilisation. 

The programme is part of a broader package of financial assistance anchored by the International Monetary Fund’s (IMF) Extended Fund Facility (EFF) for the country, which aims to stabilise the economy and lay the foundation for economic recovery and sustained growth.

Funding constraints 

However, when contacted by The Sunday Morning, Road Development Authority (RDA) Director General L.V.S. Weerakoon said the $ 53 million pledged by the ADB would be received in another seven months, as the funds would only be disbursed once the process for the restructuring of loans was completed.

“We will initially receive $ 10 million from the Treasury, equivalent to Rs. 3 billion, which we will utilise for road maintenance and to complete the partially built projects under the National Road Development Programme and iRoad Project,” he said. 

He explained that the amount would not be sufficient for the full maintenance and therefore only prioritised roads and projects would be selected at the beginning.

However, when asked about the mega-scale development projects, the RDA DG stressed that discussions were ongoing, although there had been no development regarding the projects yet. 

As learnt by The Sunday Morning, the Government had failed to secure any foreign investors for any of the major highway projects.

The mega road development projects include the Central Expressway Project, Ruwanpura Expressway, Port Access Elevated Highway Project, and the Elevated Highway Project from New Kelani Bridge to Athurugiriya.

The reason for the delay in attracting foreign investments is mainly due to the Government policy of the debt-free Build-Operate-Transfer (BOT) method adopted recently, an RDA official opined.

Prior to calling for BOT projects, the Highways Ministry had obtained Cabinet approval to receive technical proposals for the Elevated Highway Project from New Kelani Bridge to Athurugiriya and discussions were ongoing with the China Harbour Engineering Company Ltd. Further, a proposal for the construction of Central Expressway Project Stage III (CEP III) from China and CEP IV from the UK was about to receive Cabinet approval. 

Likewise, there is no final decision on the proposed Elevated Highway Project from New Kelani Bridge to Athurugiriya, which saw vehement opposition from the residents in Battaramulla as the proposed highway was to be constructed over the remaining areas of Colombo’s wetlands in Thalangama and Averihena.

Ruwanpura Expressway Project

The Cabinet had officially removed the Chinese contractor from Section I of the Ruwanpura Expressway Project (REP), which extends from Kahathuduwa to Ingiriya, and had decided to go ahead with local funding. As confirmed by Ministry of Highways Secretary Ranjith Premasiri, local funds are to be raised through State banks and the Ministry of Highways is yet to lay out a mechanism for funding purposes. 

Accordingly, the construction work of Section I of the REP was recently awarded to local contractor Maga Engineering (Pvt) Ltd., although the $ 54.7 billion contract was initially to be awarded to four different companies. 

Later on, the contractors had abandoned the project, claiming that they were facing financial difficulties, it is learnt. 

The proposed Ruwanpura Expressway from Kahathuduwa to Pelmadulla via Ratnapura connects the Western Province with the Sabaragamuwa Province. The project from Kahathuduwa to Ratnapura to Pelmadulla (73.9 km) has been divided into three phases for implementation purposes. Phase I extends from Kahathuduwa to Ingiriya (26.3 km), Phase II from Ingiriya to Ratnapura (26.2 km), and Phase III from Ratnapura to Pelmadulla (21.4 km).

The overall cost of the REP was initially estimated at Rs. 276.3 billion.

Meanwhile, the CEP has already faced delays as the project had not progressed as it was discussed initially. As a result, as per the estimates made a year ago, the Government will have to incur additional billions of rupees in losses, because the construction cost of the sections that are yet to be handed over will increase drastically. 

CEP

At present, Section I and III of the CEP are under construction. Section I is being constructed with Chinese funds while the construction work on Section III was begun by the RDA with local funds until a suitable contractor was finalised. 

The total cost escalation as calculated by the RDA for Phase I and III of the CEP, which were to be funded by China and Japan, was estimated at around Rs. 13 billion in 2021. 

The calculations were made in April 2021 when the rupee value against the dollar was at Rs. 197, whereas the present dollar rate is Rs. 293. As per the 2021 calculations, the Government had to pay Rs. 7 billion for the Chinese contractor due to the delay in commissioning the construction of the Section I of the CEP, for which the contract agreements were signed in 2015. 

Similarly, the 34 km-long Section III from Pothuhera to Galagedara was to be constructed by a Japanese contractor at an estimated cost of around Rs. 135 billion with a loan obtained from Tokyo Mitsubishi Bank (TMB), Japan. 

However, the delay caused due to the inability to come into an agreement on the conditions mentioned in the loan agreement caused a massive price escalation. 

Nevertheless, the RDA was to finalise the awarding of the construction contract for the long-delayed Sections III and IV of the CEP, when the Secretary to the President Dr. P.B. Jayasundara had instructed it otherwise. 

The construction contracts were to be awarded to a Chinese company for the construction of Section III of the CEP, while the construction of Section IV of the CEP was to have been awarded to a UK-based contractor. 

Section I was awarded in 2015, but funding was finalised only in August 2020 and the completion may take another two-and-half years. Section II was constructed by local contractors with funds from local banks and was due to be completed in November 2020. The construction of Section III has been delayed by almost five years.

Allocating funds

Meanwhile, Minister Dr. Gunawardena told the media that the debt restructuring programme would be completed by September and accordingly, all suspended development projects would be restarted. 

Financial allocations have been requested from the Treasury only for the development of several areas where various problems have risen at present and funds will be received in the coming week. 

The Minister has made these announcements at the media conference held recently at the Government Information Department for the notification of Cabinet decisions. 

Dr. Gunawardena has further said that there were certain development projects that were suspended at present, including the construction of two flyovers in Gatambe and Kohuwala.

The plans have been prepared and the construction is being implemented under Bulgarian aid. About 95% of the work on the Kohuwala flyover has been completed. 

“People are in a difficult situation. We know the difficulties and the pressure suffered by the people. We have pointed out the situation that has arisen with the stoppage of construction of the roads midway to the representatives of the Asian Development Bank. 

“Therefore, it has been agreed to provide $ 53 million to make these roads usable. The Government expects the debt restructuring programme to be successful by September. If so, the money will be received. 

“As soon as it is successful, all the development projects that have been stopped can be started immediately,” the Minister has said.