• No change in status quo since December

Despite a statement last week on the renewal of the Japan-funded Light Rail Transit (LRT) Project, there has been no official communication regarding the project between Japan and Sri Lanka, The Sunday Morning learns.

Last week, Minister of Urban Development and Housing Prasanna Ranatunga stated that the Government was ready to renew the LRT Project contract with a Japan International Cooperation Agency (JICA) loan facility, given its favourable conditions including low interest rates and a 12-year grace period.

Ranatunga blamed the previous Gotabaya Rajapaksa-led Government for neglecting to get the key urban transportation project off the ground, which had caused much controversy when terminated.

According to Ranatunga, the Urban Development Authority (UDA) will soon call for Expressions of Interest (EOIs) from interested international firms or joint venture companies to build the necessary infrastructure and implement the project, subject to approval from the Cabinet of Ministers. 

However, The Sunday Morning learns that there has been no official communication between Sri Lanka and Japan on the re-activation of the once-terminated LRT Project thus far.

It is also learnt that despite an interest being shown by the Government of Japan over the relaunch of the LRT Project, there has been no project proposal or any communication of interest in writing forwarded to the Government as yet.

According to a senior Government official close to the subject, any new investment in infrastructure will only arrive after the $ 2.9 million Extended Fund Facility (EFF) from the International Monetary Fund (IMF) is approved and the early tranches of the funding are received.  

An improvement in the economic condition and political stability of Sri Lanka will need to be visible before Japan, other investors, and lenders regain confidence to return to Sri Lanka, the official stressed. 

However, it is reliably learnt that there had been an indication of interest in the project, as disclosed by officials of the Government of Japan when President Ranil Wickremesinghe visited Japan in December.

However, it is also learnt that there has been no further official communication on the matter since then.

The 15.7 km-long LRT system with 16 stations from Colombo Fort to Malabe via Battaramulla comprised an elevated railway track, elevated stations, a train depot, the procurement of LRT trains, and the installation of electrical, communication, and signal systems.

The system was expected to reduce travel time from Colombo Fort to Malabe to approximately 30 minutes.

The loan agreement was signed between Sri Lanka and Japan in 2019 and Japan extended a loan of around Rs. 48 billion to Sri Lanka for the Colombo LRT Project earlier. 

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.

Accordingly, in the project, the preliminary base cost estimated during the feasibility study was $ 1,374 million; including price escalation, contingencies, and interest, Sri Lanka and JICA have estimated the loan amount as $ 1,850 million.

Nevertheless, as revealed by the Auditor General’s Department, the Cabinet of Ministers had decided to terminate the project on 6 October 2020 by closing the project office and settling all liabilities by taking into consideration the demerit facts such as higher project cost. However, the project had been continued up to the end of January 2021.

The National Audit Office (NAO) has revealed that a total of Rs. 2,364 million comprising Rs. 1,791 million of JICA funds and Rs. 573 million from Treasury provisions had been incurred for this project by the end of 2019 for the acquisition of lands, environmental activities, utility variability, passing of an act in Parliament, establishment of an institution for the implementation and maintenance of social activities, operating the Project Management Units, planning the project, and obtaining procurement assistance for supervision of construction that had been targeted by the project for 2019.

Since it was decided to terminate the project by the end of last year, the expenses incurred were unproductive, it is further revealed.

Meanwhile, former Deputy Project Director of the Western Region Transport Development Project Eng. P. Dissanayake told The Sunday Morning that Sri Lanka had already completed the payment of all penalties as claimed by Japan and had terminated the agreement.

When asked for the possibilities of reactivating the loan, Dissanayake – who is now heading a World Bank project and works directly under the Ministry of Local Government – said the project would have to come as a new project following all procedures with new terms and conditions as it was not possible to reactivate a previous project once it had been cancelled.