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Sri Lanka seeks 5-year extension for BIA JICA loan

29 Dec 2021

  • JICA loaned ¥ 75.4 b for airport expansion
  • Negotiations between parties yet to commence
    BY Shenal Fernando Airport and Aviation Services (Sri Lanka) Ltd. (AASL) is looking to obtain a five-year extension of the grace period for the Japanese yen (¥) 29 billion loan obtained from the Japan International Co-operation Agency (JICA) in March 2012 for “Package A” of the Bandaranaike International Airport (BIA) expansion project, The Morning Business learns. Speaking to us yesterday (28), AASL Chairman Maj. Gen. (Retd.) G.A. Chandrasiri stated: “We have informed the Government, JICA, and the Ministry of Tourism that we require the grace period to be extended by another five years, and we are currently working on getting it extended.” However, according to sources within JICA, negotiations relating to the extension of the grace period of the loan have yet to commence. Nevertheless, they did admit that they expect negotiations to commence soon. Maj. Gen. Chandrasiri further stated that AASL is no longer paying late fees to JICA, as the construction of Package A of the BIA expansion project commenced last year. The project for the expansion of BIA implemented by AASL is composed of two parts: “Package A” for terminal building and associated works, and “Package B” for remote apron and taxiways. With regard to Package A, AASL entered into two agreements with JICA. The first agreement was entered into in March 2012 for ¥ 29 billion and the second was entered into in March 2016 for ¥ 45.4 billion. Under the first agreement entered into in 2012, AASL had a grace period of 10 years, which ends in 2023, whereupon Sri Lanka would be required to commence the repayment of loan instalments plus interest. Therefore, an extension of this grace period will be vital for Sri Lanka, it is understood. Package A of the BIA expansion project is estimated to cost Rs. 133 billion, which will be largely funded by the Special Term for Economic Partnership (STEP) concessionary Official Development Assistant (ODA) loan granted by JICA, amounting to Rs. 131.5 billion (¥ 74.4 billion) at a 0.1% interest rate per annum obtained under the above-mentioned agreements on the condition that the project contract is offered to a Japanese contractor. The remaining Rs. 21.5 billion will be funded by AASL. Package A of the project was scheduled to commence in 2017 and was expected to be completed by 2020. However, the estimates submitted by the two Japanese contractors were significantly higher than the estimates provided by local engineers in 2016. As a result, the contract with the Japanese contractor, Taisei Corporation, was inked only in February 2020 after the Technical Evaluation Committee appointed by the Government in January 2020 to negotiate with the contractor had managed to convince them to reduce their estimates to an acceptable extent. As a consequence of this significant delay in commencing Package A of the BIA expansion project, AASL was forced to pay a sum of around Rs. 328 million as liability fees or commitment charges to JICA as of 20 April 2021, as per data provided in the Auditor General’s report for 2020. Construction commenced only from December 2020 due to the pandemic. As of right now, a majority of the piling work of Package A has been completed and is on track to be completed by 2023.


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