Sri Lanka Ports Authority (SLPA) last week issued a statement setting the record straight with regard to Magampura Mahinda Rajapaksa Port. Here is the full statement
In the recent past, there have been several allegations on Magampura Mahinda Rajapaksa Port. These allegations seemed to have based on the following concerns related to one another.
1. Insufficiency of the depth of the harbour
2. Inability to obtain an insurance for the port
3. Non-availability of a clear map
4. Non-arrival of ships to the port
5. Presence of huge irremovable rock mass at harbour mouth
6. Dangers to the structures and the civil life of Hambantota town in the event of blasting the said rock mass
7. Requirement of Large additional loan to remove the rock
8. Risk of going wasting millions of dollars
Time to time these allegations either appeared in newspapers & electronic media or spread across the society as rumours. The real facts on the cost of the project, including additional costs experiencing due to quantity variations of hard and soft material in the basin and the channel has been revealed by Dr. Priyath B. Wickrama, Chairman, Sri Lanka ports Authority in various forum. However, these facts have been either misinterpreted by some personnel or misled to some wrong conclusions. This statement aims to clear up those concerns and to understand the factual situation of the Magampura port.
Insufficiency of the depth of the harbour
Magampura Mahinda Rajapaksa Port basin, having a depth of 17m is sufficient to cater most recently built ships targeted at the Port. The length, width and draft of the largest container ship operational in 2011 (Emma Maersk) are 397 m, 56 m and 15.5 m respectively. A serious allegation was on the insufficiency of the habour depth despite the above and some articles even had reported that the minimum depth of a commercial harbour should be 35m, while the maximum depth of Colombo harbour at present is 15m and harbours having depth of 35m is not in existence. Therefore, there is no ground on insufficiency of the depth.
Insurance of the Port & Port map
Ports are not insured as a whole though various plants or machinery may be insured against various perils. Colombo Port has never obtained an insurance of that nature and ships in international voyage on the other hand need to be insured against various risks. Ships entering Colombo Port were imposed an additional insurance cover or subject to high insurance premiums at the time Sri Lanka faced serious security threats from LTTE. However, it is important to have Admiralty Chart indicating the location and hydrographical data creating an identity for the port. These charts are published by the UK Hydrographer of the Navy. The National Aquatic Resources Research and Development Agency (NARA) liaises with the UK Hydrographer of the Navy and gets these new charts or annual updates. NARA is in the process of collecting the relevant data from the Ports Authority for sending to the UK Hydrographer of the Navy on completion of the balance 0.4% of dredging work at the channel. However, even without published Admiralty chart six international ships have already been to the Magampura port.
Presence of irremovable huge Rock
The presence of huge irremovable rock mass at the habour mouth is far beyond the truth. The construction works of Magampura Mahinda Rajapaksa Port commenced in January 2008 as a green field port in the vicinity of Karagam lewaya. Excavation/Dredging work comprised of two major components, Basin excavation and Channel dredging. The Basin is approximately separated by the Channel from the A2 road around 235 km post. Both excavating the Basin in the Karagam lewaya and dredging works of Channel from the sea side, approximately 1km away from the Basin, commenced simultaneously. From then onwards both activities moved ahead in parallel independent to each other. However, dredging work had to be stopped during the periods of monsoons. Dredging comprised both with Soft material as well as Hard material requiring blasting. By the ceremonial opening on 18 November 2011, excavation of Basin had been fully completed (up to -17m) together with most of the land side construction work, while an area of approximately 10,000 m2 (100 m by 100m area) in the Channel was left without dredging to the intended depth. The balance area of the channel had been dredged up to intended depth, -16m, at the time. However, it was decided to ceremonially open the port on this date with a channel dredging progress of 96%, this being an auspicious day for such opening. Balance dredging work continued after the opening day and happened to stop in May 2011 due to monsoon. The balance amount of dredging is about 0.4% (50 m x 70 m) of the total Channel dredging volume and this work would be commenced after the monsoon at the end of September and would expected to be completed within 45 days. Therefore, the dredging remaining at present (including rock requiring blasting) is not an irremovable rock mass but continuation of the similar work performed during the construction.
Additional loan for removal of rock
The total estimated cost of the project has shown a substantial increase due to several reasons including increase of hard material quantities both in the basin and channel, increase of price adjustment amounts compensating the changes in the prices of material and labour. The basin excavation and channel dredging contribute approximately 40% of the project cost.
Hard and soft material quantities had been calculated based on 31 boreholes in the basin area and 6 boreholes in the channel area initially on preparation of the BOQ. This was based on the available data at the time of getting the offer. The accurate quantities may either be lower or higher. Due to this uncertainty, it had been decided to make the payments on measure and pay basis on agreed rates, while the BOQ quantity only provides initial guidance. On implementing the work more detail soil investigations were done and the quantities of hard material were higher than the initial estimated values for both basin and the channel. Since the rates for excavating/ dredging hard material is higher than the soft material the estimated cost got increased. The relevant increases in the hard material quantities are approximately 45% and 53% in the basin and channel respectively. This increase had caused US $ 13.56 mn in the basin excavation cost and US $ 31.02 mn in the channel dredging cost. This increase costs are based on original rates and more accurate quantities. Soft material quantities have accordingly been decreased and therefore the net increase in both excavation and dredging is US $ 40.66 mn.
The prices of the material, labour and equipment charges can change over the contract period. However, the contractor’s rate is based on the prices prevailing at the time of bidding. These changes are compensated in price according to an agreed international formula based on price indices published by the Government. The money required for this price adjustment payments were higher than the estimated original values. Therefore, an additional estimated amount of US $ 87.7 million is required for payment of said price adjustments.
Sri Lanka Ports Authority is following the due procedure to get an additional loan in view of covering up the additional expenditures mentioned above. This loan would also contain costs in procuring some operational equipment including gantry cranes, electromechanical works at the oil terminal, and construction of some utility building and accommodating changes of designs of the breakwater. Accordingly the total estimated amount of additional loan is US $ 147.9 mn.
Magampura Mahinda Rajapaksa Port – No Ships – A Waste of Money
Colombo port has been conceptually in operation since the 15th Century with staring of anchoring vessels approximately at the present location. However, it had taken hundreds of years to transform this port facility into its present status. On the contrary Magampura port, a green field brand new port, with berths of -17m depth & 1,200m length, substantial backup yard and utility buildings including 14 storied Administration Building has been constructed within 39 months. Cranes will be installed within 12 months. Marketing port without constructing is hardly possible as the construction takes longer time and there could be many reasons hindering construction even with the best plans on boards. For example, both Hambantota and Colombo South Port were discussed for years without commencing any construction work.
Having constructed Magampura Port with the above facilities will take some time to familiarise among the world of shipping and port even with the strenuous marketing in position. Unlike small business ventures ports will not be fully operational just after opening and this aspect was taken into account. As Sri Lanka Ports Authority has taken some initiative in this respect long before and this port is expected to become a busier port within a short time.
Sri Lanka Ports Authority has floated a Request of Proposal (RFP) scheme and attracted 27 entrepreneurs interested in developing business ventures within the port. Out of the above 14 of them have been identified and short listed. The Cabinet of Ministers has already been given approval for three business ventures, investment amounting more than US $ 600 million. On signing the agreement with these investors they will start constructing their factories and so on which will also create business in terms of project cargo initially. The balance short listed investments will also be considered gradually.
A ship repair yard is also planned to establish within the port premises in an area of 48 hectares of land. As the demand of the investors is high another RFP will also be planned to float soon.