Hambantota port – sustenance questionable?

Hambantota Port

By D.Godage

The Hambantota Port was constructed and commissioned about three years ago. Reports stated the cost of construction of phase I as $ 361 m, about $ 300 m coming from China Exim Bank as a commercial loan and a further $ 148 m spent to meet cost of rock blasting in channel, cost escalations, new office building and other design changes as reported to a Sunday newspaper by then Ports Chairman.

There appears no mention about other preliminary costs such as land acquisition, Kataragama main road diversion with service diversion costs financed from Ports Authority funds which must have run into several billions of rupees. The resulting cost of Port phase I should be around $ 560 m while the loan portion has to be paid back.

Expansion of the Port as phase II by further excavation into land progresses at $ 800 m or more as reported, being more Chinese Exim Bank loan.

What is the contribution to the country’s economy from this project? The Ports Chairman had stated to a Sunday newspaper in May this year that for loan repayment this year Rs. 7 billion is required while total earnings of the port amounts to Rs. 100-150 m this year. What happens when actual expenses are deducted from earnings of the year and what funds are available to repay the loan?

Hambantota Port undertakes vehicle loading/unloading, fuel bunkering as primary operational activities at present. MOU seem to have been signed to have a shipyard. Earnings will go to the shipyard company. All above mentioned revenues would not help the port to become a profit-making venture.

The Colombo Port has a history of about 140 years after becoming a sheltered port with breakwaters. This port has oil handling, bunkering, break- bulk and bulk cargo handling, vehicle handling (until transferred to Hambantota), container handling (from around 1980), and a major ship yard. Colombo Port revenue was found to be made up as roughly 60% from container operations, while all other cargo handling including vehicles and oil brought in less than 25%, navigational revenue was about 12% when analysed about 10 years ago and the current situation could not be different.

Feasibility study reports of Hambantota Port, one by SNC Lavalin of Canada and other by Ramboll of Denmark, showed the port viability primarily on container handling. Colombo Port analysis given above illustrates this. Hence with Colombo South Harbour having capacity for about 20 years to the future, the sustenance of Hambantota Port is doubtful having invested over $ 1,200 m being mostly commercial loans. Shipping trade in the Indian sub-continent is a matter to be watched.

Some people reiterated for about two decades that nearly 200 ships bypass Sri Lanka daily and that Hambantota must be developed to attract them. Are we realising that or adding another burden to the country by this project?

(The writer is a Chartered Engineer and an ex-employee of the Sri Lanka Ports Authority.)