India’s Adani Group signs contract to develop the western container terminal in the port of Colombo

India’s Adani Group signed a contract with the state-owned Sri Lanka Ports Authority (SLPA) on Thursday to develop and operate the western container terminal of the strategic port of Colombo. As the first Indian port operator in Sri Lanka, the Adani Group will hold 51 percent of the port’s Western Container Terminal (WCT), a statement said.

The Adani Group signed a Build-Operate-Transfer (BOT) agreement with local partner John Keells Holdings and SLPA to develop the WCT in the port of Colombo, it said.

The two local units would own 34 and 15 percent of the shares in the new joint venture called West Container International Terminal.

The Port of Colombo is one of the most preferred regional hubs for handling Indian containers and major ship operators with 45 percent of Colombo’s handling volume coming from or destined for a terminal in the Adani Ports and Special Economic Zone (APSEZ) in India.

APSEZ is the largest port developer and operator in India and represents 24 percent of the country’s total port capacity.

The WCT proposal came after Sri Lanka decided to withdraw the previous Memorandum of Understanding signed in 2019 with India and Japan through the Eastern Container Terminal (ECT).

The state-run SLPA signed a cooperation agreement with India and Japan in May 2019 to develop the ECT during the previous Sirisena administration.

The Port of Colombo unions rejected the proposal from investors in India and Japan to acquire 49 percent of the shares in ETC. They demanded that the ECT remain 100 percent owned by the SLPA, as opposed to 51 percent.

Under pressure from the unions, Prime Minister Mahinda Rajapaksa agreed to repeal the deal, prompting India to urge Sri Lanka to honor its pledge to the trilateral agreement with itself and Japan.

Both India and Japan criticized Sri Lanka for not complying with a unilateral international agreement. Japan had also expressed dissatisfaction with the Sri Lankan government.

India and Japan are members of “Quad” or the quadrilateral coalition of four Indo-Pacific nations, which also includes the USA and Australia. In 2017, the four countries had drafted the long-pending proposal to set up the “Quad” to counter China’s aggressive behavior in the Indo-Pacific region.

China’s influence is growing in various infrastructure projects in Sri Lanka as part of its ambitious Belt and Road Initiative. China has invested over $ 8 billion in infrastructure projects in Sri Lanka. Colombo handed over its port of Hambantota to Beijing in 2017 as a debt swap.