The Sunday Leader

The White Elephant In Hambantota

By Paneetha Ameresekere

Mahinda Rajapaksa, The Magampura Mahinda Rajapaksa Harbour, The opening ceremony of the port and Dr. Priyath Bandu Wickrama

Hambantota Port costs may escalate by another US$ 148 million (Rs. 15.9 billion), state run Sri Lanka Ports Authority Chairman Dr. Priyath Bandu Wickrama told The Sunday Leader in an email interview.
Those additional costs are due to having to blast and remove the bedrock found in the harbour which would cost US$ 45 million (Rs. 4.8 billion), another US$ 82 million (Rs. 8.9 billion) for escalating costs of raw material, a further US$ 9.25 million (Rs. 999 million) to build a head-office building in the port premises, a further US$ 6.8 million for the change in breakwater design works and another US$ 16.90 million for the purchase of port equipment.
Given below is the interview in question (Q) and answer (A) format.

Q: Will the public/Government of Sri Lanka (GoSL) have to bear an addition cost of Rs. 20 billion on account of having to blast the bedrock found at the Hambantota harbour to bring the harbour draft to a depth of 17 metres so as to be able to accommodate mega carriers? If not how much will this additional cost be? Could you please explain in detail?
A:
Hambantota Port Project under Phase I, harbour basin and channel depth is -16 m and  under Phase II it is -17m. However harbour basin was excavated in dry conditions and considering the cost effectiveness it has already been excavated to  depth of -17m but the quantities and the cost of  additional 1m depth will be counted under Phase II contract. As per the BOQ of the Contract, total amount provided to excavate basin to -16 m was Rs. 8.4 billion. Channel dredging is up to -16m as per the BOQ of the contract was Rs. 7 billion. Present claim of the contractor to excavate the harbour basin and channel is Rs. 9.7 and 10.5 billion respectively. Hence the total additional claim of the contractor is Rs. 4.8 billion and not Rs. 20 billion as in the questionnaire. However this additional Rs. 4.8 billion is also only the contractor’s claim and the SLPA has not yet agreed.
The main reason for the additional quantity of hard material is, when preparing the original quantities (BOQ) soil investigation borehole intervals were of long distance and it does not show a very correct  picture of the rock profile. However it does not mean the harbour basin has a very shallow bedrock. When excavating the harbour basin, the SLPA allowed the general public to witness the construction progress and around 2,000 persons per day have visited the Hambantota Port site and they themselves know the correct picture.

Q: If indeed the cost is Rs. 20 billion, or another amount (please provide the answer to question no. 1 if that be so), does it exclude the interest component of such additional costing? If not, what?
A:
The additional claim of Rs. 4.8 billion is without any interest and the contractor will not make any claim as well as they are not entitled to any interest claim as this amount is not yet finalised.

Q: Is this additional cost due to having to blast and remove one million cubic metres of bedrock at a price of Rs. 20,000 per cubic metre as per contractors’ estimates? If not how much of bedrock will have to be blasted and removed?
A:
Unit rate for removal of hard material at the harbour basin is Rs. 827 per cubic meter and additional claim quantity is two million cubic metres. In the case of the entrance channel, unit rate for removal of hard material is Rs. 5,493 per cubic meter and additional claim quantity is 663,975 cubic meters.
In the year 2001, the Port of Colombo depth enhancing project was launched. According to that contract, the unit rate for removal of hard material under water was Rs. 11,450 but in this Hambantota Project for the same work, unite rate is Rs. 5,493. In normal practice, after 10 years the price may double but in this case it has become half the price.

Q: Is it true that additionally SLPA also had to bear the cost of building the Hambantota cricket stadium and works connected with it? If so could you please say what those additional costs were? If not, what?
A:
In the cricket stadium SLPA will not bear any single cent of the project cost. Sri Lanka Cricket will settle all the costs after measuring the quantities of work done.

Q: Is it true that the capital cost of phase one of the Hambantota Port project originally estimated at US$ 360 million? But now, because of this bedrock blasting and removal work and such like, plus the cost of paying for the construction of the Hambantota cricket stadium, it would mean that the original costs will now go up by 60% or US$ 216 million (Rs. 23.9 billion) to US$ 576 million? If not, by how much?
A:
The original contract price of Hambantota Port Phase I is US$ 360 million (Rs. 38.9 Billion). As mentioned in Q5, no cost is added due to the cricket stadium. But additional claim of the contractor is US$ 148 million (15.9 Billion).
Out of that, US$ 82 million (Rs. 8.9 Billion) is accounted for compensating price increases of construction materials, such as cement, steel, labour, fuel etc. compared to the prices in year 2007 January as the base date of submission of the bid. This US$ 82 million had been worked out on an agreed formula according to international conditions of contract, based on the price indices published by ICTAD. To illustrate the increase that had taken place along the way the following examples are cited.
Prices of Diesel/ Litre had been changed from Rs. 75, Rs. 110 and Rs. 76 in years 2007, 2008 and 2011 respectively. Prices of cement per bag had being changed from Rs. 526, Rs. 660, Rs. 571 in years 2007, 2008 and 2011 respectively. Prices of reinforcement steel per tonne had being changed from Rs. 70,810, Rs. 93,398 and Rs. 97,027 in years 2007, 2009 and 2011 respectively.
Another US$ 45 million (Rs. 4.9 billion) is the claim of additional removal of hard material at the harbour basin and entrance channel. The reasons for additional quantity is given in the answer of Question no. 1.
It has been decided to construct a Head Office building for Hambantota Port to accommodate the whole staff at one unit and it will facilitate all port uses/stakeholders for their day to day operational works. At Colombo Port it is a well known fact the staff is scattered and congestion of Port roads and time wastage of port users is common. To overcome that situation it was decided that a Head Office for the Hambantota Port be constructed and another US$ 9.25 million (Rs. 999 Million) has to be allocated for that purpose.
Breakwater design was changed according to latest investigations. When the construction was in progress, a laboratory model test was done parallelly and accordingly, breakwater alignments, size of wave breaking units had to be changed to get the most suitable design.   The additional cost for these changes was US$ 6.8 million (Rs. 734 million).
Additional operational equipment such as a ship to show Gantry Cranes was proposed as additional work and the cost is around US$ 16.9 million (Rs. 1.8 billion). This additional equipment proposal has to be done according to the response received from investors. Recently RFP (Request for Proposals) was called for industries to invest in the Hambantota Port and accordingly 27 proposals were received from international and local companies with a total investment of around US$ 1 billion. To cater to their requirements cargo/container handling equipment needed to be provided in the very near future and accordingly it was decided to provide that operational equipment to Hambantota Port Phase I .
The above items have been added and some original amounts omitted and finally additional cost balance was around US$ 148 million (Rs. 15.9 billion).

Q: Is it also so that the original US$ 360 million costing for phase one of the Hambantota port project was worked out on the basis that US$ 300 million of those expenses was being met by China’s Exim Bank at an interest payment of LIBOR plus 6-7% and payable over 20 years with the balance chipped in by the Government of Sri Lanka (GoSL)? If not, what?
A:
The loan amount from China Exim Bank is US$ 306 million with the interest of 6.3%. A one year grace period is followed on completion of the construction. The loan repayment period is 11 years with two installments per annum. The original interest rate was attached to LIBOR and it was LIBOR +90 b.p per annum. Considering the upward trend of LIBOR this was subsequently negotiated to a fixed rate of 6.3% by Treasury officials.

Q: Is it also true that the second phase of the project, also funded by China’s Exim Bank under the same conditions will cost the taxpayer another US$ 800 million, with the balance US$ 100 million costs having had to be met by GoSL?
A:
Phase II of the Project is estimated at around US$ 800 million through China Exim Bank. The whole project cost will be financed by the China Exim Bank and there is no balance US$ 100 million involvement. However Phase I as well as Phase II loan payback will be done by Sri Lanka Ports Authority funds and not by GoSL.

Q: Is it so, that due to the aforesaid escalating costs, the original capital costs of both phase one and two of the project estimated at US$ 1,260 million cumulatively, will now go up by 17.1% (US$ 216 million) to US$ 1,476 million?
A:
As explained above the Phase I original price is US$ 360. Additional escalated amount is US$ 148 million but it is not yet finalised. In the worst case Phase I total cost may be US$ 508 million, Phase II US$ 800 million and then estimated total cost for Phase I and Phase II is US$ 1,308 million.

Q: Is it so, that this bedrock found at a depth of seven metres at Karaganlevaya on which the Port is being built, is not a new discovery? That it was first discovered by a consultancy called SNC Lavalin of Canada which did a feasibility study on a Canadian grant during President Chandrika Bandaranaike Kumaratunga’s regime of 1994-2001? Afterwards another feasibility study at a cost of US$ 2 million was executed by Ramboll of Denmark, another consultancy, when President Mahinda Rajapaksa was Ports and Fisheries Minister during the tail end of that aforesaid Kumaratunga regime with that cost being borne by SLPA? However that feasibility report is missing from the SLPA library? Are those rhetorical questions true? If not what is the correct picture?
A:
There were two feasibility studies undertaken in the recent past on the Hambantota sea port. First, SLC Lavalin, a Canadian consultancy firm had done a feasibility study on a grant. Then a Danish consultant undertook another as the first feasibility study was identified to be a non-marketable document considering its very preliminary nature. Feasibility studies are anyway preliminary as regards the design or constructions as the purpose of these studies is to evaluate the feasibility under limited budget as the first step to proceed. Reports of these feasibility studies are with SLPA and SLPA has used these studies appropriately.
As regards the depth of the bedrock underlying the entire basin and the channel, only three boreholes are done in the first instance. Still these boreholes may have not been exactly in the present location of the port basin or the channel as the location kept changing owing to various reasons. However, considering the huge area of the basin and the channel (harbor basin 55.5 ha. and channel 32.1 ha.), few boreholes are not sufficient to determine the depth of the bedrock. In actual sense, the depth of the bedrock keeps changing and in some areas this variation is very sudden.
Under these circumstances, it is the usual practice to start off design and construction with existing limited data having agreed upon tentative quantities and fixed rates. As the risk of increase in quantities cannot be taken by the contractor, the employer has to take that risk. SLPA has acted in the same way.

Q: Is it true that the width of the Hambantota harbour is 400 metres and its length, one kilometre and going out in to the sea, and the old Matara-Kataragama road is being submerged to accommodate this new harbour?
A:
Dimensions of  Hambantota Port Phase I are 700m length and 800m wide. Entrance channel is around 1,000m long. The entrance channel is connected to Harbour Basin via the old Matara-Kataragama road and now it is submerged.

Q: Is it also so that the draft at the new Colombo South Port with ADB aid will be 18 metres in depth, one metre more than the proposed Hambantota Port draft and that the draft at the existing Colombo Port is 15 metres, which accommodates both the privately run SAGT terminal as well as the state owned Jaya container terminal?
A:
The present Port of Colombo’s maximum depth is 15m and it is not possible to increase the depth due to two main reasons: rock patches appearing on the bedrock and it is a little bit difficult to blast within the operational port and the other main reason is with the existing structures it cannot be further  deepened.
The new Colombo South Port harbour basin mainly at the South & East Terminal — the proposed depth is –18 metres but its natural depth runs up to 25 metres, close to breakwater head. It means Colombo has an almost natural depth of 18 metres and onwards as the New Port is being constructed toward the sea with almost 6.5 km breakwater. In the case of Hambantota it is a greenfield port built not on the sea. It’s an artificial port with much shorter breakwaters of around 1.3 km. The depth of the Hambantota Port is only 17m.

21 Comments for “The White Elephant In Hambantota”

  1. Paul

    Who cares if it is millions,billions,rupees or dollars?This is not from their pockets.They just give you the figures,correct or incorrect, go home and sleep peacefully.No transparency,no accountability and finally no punishment. That’s the Sri Lankan way of doing things.

  2. Lord

    Sadly our current leaders have lost their way after wiping out the LTTE. For reasons not known, we are experiencing the ‘Cart before the Horse’ philosophy in all major projects that is costing billions the tax payers. The basic principal of Taking Ownership, Working with Emotion and Having the Passion’ to carry-out the responsibility is clearly lacking with our leaders now. Ego has crept into them that they take it personally without acting professionally. These are main causes to the current scenario in our land today.

  3. Hambantota harbour for new jenaration it will take some time to improw , with out money cannot make harbour , Gall harbour make very long time ago but it was develope very resently writer have to ask those question’s five year’s later let them to develope the country without fany questions also do not try to misslead country peoply.

  4. PATHMAL

    I FEEL GOSL & SL PORTS AUTHORITY NOT DONE PROPER FEASIBILITY STUDY OF MASSIVE PROJECT WORTH OF MORE THAN US $ 1,350 MILLIONS. IF PROJECT IS NOT SUCCESSSFUL PEOPLE OF SRI LANKA HAS TO BEAR THE COST + INTEREST DUE TO THE CHINESE BANKS.

  5. Sampath

    I know this Wickrama personally, he did mechanical engineering in University of Moratuwa from 1995-2000. He has some Swedish M.Sc. . But he does not have a Ph.D. I know this first hand. Stop calling him Dr. for that he is not. if you want to be 100% sure, ring him up on the same line you rang to get this interview. Just ask him what University he did his Ph.D. and when. And just for fun ask him how many papers he had to publish to get his Ph.D. (if he has published any, those should be available online).

    And if you want to , just throw in this question ( extra fun ) . Ask him where can we get a copy of his thesis. Once you pulish your thesis, the University retains it for one year and after that, it will be available to anyone who is interested in the reseach.

    Dont get me wrong, I’m a die hard fan of MR and despised and will despise UNP till my last breath. But spade should be call a spade. :)

  6. I Hussein

    ‘Magampura Mahinda Rajapaksa Harbour’ – How many millions in total wasted for this name?

  7. Asitha

    What more transparency when all questions have been very appropriately answered in full? One must at least now learn to think devoid of this dirty party politics

  8. Dushantha Kurera

    What we also need to know is A, How many ships will dock/Whats the potential? B, Whats the payback plan vs Projected Income . C Chinese ship been the majority plying in this route, Have we got the comittment from the chinese that they will encourage shiping lines to dock as its feasible cost wise.D. What will be the direct and indirect employment opportunities when operating on full scale.E Is it true that average of 239 ships pass this route on a daily basis and the business currently goes toSingapore. F What are the strategies in place in enticing these ships to dock at H’tota ?
    This interveiw is one way to show only the cost but not the benefits.

  9. Priyan Wijeyeratne

    I have been following the Hambantota harbour project closely, and I understand what Priyanth Bandu is saying. These large project costs are difficult to estimate based on feasibility studies, cost will escalate. What we need to see is that the project gets completed with reasonable quality, technical specifications and transparency; of course SLPA must pay the bills (or Sri Lankans like you will). I am sure they will. Paul is just saying that there is no transparency. Paul have you got solid evidence that there is wide spread malpractices in the project?

  10. KD

    This Dr should resign immediatly if he has not got things right from the start.Someone has taken everyone for a ride including the President and at the end he may have to pay for it like Mubarak. If the Chinese did the FS they should be held accountable and no further payments made .This is the result of cheap chinese products.

  11. Patric

    So whats wrong my friends, we just have to wait for the 400 odd ships to call the port of Hambantota which pass by deep south of Hambantots – by then a tsunami would possibly wipe out the port, so build ports, air ports, International Convention centers, cricket grounds, Commonwealth grounds, Formula One race tracts after all why not !!!!

  12. rao

    this project started with 10% commission,further many croks demanding more shares due to that they have to issue many variation to the contract to satisfy many brothers and sons. chinese will provide money by paper but they know how to inflate contract value and get what they want. End of the day poor srilankan pay to asias’s riching family.

  13. Mahakaira

    No problem. If no ships come calling (to generate income to pay the big loans to the Chinese) then close Colombo Harbour and force all the ships to go to Hambantota. Same with the new airport in Hambantota. If no airlines come there the close Katunayaka and force everyone to land in Hambantota. That will teach the skeptics a lesson.

  14. willows

    50 years of future generation has to pay for the king???

  15. Sarath

    it is US $ 1,350 MILLIONS project but SLPA has tried to save money from feasibility study, Wickrama, you are a engineer from University of Moratuwa aren’t you? What shame !!! Don’t bring shame to the our prestigious university and country

  16. I’m a die hard fan of MR and despised and will despise UNP till my last breath. But spade should be call a spade.

  17. Rajive

    When you build a house con you complete for the estimated values?

    This is a Mega Project to develop our Nation this is not to develop (MR) or
    His Rajapksha Sahodara company or Dr

    When you compare Singapore and Malaysia there are new similar projects no body look at the Estimated Cost and the final but people talk about the benefit of the projects
    also they enjoyed the Development as a (Malaysians /Singaporean)

    If you take Malaysia most of the developed Manufactures have established in Malaysia Government provide all the facility’s to investors that is how they develop their Nation (Volvo has opened factory in Malaysia)you name a brand that brand has factory in Malaysia

    So if any body interested to developed Sri lanka (up to date only the W/P has 98% Job opportunity’s ) Hambantota Harbor is the only option
    Colombo no space offer similar facility’s to investors Like Malaysia Singapore and Trough that Develop our Nation Dr you and our Grate leader (MR) Name will be their in all Sri Lankans Harts on two things
    (1) Peace full Country (all ready done)
    (2) Develop the Economy

    • Unknown

      Hi,

      I would like to post some answers to your questions.

      1. Yes, If you do a proper planning, financial & technical feasibility study and get involved a team of competent & qualified professionals anyone could complete a project with the specified estimation with a reasonable margin of variance.

      2. No comments I’m neutral in political view, but any national project should be for the benefit for everyone.

      3. Singapore & Malaysian projects are specifically monitored by qualified teams appointed by the government and they are particular not only in financial estimations, they particular on timely completion to the highest level of quality. Further any develop country do extensive research prior to any project analyzing COST Vs BENEFITS.. Technical & Financial feasibility.

      4. No Porsche, BMW factory in Malaysia so far… May be spare parts..

      5. When compared to Singapore, Sri Lanka has vast resources and I admit that we have a peaceful country now, but when it comes to the economic development I feel the government should get the involvement of qualified and complete set of professionals on key decision making rather getting idiotic political appointees on these national projects.

      At last I could comment, that there’s a clear development in ahead but Government should milk this opportunity to develop wisely than ever.

      Rgds.

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