India Sri Lanka
Modi Government Pressuring Sri Lanka to Hand Over a Port Terminal to Adani Group?
Jan 22, 2021
Is Modi Government pressuring Sri Lanka to hand over port to Adani Group?

WORLD EXCLUSIVE:  The workers’ union of the Sri Lankan Port Authority (SLPA) has alleged that the government of India headed by Prime Minister Narendra Modi is putting undue pressure on the island-nation to hand over the development and operation of a major Colombo port terminal to the Adani Group. Is New Delhi’s prime interest the national security of India amid the growing Chinese presence in Sri Lanka, or is the Modi government seeking to have the terminal run by a business group headed by a close associate of the prime minister? Controversy over the impending deal has led to conflict between unions and management at the port of Colombo.

Is India’s Modi Government pressuring the Sri Lankan government to hand over the operations of a critical port terminal to the Adani Group? Claims to this effect have circulated for months now, giving rise to significant opposition to the impending deal from political parties and trade unions in Sri Lanka. In this article, based on official government documents and interviews with key participants, AdaniWatch reveals how the Modi government in New Delhi nominated an Adani company to take over development and operation of the East Container Terminal (ECT).

Sri Lanka’s economy is currently in dire straits because of the COVID-19 pandemic. On 12 January 2021, for the second time in recent months, the government in the Sri Lankan capital Colombo appealed to its international investors and creditors to roll over scheduled debt repayments and bond payouts totalling around USD $6.8 billion. At this juncture, the Indian government’s push for Adani to get a crucial port terminal deal is significant. Colombo port is one of Sri Lanka’s most significant revenue generators. Under the circumstances, a question arises as to whether the government of Sri Lankan president Gotabaya Rajapaksa is in a position to withstand external pressure and negotiate a good deal for his country.

Sri Lanka’s Colombo port is one of the busiest ports in South Asia. An estimated 70% of India’s import-and-export cargo is trans-shipped through the Colombo port (shipped to and from Colombo by massive intercontinental container ships and shipped further to and from Indian ports by smaller ‘feeder’ ships). Its four fully operational terminals – Jaya Container Terminal, Unity Container Terminal, South Asia Gateway Terminal and Colombo International Container Terminal (CICT) – are said to be operating at over 80% capacity.

Construction of a container berth as part of the first phase of a fifth terminal at Colombo port – the East Container Terminal (ECT) – was completed in 2015. However, the berth did not begin operations until October 2020 after port workers’ unions alleged that the Sri Lankan government was holding off operations in anticipation of a deal with India and Japan to hand over the development of the terminal to the private sector.

East Container Terminal, Columbo. Photo SLPA

This was a significant deviation from what the Sri Lankan government had originally planned. According to a project document published in 2015 by the Asian Development Bank, which partially financed the port’s expansion, the terminals were supposed to have been built through a Public Private Partnership (PPP) agreement and the private company involved would be selected through an open and competitive auction.

The private concessionaire was to develop its allocated terminal on a Build, Operate and Transfer (BOT) basis – where it would own the lease for the terminal for a pre-determined number of years. As it turned out, this path of a competitive auction was not in fact available for the Sri Lankan government to follow. The expansion project has been subject to political pressure from the two geopolitical giants in the region – China and India.

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China’s growing economic clout in Sri Lanka

Of the four operational terminals in the Colombo port, the biggest one – Colombo International Container Terminal (CICT) – has been developed through a joint venture between Chinese state-controlled company China Merchant Holdings (CMH) and a Sri Lankan privately-owned company Aitken Spence. The joint venture won the BOT tender for the CICT with a concession period of 35years. The terminal became fully operational in 2014.

The Sri Lanka Port Authority (SLPA), the government body that controls ports in Sri Lanka, holds 15% in the CICT, while the original joint venture had CMH controlling a 55% stake and Aitken Spence holding 30%.  Aitken Spence, allegedly as a result of government pressure, sold most of its shares to CMH, increasing the Chinese company’s stake in the consortium to 78.4% while the SLPA purchased the remaining 6.4%, continuing to be a minority stakeholder with a 21.4% share.

China’s presence in Sri Lanka has been growing over the last 15 years – it has developed the Hambantota port in the southern province of Sri Lanka. It has been alleged that the government in Colombo, deep in debt, was ‘forced’ to hand over the port to the Chinese government-controlled, Hong Kong-based China Merchants Port Holding Company Limited on a 99-year lease.

Given Sri Lanka’s strategic location in the immediate neighbourhood of India and in the Indian Ocean region, China’s growing economic clout in the island-nation has been viewed with trepidation by security experts in New Delhi. Their concerns are shared in Washington and Tokyo.

A Geo-Strategic Agreement

In 2017, the then Sri Lankan government signed a broad Memorandum of Cooperation (MoC) for economic development with the governments of Japan and India. In 2019, based on the MoC, the three governments signed another agreement for the development of the East Container Terminal (ECT), the second deep-water facility to handle the largest intercontinental container ships in the Colombo Port.

The author of this article accessed a copy of the ‘Memorandum of Cooperation for the development of the Colombo South Port in Sri Lanka’, signed on 28 May 2019 by Sagala Gajendra Ratnayaka, the then Sri Lankan Minister of Ports, Shipping and Southern Development, Taranjit Singh Sandhu, the then Indian High Commissioner to Sri Lanka, and Akira Sugiyama, the then Japanese Ambassador to the country. This document is disclosed here for the first time.

The MoC clearly states, right at the outset, that the interest of Japan and India is geo-strategic in nature. It reads: ‘The three governments share the view that it is of great geo-strategic importance for Japan and India to be stakeholders in the operation of the East Container Terminal (ECT) located in the Colombo South Port.’

The MoC states that a new Terminal Operation Company (TOC) will be formed in which the Sri Lanka Port Authority will hold 51% stake and the Japanese and Indian companies will together hold 49%. As the Colombo port is operating at its full capacity, Japan will provide a loan designated in Yen ‘at highly concessional conditions' to the government of Sri Lanka as early as possible to fast-track the capacity expansion of the ECT. Japanese companies which will participate in the TOC will cover the payments made by the SLPA for the construction of the existing capacity (the already-completed first phase) and that will be used for the placement of cranes and related equipment to start operations at the earliest opportunity.

Well-placed sources told this writer that the ‘highly concessional conditions’ were a Yen loan up to the equivalent of $700 million USD at an annual interest rate of 0.01% for a tenure of 40 years with an initial ten-year moratorium on repayment.

Interestingly, the role of Indian companies and their responsibilities were not mentioned in the MoC.

Sri Lankan Opposition Questions Agreement

Immediately after the three governments signed the MoC, the Sri Lankan news organization News 1st published a report quoting various political party leaders alleging that the MoC was an attempt to sell the country's national assets to foreigners. The report pointed out that when the decision was taken to hand over the operations of the CICT to a Chinese company, the then government had given a written assurance to protesting trade unions that the development and operation of the ECT would not be handed over to a third party.

This was confirmed to this writer by Prasanna Kalutharage, President of the Sri Lanka Independent Ports Employees’ Association (SLIPEA), in a recorded telephone interview. He was categorical in saying that the Sri Lankan government’s efforts to hand over the ECT to the Adani Group ‘due to the pressure from India will not be allowed at any cost’ and claimed that workers and trade unions cutting across the political spectrum have joined hands to oppose the move.

Prasanna Kalutharage, President of the Sri Lanka Independent Port Employees Association (SLIPEA)

Kalutharage sarcastically said: ‘It is the pressure from your leader Narendra Modi. Your leader wants Sri Lanka to hand over the ECT to his friend. He is putting pressure on our government and ministers. But we won’t let our national asset go to Adani or any other private company. When CICT was privatised, (the then Sri Lankan) government assured us (the workers and trade unions) that no more SLPA assets will be given out to third parties for either development or operation. Now the government is going back from its promise due to Indian pressure.’

He added: ‘We have the technology, capability and willingness. Are the ruling politicians trying to portray that the government of Sri Lanka can’t afford to invest $500 million which the government will recover in less than a decade? If the government is not willing, we, the 23 trade unions and workers will fetch in the money to the best of our ability. But we won’t let it (the port terminal) go to a private party – whether it is India’s Adani or any other company from a foreign land.’

The News 1st report also pointed out that half of the terminal had already been built and claimed that the government was dragging its feet in commencing operations in order to hand over the project to foreign players. The report raised a question: if the government in Colombo intended to privatise the development and operations of the ECT, why was an international tender not floated?

New Developments, Three Years Down the Line

On 2 June 2020, the Observer Research Foundation (ORF), a thinktank based in New Delhi, published a report that mentioned a telephone conversation between Indian Prime Minister Narendra Modi and Sri Lankan President Gotabaya Rajapaksa. Quoting an official from the President’s office, the report said Rajapaksa had asked Modi to ‘direct those responsible from India’s side to expedite construction of the East Terminal of the Colombo Port as soon as possible’ and Modi advised Rajapaksa ‘to appoint an official to coordinate the projects-related work with India’s new High Commissioner, Gopal Baglay.’ (The ORF is financially supported by the Reliance Industries Group, headed by India’s richest man, Mukesh Ambani.)

On 9 June, the then Sri Lankan minister of Ports and Shipping presented a Cabinet memorandum to the government. A copy of the memorandum, accessed by this writer and sections of which AdaniWatch is releasing on an exclusive basis, provides detailed information about the project.

The first part of the Cabinet memorandum explains the background of the ECT project and why the Sri Lankan government signed the MoC with the governments of India and Japan. In the second part, the memorandum explains the bleak economic situation in Sri Lanka – the rise in the country’s trade deficit, its fiscal deficit and a shortage of government revenue on account of, among other things, a sharp fall in income from the tourism industry as a consequence of the COVID-19 pandemic. The memorandum then goes on to explain the ‘approach of the government’ towards the development of the ECT.

In this section, the memorandum states that the incumbent government in Colombo informed the governments of Japan and India that it would honour the MoC signed by the previous government, given certain pre-conditions. These are:

  • Neither the government of Sri Lanka nor the SLPA will borrow or avail themselves of loans for the project;
  • The SLPA will hold the majority stake of 51% in the TOC;
  • Neither the government of Sri Lanka nor the SLPA will provide any guarantee (if the minority stakeholders take out loans);
  • The project should be developed with Foreign Direct Investment (FDI);
  • The foreign investor in the TOC should select a reputed local partner from Sri Lanka whose choice would be approved by the government and the SLPA;
  • The government of Sri Lanka would be open to a change in the shareholding structure of the TOC at a later date; and
  • In case of a change in the shareholding structure of the TOC, the SLPA would have the right of first refusal of the change.

While explaining these terms in two paragraphs, the document added that the Sri Lankan government had requested a debt moratorium for official debt and budget support from both the Japanese and Indian governments even before the outbreak of the pandemic. Hence, it could not avail itself of further loans.

Modi Government Nominates Adani Group

It is in Section 4 of the Cabinet memorandum that the promotion of the Adani Group by the Modi government is laid out in plain language. The section is quoted here:

‘The Government of India with concurrence of the Government of Japan has selected ADANI Ports and Logistics. Adani Group is one of India’s largest integrated infrastructure conglomerates with interests in Resources (coal mining and trading), Logistics (ports, logistics, shipping and rail), Energy (renewable and thermal power generation, transmission and distribution) and Agro (commodities, edible oil, food products, cold storage and grain silos), Real Estate, Consumer Finance and Defence, Headquartered in Ahmedabad, India. The USD 13 Bn. Group has operations across the world. Adani Group is also listed in the Hong Kong stock market.

‘Adani Ports and Special Economic Zone Limited (APSEZ) handles 30% of India’s container traffic. They operate 6 container terminals covering the major industrial hubs across the East and West coasts of India -- 3 at Mundra, 1 each at Hazira, Ennore and Kattupalli. Together they handle more than 5 Mn. TEUs annually. To grow their overseas business, APSEZ is also developing Greenfield container ports in Myanmar and Indonesia. They also have the largest trans-shipment port in India at Mundra handling 700,000 TEUs every year and growing.

‘APSEZ has entered into a strategic partnership with John Keells Holding PLC (JKH), the largest public listed conglomerate operating in Sri Lanka, to submit this proposal to develop and operate the East Container Terminal in the Port of Colombo, together with SLPA. Both APSEZ and JKH have deep and longstanding experience and expertise in funding, developing and successfully operating high value infrastructure projects as Public Private Partnership (PPP), including large and world class seaports. They are confident that this track record and heritage will ensure the swift and optimal development of the East Container Terminal as a successful PPP project with the SLPA and the Government of Sri Lanka. Loan capital of the SLPA could be settled through dividend setoff commencing from the first year of project of the TOC which is also required prior approval of the Government for the change of the ownership of equity participants.’

In the fifth section of the memorandum, the then Sri Lankan Minister for Ports and Shipping Johnston Fernando sought Cabinet approval to ‘recognize the proposal submitted by Adani Ports and Logistics on the recommendation of the Government of India’ and set up a five-member Cabinet Appointed Negotiation Committee (CANC) to evaluate the Adani Group’s proposal within the MoC framework, and ‘to grant concessions under strategic investment law following the due process and consistent with the concessions extended to CICT’, and to authorize SLPA for the formation of the TOC corporate structure under the relevant laws of the country.

In the first week of July 2020, the Hindu Business Line published an article which quoted an unnamed Indian government official saying India would participate in the development of the ECT and that the Adani Group would be the government nominee for the project. The same article quoted SLPA Chairman General (retired) R M Daya Ratnayake saying that during the discussion Sri Lankan government officials had with their Indian counterparts (including those stationed at the Indian High Commission in Colombo) on the project, the only name that came up as the nominee of the Indian government was that of the Adani Group.

Ratnayake later added that there is no official confirmation about this fact from the Indian government.

This writer sought responses to a questionnaire emailed to Gautam Adani, Karan Adani and two spokespersons of the Adani Group on 8 January 2021. I reminded one of the spokespersons over the phone three days later that I was awaiting a reply to the questions sent. At the time of writing on 19 January no response had been received. This article will be updated as and when a response is received.

Port Workers Go on Strike

By the middle of 2020, the Sri Lankan Port Workers Association and other trade unions were threatening to go on an indefinite strike alleging Indian pressure on Colombo to ‘prevent’ Sri Lanka from developing the ECT.

On 5 July 2020, The Sunday Times daily reported that India had finalized the selection of Adani Ports and Special Economic Zone Limited (‘Adani Ports’) as its nominee for the ECT project. The report suggested that Adani’s entry would not be beneficial for Sri Lanka because it is the same company that is developing the Vizhinjam international deep-water multi-purpose seaport project in the southern Indian state of Kerala, which is only 176 nautical miles from the Colombo port. The ECT and the Vizhinjam port – which has been planned as a trans-shipment hub by the Indian government – would be competing for the same cargo, it was argued.

In a detailed report published on July 17, News 1st mentioned the existence of a Cabinet note presented by the then Minister Fernando. Its report said: ‘Gautam Adani, the Chairman of Adani Group is a very close associate of Indian Prime Minister Narendra Modi. On the 20th of January 2020, the Indian Congress Party accused the Modi-led government of ‘favoring’ the Adani Group in the 45 Billion Indian Rupees Submarine project, alleging it was promoting its crony capitalists. Indian media also revealed from time to time about the projects given to Adani Group by the Modi-led government, which raised serious environmental concerns.’

Towards the end of July 2020, trade unions and different associations of port workers started an agitation against the government’s decision on developing the ECT. The unions demanded that the government install cranes at the already completed first phase of the ECT to start operations in order to scuttle the MoC signed between the governments of Sri Lanka, India and Japan. The workers blocked the entry and exit roads at Colombo port as well as internal roads for two days, reportedly causing a loss of 10 billion Sri Lankan Rupees to the country’s national exchequer. In apprehension of the consequences of the workers’ agitation for the impending election on 5 August 5, President Gotabaya Rajapaksa appointed a five-member committee to examine the concerns raised by the workers. On that assurance, the protests were called off.

In early August 2020, it was reported that the world's largest container shipping line Maersk group, which operates around 70 container ports across the world, had expressed interest in developing and operating the ECT.

This was not the first time Maersk had shown interest in the ECT. In 2016, when the government of Sri Lanka had invited expressions of interest (EoI) from private players to develop and operate the ECT on a BOT basis, Maersk partnered with Indian government company Container Corporation of India (CONCOR), Netherlands’ APM Terminals BV, and the Sri Lankan John Keells Holdings to form a consortium to bid for the project. Later, the Sri Lankan government cancelled the EoI and the project was stalled.

Sri Lankan Prime Minister: ‘We Cannot Offend India’

On 24 July 2020, while addressing the protesting port workers in Colombo, Udeni Kaluthantri, secretary of the trade union Jathika Sevaka Sangamaya’s (JSS), and a former director of SLPA, revealed that in a meeting with different trade-union leaders, Prime Minister Mahinda Rajapaksa (who was Sri Lanka’s former President and a brother of the current President Gotabaya Rajapaksa) had told them: ‘[W]e can allow you to unload the gantry cranes, but can’t let the operations start [at the terminal]. I had to go home once, because I got hammered by the US and India. I won’t make the same mistake again.’

Prime Minister Mahinda Rajapaksa

The Sri Lankan Prime Minister seemed to be under pressure from India and the USA to hand over the contract for developing the terminal to the Adani Group. Kaluthantri added: ‘…during the last regime, the then Prime Minister Ranil Wickremesinghe told me that you have a right to protest, but don’t protest against [the terminal] privatization. That will offend India. We cannot protect our government if India is offended.’

In a lengthy recorded telephone conversation with this writer, Palitha Athukorala, President of the National Union of Seafarers Sri Lanka, a trade union associated with the International Transport Workers’ Federation (ITF), confirmed that what Kaluthantri said was ‘absolutely true’. He said: ‘Adani is Modi’s man. Modi wants to promote Adani’s business interests in Sri Lanka under the cover of India’s geo-political and security interests. India is a big country and is our immediate and close neighbour. But this is not the way. Earlier, Sri Lanka gave (the contract for the development of the) CICT to a Chinese company. Now, this government wants to please India, and Modi is seeing this as a wonderful opportunity to promote his close friend’s business.’

‘We are stuck in the middle. We are fighting tooth and nail to stop this. All the trade unions and workers across the (political) party lines are together in this fight and this is spreading across the country. Because of this issue, the current Government is fast losing its popularity. But we think our government will concede to the Indian pressure.’

Palitha Athukorala, President of the National Union of Seafarers Sri Lanka

He further said that the managing director of the terminal operation unit of John Keells Holdings had confirmed to him that the company had arrived at an agreement with Adani Ports for the development and operation of the ECT. Athukorala was certain that Adani would get management control over the project and that both Adani Ports and John Keells Holdings will together hold 80%-plus shares in the TOC in line with the CICT, irrespective of what SLPA and the Sri Lankan government were claiming.

He asked: ‘Do you think a big business house like Adani will come to Sri Lanka and settle for a 25-30% stake in a business?’ and then answered the question himself: ‘Certainly not.’

In the third week of October 2020, the Indian strategic-affairs news website StartNews Global published an article titled ‘India Pushes For Early Decision On Lanka Port Project’. It quoted an Indian government official familiar with the subject saying: ‘They [Sri Lanka] have been promising the project to India. We have told the Sri Lankans that they need to move either with a bilateral (India and Sri Lanka) or trilateral (India, Sri Lanka and Japan) format.’

Citing the CICT, operated by a Chinese government company, the unnamed official reportedly said that ‘it’s only logical that we should have a stake in the terminal’, adding: ‘Besides, we cannot have a foreign power sitting at what is a commercial hub for India.’

Regarding the controlling stake going to SLPA, the article quoted the government official asking: ‘Who will invest in the project if they do not have a controlling stake in it? If they can give the Chinese an 81% stake in the Colombo International Container Terminal (CICT), why can’t they give India 51% equity in the East Container terminal?’

If this unnamed government official is correct, it provides a clear indication that the Indian government was pushing for its nominee to have a majority stake in the project until the end of the concession period.

Another Cabinet Memorandum

On 22 October 2020, Rohitha Abeygunawardhana, the current Sri Lankan Minister of Ports and Shipping, submitted another cabinet memorandum for approval. The five-page memorandum accessed by this writer and being exclusively released by AdaniWatch reiterated the earlier minister’s memorandum on the Indian Government nominating Adani Ports as the Indian government’s nominee for the project and the details of the group’s various business interests. It also carried a report submitted by the expert committee appointed by the President (Gotabaya Rajapaksa) in July 2020. The committee’s report reiterated Colombo’s position and recounted the parlous financial condition of the SLPA.

On 1 November, The Sunday Times, after obtaining insider information from SLPA, reported that the SLPA had conceptualised the operation of the ECT by handing over the management of the terminal to the ‘Indian government-preferred Adani Group.’

On 3 November, most newspapers in India carried a report initially published by Bloomberg. Quoting people in the know, the report said Adani Ports and its local partner in Sri Lanka had secured the in-principle approval of the Sri Lankan government to sign a contract with the SLPA for the development and operation of ECT. The report mentioned that Adani had signed a preliminary agreement for the project in 2019 itself.

This started another round of protest in Sri Lanka and the opposition parties launched an attack on the government accusing it of misleading the people of the country and selling Sri Lanka’s national assets to a private company under pressure from India. A parliamentarian from the opposition party said they supported the actual format of the MoC that gave the controlling stake to the SLPA and 49% to Japan and India. But the current government has changed it and now foreign private entities would be controlling the ECT.

A week later, SLPA Chairman Daya Ratnayake refuted these allegations. He told The Island, ‘It’s all speculation without any concrete basis. After the change of government, negotiations began to be re-looked at in a more comprehensive manner and the government of Sri Lanka is in discussions with the governments of Japan and India on how to operationalise the terminal. These negotiations are still taking place on state-level.’

On a specific question related to Adani Ports and its Lankan partner striking a definitive deal with SLPA in which SLPA is the majority stakeholder, Ratnayake replied ‘nothing is concrete in this regard yet. The three governments (India, Japan and Sri Lanka) will work out details based on the Memorandum of Cooperation (MoC)’.

Daya Ratnayake - Image courtesy Daily Mirror online

In a telephone interview with this writer, Daya Ratnayake said: ‘The current issue is, the trade unions and the workers in the port don’t want the ECT to be given to India, but to be developed and operated by the SLPA. They are alleging that, according to the MoC signed between the three governments of Sri Lanka, India and Japan, it was clear that the operations of the ECT will be done by a private Indian company, recommended by the Government of India. The workers and the unions want the MoC (related to ECT) to be cancelled. But it is signed between three sovereign governments. India and Japan are two important countries. How can it be cancelled?’

‘The position of the government of Sri Lanka is clear. The MoC can’t be cancelled. So, the concerned minister submitted a cabinet paper requesting the government to appoint a project committee to study the pros and cons of the proposal, and it will submit the report. Another committee – a Cabinet negotiation committee – has been appointed to study the submitted project proposal and negotiate with the concerned parties. Any decision will be taken only after studying the reports submitted by these committees. That is the current position of the government of Sri Lanka on the issue. That means, so far, no decision has been taken by the government of Sri Lanka in this matter.’

To a specific question, citing the newspaper reports quoting the trade union leaders that the Sri Lankan government is being pressurized by the government of India to accept Adani Group as the official nominee of India, General Ratnayake said, it is wrong to say that the Indian government had placed pressure on Sri Lanka to accept Adani as its nominee. In the same breath, he added ‘it was part of the agreement.’

The SLPA chairman also officially confirmed that the Indian government had proposed the name of the Adani Group as the official Indian nominee for the project. He said ‘yes, it is true that the Indian government had proposed the name of Adani Group as the official party for the management (of the ECT) for the government of India. The MoC is signed with that understanding. That is not an allegation, but a fact. Similarly, Japan had also proposed a couple of names. Officially these names (from Japan) have not reached us (SLPA). But I can confirm that the government of India had submitted the name of Adani to the SLPA, though we haven’t finalised anything yet. We haven’t spoken to Adani or anybody as such till now. We are in touch with the embassies (of Japan and India) and the discussions are still on.’

When asked about the alleged pressure by the Indian government to hand over a majority stake in the TOC to the private operator, General Ratnayake said he was not aware of any such proposal and the SLPA is clear that it will hold 51% stake in the TOC whenever it is formed.

On Maersk’s proposal, General Ratnayake said that the SLPA asked (Maersk) to submit its proposal to the concerned ministry and the government and has no further information on that.

UpulJayatissa, an Additional Managing Director of the SLPA, also spoke to this writer. He was emphatic when he said: ‘Not only Maersk. Every global shipping line and major port operators are interested in developing the ECT and bringing it under their control because Colombo port is a lucrative business option for them and the existing deep-water facility is running almost full capacity which is causing major delays. As of now the SLPA operates the existing facility of ECT with three cranes and it has to be developed further.’

When asked about the involvement of Adani Ports and John Keells in the project and the consortium’s submitted proposal, Jayatissa said those issues are policy matters on which he can’t comment.

Indian and US officials Visit Sri Lanka

In the last week of November 2020, National Security Advisor (NSA) of India, Ajit Doval, who is perceived to be a close confidante of Prime Minister Modi, landed in Colombo for a two-day official visit to promote trilateral maritime cooperation, involving the Maldives as the third partner.

The Indian NSA visited the island nation less than three months after the foreign ministers of the ‘quad countries’ –the USA, India, Australia and Japan – held their second round of consultations in Tokyo to construct a larger Indo-Pacific alliance to arrest the growing influence of China in the region. After the ‘quad meeting’, US Secretary of State Mike Pompeo visited India, Sri Lanka and other countries in the region.

While the US Secretary of State was in the country, the Sri Lankan president, Gotabaya Rajapaksa, tweeted: ‘Engaged in a forward looking & a cordial interaction with @SecPompeo this morning. Appreciate @SecPompeo’s stance on the need 2 strengthen the bilateral relationship & support 4 defence cooperation. Value @SecPompeo’s views on assistance 4 investment & our development needs.’

Immediately after Pompeo’s visit, Rajapaksa tweeted#Sri Lanka will always maintain a neutral stand in foreign policy and will not get entangled in struggles between power blocs’, presumably in an attempt not to upset China. In the tweet, he tagged Pompeo with a hashtag #USwithSL.

Doval’s visit came hard on the heels of this. While Doval was still in Colombo, Chaminda Wijesiri, a parliamentarian from the opposition party Samagi Jana Balawegay, attempted to ask in the Sri Lankan parliament whether Doval’s visit had anything to do with the ongoing discussion on the ECT. Speaker Mahinda Yapa Abeywardena shot down the attempt by ruling it was not on the agenda of the day’s business in parliament.

Indian National Security Advisor Ajit Doval

Indian Media: ‘Doval Clinches Port Deal’

Immediately after Doval’s return from Sri Lanka, the Indian news website The Citizen, quoting ‘informed sources’, reported that ‘the long-pending tri-nation project, involving Sri Lanka, India and Japan, to develop and run the strategically located Eastern Container Terminal (ECT) in Colombo port will now see the light of day,’ attributing it to the visit of the Indian NSA in the title itself. The title of the article was ‘Doval Clinches key port deal during two day visit to Sri Lanka.’

While the SLPA chairman and others from the government tried to assuage the workers and trade unions by claiming the government is yet to take a firm decision on whether the ECT would be handed over to an Indian company, Sri Lanka’s Foreign Secretary, Admiral Jayanath Colombage, contradicted him, telling Business World: ‘We all know the port of Colombo has risen to the 18 best connected container ports in the world this year. And through the port about 38% of containers we handle are from India. So naturally, India should be given to operate the East Container Terminal and we have agreed. But actually, you know if the decisions are made based on economics, things are different. But when the decisions were made in order to strategically off-balance (sic), that’s where it goes from.’

‘Now India is a democratic country, Sri Lanka is a democratic country, people have their own voice. People have their own perception. And the opposition is always inciting opposition from the people. So people in the port are not willing to go ahead with the project, but then they are not the decision makers. Of course, they don’t really bother about it or they may not really understand the geostrategic implications. They may think oh, this is our port, we have an extra-nationalistic feeling that may not work.

‘But you see, my point is you know we have to make this happen. We have to use this port, a 600-m berth already built. It’s a matter of bringing a crane and getting ship work, you know. It is nearing capacity on the other container jetties. So indecision has cost five long very valuable years to Sri Lanka. We don’t have the luxury of waiting any longer. So we have to make our commitment, right? We have to fulfill our commitment. And true to the word, India should make it happen.’

This clarified the Sri Lankan government's stand.

At the start of the third week of December 2020, in affirmation of The Citizen’s report of the last day of November, it was reported from Sri Lanka that the current Minister of Ports and Shipping Rohitha Abegunawardhana had confirmed to the media that though the Sri Lankan government wanted to go ahead with a local investor to develop the project, it could not find a suitable company that could invest to develop and operate the project. They had therefore accepted the Indian government proposed Adani Group as a suitable overseas investor for the development of the ECT in which SLPA will hold 51% stake.

Opposition to the Sri Lankan government’s plan grew manifold in December. Trade-union leader and civil-society Activist Saman Rathnapriya said that the government was attempting to hand over the ECT to an Indian group – Adani – which was responsible for the death of many farmers, citing the ongoing farmers’ agitation against the new agricultural regulations introduced by the Modi government.

Prasanna Kalutharage told this writer that there are 23 trade unions that are opposing the Lankan government move. He said: ‘For Modi, Adani might be a friend. For us, our national asset is more important. We have no intention to handover it to any private player. We have submitted our proposal to the government.’

Kalutharage, like other political and trade-union leaders, accuses the current government in Colombo of being responsible for the controversy. He asks why private players are needed when Sri Lanka has the technical know-how and experience in operating a port terminal?

Dissent against Adani has spilled into other areas as well. A few days before Christmas, Anura Kumara Dissanayake, a leader of the left-leaning political party Janatha Vimukthi Peramuna, accused the government of under-charging import duty from Wilmar Limited on its imports of coconut oil and sugar into the country, causing huge losses to the government. He pointed out that Wilmar Limited is Adani’s business partner in India and that Adani was trying to get a controlling stake in the ECT.

An online portal on shipping news The Hellenic Shipping News Worldwide, which claims to be ‘the leader in world shipping news over 10 years’, published an article on the subject on 21 December. While trying to explain both sides of the issue, the article said: ‘There are various allegations of questionable business practices against Adani’s conglomerate. This year, the Central Bureau of Investigation of India booked the Adani Power Ltd., bigwigs and their counterparts from 25 other companies for allegedly causing a staggering loss to the state coffers.’

A recent report by Bloomberg points out that the Modi government has come under heavy criticism for the manner in which the Adani Group was allowed to secure contracts for operating six Indian airports. It is said to have enabled companies without any experience in the field to bid so that the Adani Group would benefit. It also said the Adani Group had been fined in Australia for ‘misinterpreting’ environmental-approval conditions at its mine in central Queensland.

The unions of Colombo port workers are not alone in protesting against the Adani Group. Indian farmers, who are currently struggling to scuttle a set of draconian farm laws have accused it of exploiting them, a charge Adani has vehemently denied. In November 2020, members of the #StopAdani movement gathered outside the Sydney Cricket Ground during a one-day international between Australia and India in protest against the company’s mining project, and two of them even invaded the pitch.

Indian Foreign Minister Visits Colombo

In the first week of January 2021, Indian foreign minister, Subrahmanyan Jaishankar, visited Colombo on a three-day official tour in which he held discussions with the Sri Lankan President and his counterpart among other government officials.

Indian foreign minister, Subrahmanyan Jaishankar

The Sri Lankan President’s press release on this meeting states that ‘in addition to the ongoing projects carried out in Sri Lanka with the assistance of India, several other areas for cooperation development were identified during the discussion. The East Container Terminal of the Colombo Port, LNG power plant, construction of houses and roads, development of agriculture and research, communication technology and development of alternative energy sources are among them.’

It is interesting to note that the Adani Group is the market leader in India in the alternative energy business and the Reliance group, led by Mukesh Ambani, is the largest mobile phone service provider in India (communication technology).

The Hindu reported that around the same time that Dr Jaishankar met the Sri Lankan president, his brother, Sri Lankan PM Mahinda Rajapaksa, informed the parliament that ‘the (Sri Lankan) government had not decided to hand over the management of the ECT to any foreign company’.’

Prasanna Kalutharage believes that the main objective of the visit was to speed up the process of handing over the ECT to the Adani Group. Multiple officials in the SLPA to whom this writer reached out declined to comment, neither confirming nor denying this claim. The Sri Lankan ministry for ports and shipping also declined to comment despite numerous attempts by this author to reach it, including an emailed questionnaire and several phone calls.

After a meeting with the protesting trade union leaders on 13 January 2021, the Sri Lankan President’s office issued a press release titled ‘ECT will not be sold or leased – President tells Trade Union reps’. It said: ‘The previous administration had agreed to sell the East Terminal to India. The agreement envisaged obtaining a loan from Japan after sale and purchasing construction equipment with the loan money. The President pointed out that after the present Government negotiated with India on the contract it was possible to reach an agreement to retain 51% of the ownership and the control of the Terminal under the Sri Lanka Ports Authority (SLPA).’

In the press release, the President explained the plan ‘was to develop the terminal as an investment project that has 51% ownership by the Government of Sri Lanka and the remaining 49% as an investment by India’s Adani Group and other stakeholders’. And the President clearly stated that there should be no doubt about it and asked all the trade-union representatives to submit their proposals and ideas on this program, making it clear that Adani will be the operator of the port while SLPA would hold a 51% stake in the TOC.

The Chinese companies that are operating in strategically important locations are government-owned and controlled. If the Indian government’s real interest is to counter China’s increasing presence in Sri Lanka, why did the government propose the Adani Group, a private corporate house, as India’s official nominee for the project? If Adani’s business fortunes fail tomorrow and if it sells its Sri Lankan business to a Chinese company, who will take the responsibility for that and how will the country’s geo-political and strategic interests then be taken care of?

These are difficult questions to answer.

The writer is an independent journalist based in New Delhi.

Relevant Government Documents:

May 2019 Sri Lanka Cabinet Memo p.1

 

May 2019 Sri Lanka Cabinet Memo p.2

May 2019 Sri Lanka Cabinet Memo p.3June 2020 Sri Lanka Cabinet Memo p.1

June 2020 Sri Lanka Cabinet Memo p.2

June 2020 Sri Lanka Cabinet Memo p.3

June 2020 Sri Lanka Cabinet Memo p.4

October 2020 Sri Lanka Cabinet Memo p.2

October 2020 Sri Lanka Cabinet Memo p.2-2

October 2020 Sri Lanka Cabinet Memo p.2-3

October 2020 Sri Lanka Cabinet Memo p.2-4

October 2020 Sri Lanka Cabinet Memo p.2-5