India will likely field the Adani Group as its nominee in a planned India-Japan-Sri Lanka partnership that would jointly run the East Container Terminal (ECT), the fourth at Colombo port, a regional transhipment hub through which India routes a fourth of its container cargo every year, multiple sources including a top Sri Lanka Ports Authority official, has indicated.

“During discussions with Indian government and embassy officials, when we talk of who is coming (as Indian partner), how they are coming and the people who have shown interest in the project, what I can remember is only the Adani Group. They are the ones being mentioned,” General (Retd) R M Daya Ratnayake, Chairman of the Sri Lanka Ports Authority (SLPA), told BusinessLine . “But, officially, we have not got anything yet (from the Indian government),” Ratnayake added.

SLP is the state-owned operator of commercial ports in Sri Lanka.

“To me, the indications are that India will participate in ECT through the Adani Group,” said an Indian government official briefed on the development.

In May 2019, the Sri Lankan government signed a Memorandum of Cooperation (MoC) with Japan and India to jointly develop the ECT. According to the agreement, SLPA will retain full ownership of the ECT while the terminal will be run by a jointly owned company in which SLPA will hold a 51 per cent stake.

The 2.5-million twenty-foot equivalent units (TEUs) capacity terminal is estimated to cost about $700 million, Ratnayake said. The first phase of the terminal was completed in May 2015 involving a single berth of 440 m, alongside water depth of 18 m, but is yet to start operations.

Rising Chinese influence

India’s move to name Adani Ports and Special Economic Zone Ltd (APSEZ), the country’s biggest private port operator, as the Indian partner in the ECT comes amid the rising influence of China in the region, including Chinese investments in Sri Lankan ports, particularly in Colombo and Hambantota.

Hong Kong Stock Exchange-listed China Merchants Port Holdings Company Ltd, a unit of state-owned China Merchants Group, holds 85 per cent stake in Colombo International Container Terminals Ltd (CICT), one of the four facilities at Colombo and the only deep water terminal capable of handling the largest container ships.

Aside the strategic and geo-political interests, India’s planned involvement in the ECT has a big commercial angle.

Colombo Port is the most preferred regional hub for transshipment of Indian containers and mainline ship operators. Colombo is 47 nautical miles, requiring a detour of just three hours from the east west mainline shipping route.

Indian transhipment containers accounted for 45 per cent or 2.5-million TEUs of Colombo’s total container transhipment volume of 5.6 million TEUs in FY19.

For many years, India has been trying to cut its dependence on Colombo to send and receive container cargo and save extra time and costs for India’s exporters and importers, but without much success.

The box transhipment terminal run by D P World at Vallarpadam in Cochin Port Trust has not been able to realise its objectives of reducing India’s dependence on Colombo, after many years of operations.

APSEZ itself is building a transhipment port at Vizhinjam near Thiruvananthapuram in Kerala, but the project has been delayed.

SLPA Chairman Ratnayake said the change in Government in the island nation late last year will not affect the MoC signed with the Indian government, despite a protest by port workers a few days ago on erecting cranes at the partly constructed ECT.

“We are definitely going to honour that; we have no doubt about it,” he asserted.