Sri Lanka announced on Tuesday that it has approved a proposal to develop the strategic Colombo Port's Western Container Terminal (WCT) under a joint venture with India and Japan for a period of 35 years, weeks after it scrapped a trilateral deal with both countries to develop another terminal at the same port.
"Cabinet approval has been granted on 01-02-21 to develop the West Container Terminal of Colombo South Port as a private-public limited company in collaboration with the Sri Lanka Ports Authority and parties nominated by Indian and Japanese government," said a Cabinet memorandum released on Tuesday.
It said the Build, Operate and Transfer (BOT) proposal approved by a negotiating committee had been forwarded to both the Indian High Commission and the Japanese embassy here.
The Cabinet memorandum said that the proposal presented by Adani Ports and special economic zone limited (APSEZ Consortium) has been approved by the Indian High Commission.
However, sources expressed surprise at the mention of the "approval by the Indian High Commission" and further stressed that investments in Sri Lanka are approved by the government of Sri Lanka and not the Indian High Commission.
In terms of the agreement, the WCT is to be operated over a period of 35 years as a public-private partnership with Adani Ports and APSEZ.
The WCT proposal came after Sri Lanka decided to retract on the previous memorandum of understanding signed in 2019 with India and Japan on the Eastern Container Terminal (ECT).
The state-owned Sri Lanka Ports Authority (SLPA) signed a memorandum of cooperation in May 2019 with India and Japan to develop the ECT during the previous Sirisena government.
The Colombo port trade unions opposed the proposal of investors from India and Japan buying 49 per cent stake in the ETC. They demanded the ECT to remain 100 per cent owned by the SLPA as opposed to the 51 per cent.
Under pressure from trade unions, Prime Minister Mahinda Rajapaksa last month agreed to scrap the deal, prompting India to demand Sri Lanka to abide by its commitment to the trilateral deal with it and Japan.
Both India and Japan found fault with Sri Lanka fort reneging on an international agreement unilaterally. Japan had also conveyed its unhappiness with the Sri Lankan government.
India and Japan are members of "Quad" or the Quadrilateral coalition of four Indo-Pacific nations that also includes the US and Australia. The four countries had in 2017 given shape to the long-pending proposal of setting up the 'Quad' to counter China's aggressive behaviour 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 USD eight billion in infrastructure projects in Sri Lanka. Colombo handed over its Hambantota port to Beijing in 2017 as a debt swap.