Govt. plans to restart suspended Japanese-funded LRT project
In an effort to mend fences with Japan, the Sri Lanka government plans to resume the Japan International Cooperation Agency (JICA)-funded US$2.2 billion ‘Light Rail Transit (LRT) project, stretching from Malabe to Colombo Fort which was abruptly terminated by the previous regime, Presidential Secretariat sources divulged.
The new administration is set to renew the LRT project contract with JICA loan facility due to its favourable conditions including low interest rates and the grace period of 12 years which was completely ignored by the previous regime.
On the advice of the then President Gotabaya Rajapaksa, Presidential Secretary Dr. P.B. Jayasundera had instructed the Ministry of Transport Services Management to review and terminate the project and close the project office with immediate effect.
He cited the reason for this action and a subsequent cabinet decision in favour of it to the high cost incurred for the LRT project and it was not being the appropriate cost effective transport solution for the Urban Colombo transportation infrastructure.
The government is yet to take any action to terminate the loan agreement with JICA, the Auditor General (AG)’s special report revealed.
The AG disclosed that the Department of External Resources had informed JICA that the loan amount would be utilised for another development project.
The total project cost was estimated to be 246,641 billion yen (US$ 2.3 billion) but this includes land acquisition, administration, interest and taxes which are not financed by the loan.
The consultants started work in early 2019. Their seven-year contract was signed with the Ministry of Megapolis and covered detailed design and related engineering services, procurement assistance, construction supervision, testing and commissioning as well as defect liability check.
The Government has not yet settled a claim of around Rs 5 billion from the project consultants Oriental Consultants Global of Japan and Sri Lanka’s Consulting Engineers & Architects Associated for the work already done, expenses and loss of profit caused by the cancellation of the project in 2020.
Sri Lanka’s Auditor General has confirmed this claim adding that after loan agreement number 2019011 linked to the LRT was scrapped following a policy decision, a consultancy contract was terminated and the firm has demanded a sum of Rs.5.89 billion for losses and damages.
In addition, there will be certain penalties from JICA as Sri Lanka has already signed an agreement on the project, a senior official closely connected to negotiations with JICA revealed.
The total consultancy cost of the project is estimated at around $140 million for seven years, including the feasibility review, detailed design, evaluation assistance, and construction supervision inclusive of all government taxes.
Any disbursements already made by JICA will have to be settled, despite the project being called off for the first two years, he added.
It has also been observed that the Government incurring a higher cost would be unavoidable if the consultancy firm were to seek justice from the International Court of Justice, as provisions governing the loans relating to the unilateral termination of a project had not been indicated in the contract.
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