Adani seals deal to develop Western Container Terminal at Colombo Port

India's Adani Group on Thursday sealed a deal with the state-owned Sri Lanka Ports Authority (SLPA) to develop and run the strategic Colombo Port's Western Container Terminal.

As the first-ever Indian port operator in Sri Lanka, Adani Group will have a 51 per cent stake at the port's Western Container Terminal (WCT), a statement said.

Adani Group signed a build-operate-transfer (BOT) agreement with its local partner John Keells Holdings and the SLPA to develop the WCT at the Colombo Port, it said.

The two local entities would hold 34 and 15 per cent stakes of the new joint company titled the West Container International Terminal.

The Colombo Port is one of the most preferred regional hubs for transhipment of Indian containers and mainline ship operators with 45 per cent of Colombo's transhipment volumes originating from or destined to an Adani Ports and Special Economic Zone (APSEZ) terminal in India.

APSEZ is the largest port developer and operator in India and represents 24 per cent of the country's total port capacity.

The WCT proposal came after Sri Lanka decided to retract the previous memorandum of understanding signed in 2019 with India and Japan on the Eastern Container Terminal (ECT).

The state-owned 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 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 for 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 8 billion in infrastructure projects in Sri Lanka. Colombo handed over its Hambantota port to Beijing in 2017 as a debt swap.