THE FUTURE OF SLPA WITH ECT

By Eng. R.P.P. Krishantha

NECESSITY OF OPERATING EAST CONTAINER TERMINAL BY SRI LANKA PORTS AUTHORITY

Necessity of Operating the East Container Terminal by Sri Lanka Ports Authority.

Necessity of operating East Container Terminal by SLPA has been analyzed in this report taking into account the national policy framework, cargo forecast, trends in global cargo operation, actual contribution to the national economy, and the national interest.

1. Achievements of the Port of Colombo

Sri Lanka Ports Authority could uplift the position of the Port of Colombo to 22nd place among the best container ports in the world and also as the leading regional transshipment hub in the Indian Ocean through well planned development strategies and capitalizing strategic location in the East-West route which carries over 60% of the world container seaborne trade. The recorded growth in 2018 was 13.5% and according to the Drewry Port Connectivity Index also ranked the Port of Colombo as the 11th best port in connectivity in the world for 2018. Currently, Colombo Port handles above 7 Million Twenty feet Equivalent Units (TEUs) and it has already reached its peak capacity by now.

2. Challenges and Impacts on Container Terminals due to the Advancements in the Global Shipping Trade

Shipping companies are continuously adding larger container ships to their fleet to increase cargo carrying capacity in order to get the advantage of economies of scale. New container ships are equipped with capacity such as 24,000 TEU which are calling at fewer hub ports as their port stay time frames have to be minimized. Usually, these Ultra Large Container Ships (ULCS) are 400 m in length and much wider with a beam of 61 m, that maintains more than 16.5 m loaded draught

3. Advantage of ECT Owned and Operated by the Government

Requirement of a government owned deep container terminal has envisaged by the Government when the South Harbor has planned. Hence, the ECT constructions were started under the direction of Honorable past President Mahinda Rajapksa’s government considering the real need of such a terminal that is operated by SLPA.

3.1   Income from a SLPA Owned and Operated Terminal

SLPA generates significantly larger incomes from its own terminals than the income obtained from the private operators. SLPA generated an income of US$ 263 Million in 2019 without the revenues from the private terminal operators. The income from the private terminals is about US$ 38 Million in 2019 from the land lease, the royalty and dividends according to the financial statement, 2019. These financial figures show that a significant amount of the income generated in the private terminals are draining out from the country and it is a major loss to the country at large. Further, SLPA is to provide and maintain infrastructure facilities and services to the doorsteps of the private terminals at the expense of SLPA’s income.

3.2   Income from a SLPA Owned and Operated Terminal

SLPA operated container terminals have performed well above the competing SAGT terminal amidst the limited and restricted deep draught berths in JCT. SLPA owned JCT terminal handles 2.28 Million TEUs out of the total container handling in the Port of Colombo (7.23 Million TEUs). JCT terminal has two numbers of deep draft berths (14.25 m draft) in 660 m quay wall and the SAGT terminal has three berths in a straight quay wall of 940 m (14.25 m draft). SLPA employees attached to JCT terminal have shown their dedicated and efficient service with old container handling equipment at JCT purchased in the year 1998.

3.3   Workforce in SLPA Owned Terminal

SLPA manage all the terminal operations and maintenance without outsourcing any work by around 1700 employees attached to the JCT terminal. We have noted that outsiders are wrongly interpreting that all 9990 employees of SLPA is working for the JCT. The workforce other than in JCT, are involved in operations and maintenances of all the ports under SLPA, providing navigation services to all ports, warehousing (LC and MCC cargo), liquid bulk (crude and refined oil), dry bulk (grains and cement), general cargo handling, water bunkering, port security, planning and development works, firefighting, harbor dredging, RoRo operation, facilitating cruise ships, etc.

4. Viability of Modernization of Existing Terminals in the Old Port

Modernization of JCT terminal is not a viable option at this time as it cannot cope with the urgent capacity shortage and is not possible to accommodate ULCS. Rate of return on investment to modernize the JCT is not convinced and investment in ECT is the appropriate and right decision to survive in the trade. According to the global shipping trade analysis, JCT and SAGT terminals in the old port will cease in operation within 10 to 15 years as these terminals cannot handle mega ships with draft more than 14.25 m. These two terminals were unable to handle 374 numbers of such ships with draft more than 14.25 m arrived in 2019.

Existing harbor basin requires high expenditure for improving and maintain nautical accessibility to receive large container ships, by deepening the harbor basing beyond 15 m (rock blasting required), ship maneuverability within the confined harbor, deepening the access channel, and widening the harbor entrance, proposed extending JCT quay wall by 120 m, purchasing new container handling equipment, etc. Further, construction works at JCT would obstruct the operation of both JCT and SAGT and will lose the existing shipping lines.

Even though it is required to implement proposed JCT V expansion project as planned, it is not the time to implement this project spending approximately US$ 32 Million. We strongly suggest prioritizing ECT development by SLPA as it is the right investment to survive both the SLPA and the Port of Colombo in long run. JCT V is also a vital requirement and it shall be implemented as soon as ECT operation realized or SLPA has adequate funds to develop both terminals simultaneously.

5. Implementation Plan to Operate ECT by SLPA

ECT phase 1 has completed with 440 m long berth in a 660 m quay length with a 18 hectare container yard and related facilities to operate a mega ship. Already Completed part of ECT can accommodate 850,000 TEUs meeting the capacity shortage in the Port of Colombo. Full development of the terminal is suggested to be taken place in three different phases within a span of five years to have a straight quay wall of 1320 m with a yard of 75 hectares (please refer figure-A). Investment cost is around US$ 500 million including civil construction work cost and the cost of the equipment for the complete development but this Investment cost is not required because now ECT operation is began. Then ECT revenue is recovering from 2021 and so on.

6. Purchasing New Equipment

Four numbers of quay cranes and 12 numbers of yard cranes (Rubber Tyred Gantry cranes) are required to be purchased while the terminal is operated with the available cranes. Cost of new equipment is approximately US$ 65 million and the required funds are available with SLPA.

6. Conclusions

We, as the SLPA Engineers Association, strongly recommend and advice the followings to operate the ECT as a government terminal and trust the government will positively support the endeavor.

1. SLPA shall be given opportunity to operate the ECT terminal as a government owned terminal for the national interest. ECT is the only economically viable option considering the capacity enhancement required to meet the present and future global cargo trade demand and to take the maximum benefit to the country and to maintain the long term sustainability in the business as a government operator. Operation of the ECT as a government owned terminal is a vital requirement to support the country’s economy and to flourish the unprecedented benefits to the Nation enhancing the contribution towards GDP of Sri Lanka.

2. SLPA shall take prompt actions to operate ECT phase 1 within 2020. As a short term measure, ECT phase 1 shall be operated with newly purchased three quay cranes with available yard equipment, terminal operating system and available human resources. It shall be noted that newly purchased quay cranes are capable to handle more than 70% of mega ships (those unable to handle by JCT and SAGT in the old port) arrived to the Port of Colombo in 2019.

3. Prompt actions are required to purchase new container handling equipment to ECT as planned in 2015 while carrying out the operation as explained above. SLPA has got fund allocations to purchase the required equipment fleet.

4. Balance part of ECT shall be developed phase- wise with the SLPA funding arrangements and the experienced staff.

5. Prior to the implementation of the proposed JCT Phase V expansion project, the operation of the ECT Terminal should be carried out under the Sri Lanka Ports Authority. The approximately allocated amount of US $ 32 million for JCT Phase V can be scheduled for further developing of the ECT Terminal, and then it is more benefited than JCT Phase V.

Required government support to the same is highly expected and honoured.

Please refer the Comprehensive Report titled, THE FUTURE OF SLPA WITH ECT- NECESSITY OF OPERATING EAST CONTAINER TERMINAL BY SRI LANKA PORTS AUTHORITY submitted by the Engineers Association of Sri Lanka Ports Authority on the Development of East Container Terminal (ECT) in the Port of Colombo. 2020

 

Eng. R.P.P. Krishantha

BSc Eng.(UoM), MEng. (UoM), MIE (SL) C.Eng.
President
Engineers Association of Sri Lanka Ports Authority