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Magampura Port: Facts and Fallacies

The Sri Lanka Ports Authority (SLPA), in a statement says that facts have been misinterpreted and distorted by certain groups to mislead the public on the Magampura Port development project. The following is the full text of the statement:
In the recent past, there have been several allegations on Magampura Mahinda Rajapaksa Port. These allegations seemed to have based on the following concerns related to one another.

1. Insufficiency of the depth of the harbour
2. Inability to obtain an insurance for the port
3. Non-availability of a clear map
4. Non-arrival of ships to the port
5. Presence of huge irremovable rock mass at harbor mouth
6. Dangers to the structures and the civil life of Hambantota town in the event of blasting the said rock mass
7. Requirement of large additional loan to remove the rock
8. Risk of going waste millions of dollars

Time to time these allegations were either appeared in newspapers and electronic media or spread across the society as rumours. The real facts on the cost of the project, including additional costs experiencing due to quantity variations of hard and soft material in the basin and the channel has been revealed by Dr. Priyath B. Wickrama, Chairman, Sri Lanka ports Authority in various forums. However, these facts have been either misinterpreted by some personnel or misled to some wrong conclusions. This statement aims to clear up those concerns and to understand the factual situation of the Magampura port.

Insufficiency of the depth of the harbour
Magampura Mahinda Rajapaksa Port basin, having a depth of 17m is sufficient to cater most recently built ships targeted at the Port. The length, width and draft of the largest container ship operational in 2011 (Emma Maersk) are 397 m, 56 m and 15.5 m respectively. Serious allegation was on the insufficiency of the habour depth despite the above and some articles even had reported that the minimum depth of a commercial harbour should be 35m, while the maximum depth of Colombo harbour at present is 15m and harbours having depth of 35m are not in existence. Therefore, there is no reasons for concern on insufficiency of the depth.

Insurance of the Port and Port Map
Ports are not insured as a whole though various plants or machinery may be insured against various perils. Colombo Port has never obtained an insurance of that nature and ships in international voyage on the other hand need to be insured against various risks. Ships entering Colombo Port were imposed an additional insurance cover or subject to high insurance premiums at the time Sri Lanka faced serious security threats from LTTE. However, it is important to have Admiralty Chart indicating the location and hydrographical data creating an identity for the port. These charts are published by UK Hydrographer of the Navy. The National Aquatic Resources Research and Development Agency (NARA) liaises with UK Hydrographer of the Navy and get these new charts or annual updates. NARA is in the process of collecting the relevant data from the Ports Authority for sending to UK Hydrographer of the Navy on completion of the balance 0.4% of dredging work at the channel. However, even without published Admiralty chart six international ships have already called the Magampura port.

Presence of irremovable huge Rock
The presence of huge irremovable rock mass at the habour mouth is far beyond the truth. The construction works of Magampura Mahinda Rajapaksa Port commenced in January 2008 as a green field port in the vicinity of Karagam Lewaya. Excavation and redging work comprised two major components, Basin excavation and Channel dredging. The Basin is separated by the Channel from the A2 road around the 235 km post. Both excavating the Basin in the Karagam Lewaya and dredging works of Channel from the sea side, approximately 1km away from the Basin, commenced simultaneously. From then onwards both activities moved ahead in parallel independent to each other.

However, dredging work had to be stopped during the periods of monsoons. Dredging comprised both with Soft material as well as Hard material requiring blasting. By the ceremonial opening on 18th November 2011, excavation of the Basin had been fully completed (up to -17m) together with most of the land side construction work, while an area of approximately 10,000 m2 (100m by 100m area) in the Channel was left without dredging to the intended depth. The balance area of the channel had been dredged up to the intended depth, -16m, at the time. However, it was decided to ceremonially open the port on this date with a channel dredging progress of 96%, this being an auspicious day for such an opening.

Balance dredging work continued after the opening day and happened to stop in May 2011 due to the monsoon. The balance amount of dredging is about 0.4% (50 m x 70 m) of the total Channel dredging volume and this work would be commenced after the monsoon at the end of September and is expected to be completed within 45 days. Therefore, the dredging remaining at present (including rock requiring blasting) is not an irremovable rock mass but the continuation of similar work performed during the construction.

Additional loan for removal of rock
The total estimated cost of the project has shown a substantial increase due to several reasons including increase of hard material quantities both in basin and channel, increase of price adjustment amounts compensating the changes in the prices of material and labour. The basin excavation and channel dredging contribute approximately 40% of the project cost.
Hard and soft material quantities had been calculated based on 31 boreholes in the basin area and 6 boreholes in the channel area initially on preparation of the BOQ. This was based on the available data at the time of getting the offer. The accurate quantities may either be lower or higher. Due to this uncertainty, it had been decided to make the payments on measure and pay basis on agreed rates, while the BOQ quantity only provides initial guidance.

On implementing the work more detailed soil investigations were done and the quantities of hard material were higher than the initial estimated values for both basin and the channel. Since the rates for excavating/ dredging hard material is higher than the soft material the estimated cost got increased. The relevant increases in the hard material quantities are approximately 45% and 53% in the basin and channel respectively. This increase had caused US $ 13.56 million in the basin excavation cost and US $ 31.02 million in the channel dredging cost. This increase costs are based on original rates and more accurate quantities. Soft material quantities have accordingly been decreased and therefore the net increase in both excavation and dredging is US $ 40.66 million.
The prices of the material, labour and equipment charges can change over the contract period. However, the contractor’s rate is based on prices prevailing at the time of bidding. These changes are compensated in price according to an agreed international formula based on price indices published by the Government. The money required for this price adjustment payments were higher than the estimated original values. Therefore, an additional estimated amount of US $ 87.7 million is required for payment of said price adjustments.
Sri Lanka Ports Authority is following the due procedure to get an additional loan in view of covering up the above-mentioned additional expenditure. This loan would also contain costs in procuring some operational equipment including gantry cranes, electromechanical works at the oil terminal, and construction of some utility building and accommodating changes of designs of the breakwater. Accordingly the total estimated amount of additional loan is US $ 147.9 million.

No Ships - A Waste of Money
Colombo port has been conceptually in operation since the 15th Century with a string of anchoring vessels approximately at the present location. However, it had taken hundreds of years to transform this port facility into its present status. On the contrary Magampura port, a green field brand new port, with berths of -17m depth and 1,200m length, substantial backup yards and utility buildings including fourteen storied administration building has been constructed within 39 months. Cranes will be installed within 12 months. Marketing a port without constructing it is hardly possible as the construction takes a longer time and there could be many reasons hindering construction even with the best plans on boards. For example, both Hambantota and Colombo South Port was discussed for years without commencing any construction work.
Having constructed Magampura Port with the above facilities, it will take some time to familiarize among the world of shipping and ports even with the strenuous marketing in position. Unlike small business ventures, ports will not be fully operational just after opening and this aspect was taken into account. As Sri Lanka Ports Authority has taken some initiative in this respect long before and this port will be expected to become a busier port within a short time.

Sri Lanka Ports Authority has floated a Request For Proposal (RFP) scheme and attracted 27 entrepreneurs interested in developing business ventures within the port. Out of them 14 have been identified and short listed. The Cabinet of Ministers has already been given approval for three business ventures, investment amounting to more than US $ 600 million. On signing the agreement with these investors they will start constructing their factories and so on which will also create business in terms of project cargo initially. The balance short listed investments will also be considered gradually.
A ship repair yard is also planned to be established within the port premises in an area of 48 hectares of land. As the demand of the investors is high, another RFP will also be planned to float soon.