LRT project termination losses exceed Rs 5.9 Bn – Audit report

December 8, 2022 at 1:31 PM

Sri Lanka has incurred a loss of Rs.5,977.64 million due to the unilateral termination of the Light Rail Transit System (LRT) project by the former government, the National Audit Office reported.

A report issued in November 2022 by the National Audit Office says the LRT project had been identified as the feasible rail-based transport mode for Colombo based on the matters proposed by the Ministry of Megapolis and Western Development.

The project had identified seven lines, covering several areas from RTS 1 to RTS 7 as Green, Yellow, Red, Purple, Pink, Olive, and Grey. 

Priority was given to RTS 4 line from Borella to Malabe and these two lines had been planned to be constructed under six construction packages. 

The Japan International Cooperation Agency had agreed to provide financial facilities under concessionary credit conditions and the Oriental Consultants Global Company Limited of Japan had agreed to provide consultancy services in collaboration with several other companies. 

The Japan International Cooperation Agency (JICA) had provided the facility of paying the said loan during a period of 40 years including a grace period of 12 years and the annual interest rate thereon was 0.1 per cent. 

However, the government of Gotabaya Rajapaksa had terminated the project in 2020 citing that this project was costly and not cost-effective.

The National Audit Office report says documentary evidence was not made available to the Audit to confirm on what basis this project, which was identified as effective according to the financial and economic analysis prepared by an international institution, was cancelled and considered an ineffective project. 

The report further pointed out that it was observed that the termination of the project could result in damaging the mutual trust and confidence in transactions between Japan and Sri Lanka. 

The National Audit Office says if action is not taken either to recommence the project by utilizing the results achieved from the expenditure of Rs.5,977 million already incurred or to commence an alternative project, it will become an uneconomic expenditure incurred by the Government of Sri Lanka. 

The claim of Rs.5,169 million relating to the loss of profit, requested by the Oriental Consultants Global Company Limited which is the main consultancy company, or the sum paid for the said request as well as the interest to be paid in the future on the delay of compensation or any other payment made, is definitely an uneconomic expenditure for the Government of Sri Lanka.

The report points out that Oriental Consultants Global Company Limited which is the consultancy company has refused to go to arbitration and if such a situation arises, the disadvantage of incurring a high cost for the Government of Sri Lanka is inevitable. 

Full English report ( page 103 onward) : (NewsWire)