MegaProject 1274: Sri Lankan government approves US$800 million rail PPP
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The Sri Lankan Cabinet has approved the launching of tenders for the construction of new railways in the Hambantota district of the country on a build-operate-transfer (BOT) basis. The estimated project cost is US$800 million.
The railways would connect Beliatta to Hambantota, a coastal town with an international port; Kataragama, a pilgrimage destination sacred to Buddhist, Hindu, Muslim and the indigenous Vedda people; and Mattala airport.
The successful bidder would be required to construct nearly 100km of railway, as well as install the signalling systems and operate the rail services. It could decide on the fare to be levied, deploy its own locomotives and carriages for passenger or cargo transportation and levy charges for the state-sector trains entering the area and using the services.
The project may also include commercial activities outside of the railway itself, such as developing restaurants, cargo storage facilities and shopping complexes in the surrounding areas.
The Transport Ministry Secretary has stated that the length of the BOT contract will be around 40 years.
The Cabinet's approval allows the project to proceed to the feasibility study stage, which the government has agreed to fund.
There is no currently no rail access to or within the district. Sri Lanka Railways' Coastal Line links Colombo, the national capital, with Matara, capital of the district that borders Hambantota. In 2006, construction work started on an extension from Matara to Kataragama. The section to Beliatta is scheduled to open in October 2018, however there is still no completion date for the full line to Kataragama.
Thus, this project would provide crucial transport links to Hambantota and its key economic and tourist destinations.
However, it is already facing opposition. A former Transport Ministry Secretary has publicly criticised the government's approval, citing the lack of evidence from around the world of the success of rail privatisation. This serves as an important reminder that government approval does not solidify the future of a project - there are many obstacles to overcome before a tender can be launched.