Sri Lanka awaits experts report for India joint venture

The Sri Lankan government is awaiting a report from experts to finalise its joint venture with India, to run the loss-making Mattala airport in the island’s Southern Province.

Once the report is out, the proposal will be taken to the Cabinet for clearance, a top official in the Ministry of Transport and Civil Aviation told The Hindu.

According to the proposed joint venture between the Airports Authority of India and the Airport & Aviation Services in Sri Lanka, India will own a 70% stake and pump in $225 million to revamp and run the airport, while the Sri Lankan side will invest the balance amount. As per the draft agreement, fine-tuned over three formal rounds of negotiations in Colombo, India will operate the airport on a 40-year lease. “We need to revive this dying airport, which caused a massive loss of rupees 20 billion,” Minister of Civil Aviation Nimal Siripala de Silva told Parliament recently.

Getting here was not easy for either side, particularly with opposition forces, aligned to former President Mahinda Rajapaksa, staunchly opposing the deal that they claim amounts to the “sale of national assets” to foreigners. Ever since Mr. Rajapaksa built the airport in 2013, at an initial cost of about $200 million — coming primarily from an Export-Import Bank of China loan — the facility has been incurring huge losses and has made international headlines as the “world’s emptiest airport”. In June, Dubai’s flydubai became the last airline to pull out of Mattala, Sri Lanka’s second international airport.

Struggling to repay the $8 billion debt it owes China — mostly from loans taken by the Rajapaksa administration for infrastructure projects — the Sri Lankan government is trying to convert what it calls “white elephants” it inherited, into revenue generating projects.

“The Mattala joint venture will explore options like setting up a flying school, running a training academy, and re-routing air traffic, because the aim is to somehow make the facility commercially viable,” the top official said. However, those at the negotiating table know that it is no easy task.

With a current operational cost of LKR 250 million (roughly $1.56 million) per month, without a single flight, the airport offers little commercial logic. All the same, its proximity to Hambantota, less than 30 km away, where China holds a 70% stake in the massive port it helped build, and a lease spanning 99 years, appears to be reason enough from India’s strategic standpoint.

As part of its ambitious One Belt One Road initiative, China is investing heavily in the southern tip of the island — $600 million to make Hambantota port operational, in addition to the $1.12 billion from the sale of the port, to partly service the outstanding debt.

Meanwhile, India’s well-known strategic concerns here have fuelled opposition from some quarters, including the Rajapaksa camp that is trying to make a political comeback. “India only wants to take charge of the commercial aspects of the airport. They fully appreciate Sri Lanka’s sole responsibility in security matters and have not asked for any role in that,” the senior Civil Aviation Ministry official said.

According to sources in the Sri Lankan government, Colombo has sought a detailed business plan from New Delhi on how it plans to run the Mattala airport. New Delhi too is keen on firming up the deal. During his recent visit to the island, Foreign Secretary Vijay Gokhale urged Sri Lankan authorities to expedite India-assisted projects, including the Mattala airport.

Source: The Hindu

-Agencies