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LRT project termination losses surpass Rs 5.9 billion

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According to the National Audit Office, Sri Lanka suffered a loss of Rs. 5,977.64 million as a result of the previous administration’s unilateral discontinuation of the Light Rail Transit System (LRT) project.

According to a study from the National Audit Office published in November 2022, the LRT project was chosen as the most practicable rail-based transportation option for Colombo based on the suggestions made by the Ministry of Megapolis and Western Development.

Seven lines were chosen for the project, encompassing various regions from RTS 1 to RTS 7, in the colors green, yellow, red, purple, pink, olive, and grey

The RTS 4 line from Borella to Malabe received priority, and six construction packages were intended to be used to build these two lines.

The Japan International Cooperation Agency promised to offer financial resources with favorable credit terms, while the Japanese company Oriental Consultants Global Company Limited pledged to collaborate with numerous other businesses to offer consulting services.

The claimed loan might be repaid over a 40-year period, including a 12-year grace period, with a 0.1 percent annual interest rate supplied by the Japan International Cooperation Agency (JICA).

However, the Gotabaya Rajapaksa administration had canceled the project in 2020, stating that it was expensive and inefficient.

According to the National Audit Office report, there was no documentary evidence made available to the audit to confirm the grounds on which this project, which had been deemed effective by a financial and economic analysis done by a global institution, had been canceled and deemed an ineffective project.

The report also noted that it had been noted that the project’s termination might harm the mutual trust and confidence in business dealings between Japan and Sri Lanka.

According to the National Audit Office, if no action is made to either restart the project using the savings from the Rs. 5,977 million already spent or to start a different project, it will become an unprofitable expense for the Sri Lankan government.

For the Government of Sri Lanka, the claim for Rs. 5,169 million relating to the loss of profit, made by the primary consulting firm Oriental Consultants Global Company Limited, or the amount 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 unquestionably an uneconomic expenditure.

The study notes that the consulting firm, Oriental Consultants Global Company Limited, has declined to submit to arbitration, and if such a circumstance happens, the Government of Sri Lanka will unavoidably suffer the disadvantage of spending a substantial expense.

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