Abrupt cancellation of Light Rail Transit project has led to waste of Rs 10.6 bn: NAO

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By Lalith Chaminda and SK Kaluarachchi

The National Audit Office (NAO) has revealed that Rs. 10.6 billion was wasted due to the government’s decision to cancel the Light Rail Transit (LRT) project in 2020. By the time the government decided to cancel the project, various parties had spent the above mentioned sum, the NAO has said.

The project was funded by Japan International Cooperation Agency (JICA) and a number of consultants involved have tried to secure their unpaid project termination claims to avoid seeking international arbitration. However, Sri Lanka turned down their bills citing advice from Sri Lanka’s Attorney General’s Department.

The NAO said the estimated total cost of the project was 246,641 million Japanese Yen and out of total estimated cost JICA was to provide 200,215 million Japanese Yen or Rs. 286,839 million through six tranches scheduled during 2019- 2024.

Due to the termination of project activities, the consultancy firm had claimed USD 31.36 million. In order to negotiate that matter, a committee had been appointed by the Cabinet of Ministers on 23 February 2021.

“Due to the decision to suspend the project in the year under review, Rs. 102.73 million equivalent to Japan Yen 60.08 million paid as a Front End Fee, according to the loan agreement signed on 23 May 2019 on 0.2 per cent of total loan amount, was wasted.

“As a long-term solution for the heavy traffic congestion in Colombo, the Light Rail Transit Project commenced on 01 May 2017 under financial assistance of Japan. Accordingly, Rs. 5.54 billion ( Rs. 4,622.45 million from JICA funds and Rs. 923.18 million from Treasury) had been spent on that project by the end of the year 2020. As the project was expensive and not cost effective, it was informed through the Cabinet Decision, No.20/1450/312/002 dated 06 October 2020 that the project office to be closed and all the assets of the project to be handed over to the Ministry of Transport and Ministry of Urban Development and Housing. As such, the expenses incurred became fruitless.”

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