Sri Lanka Ports Authority (SLPA), controlled by the Sri Lankan government, is in talks with Indian companies to form consortiums to invest in Indian port projects, said people familiar with the development, reported The Economic Times.

Some officials of the Sri Lankan port authority say the company has already identified projects to invest in India and is looking to bid for a number of upcoming projects.

This is also the first time that Sri Lanka has shown willingness to invest in Indian projects."We are in talks with a few Indian companies to partner us for investing in projects in India.’’

We are interested in many of the port projects that the Indian government is planning such as the fourth container terminal at JNPT and others," SLPA's chairman Priyath Wickrama told ET.

Industry experts and shipping ministry officials, however, fear that getting security clearance for the projects will be tough and there could be an element of suspicion that Sri Lanka might try to hamper the growth of the Indian port sector.

But, if they manage to bid for projects, they will have to receive clearance from various ministries and that could be a challenge, especially since China is the biggest investor in port projects in Sri Lanka," said a senior official at the ministry of shipping.

Industry experts say that the move to invest in India should not be seen as something positive since Sri Lanka remains India's biggest competitor in the Indian sub-continent region.

"The new transshipment hub in Cochin and Vizhinjam Port are seen as direct competition to Colombo Port which has been expanding largely due to the cargo from India.

In such a scenario, there's no valid reason for Sri Lanka to invest in Indian port projects as it would only hamper their projects.

There could be an ulterior motive behind their intention," said Hemant Bhattbhatt, senior director at Deloitte Touche Tohmatsu.

Experts also point to the recent developments at JNPT, where the Singapore government offered to build a fourth container terminal and eventually exited the project causing delay at the port, but in the process, helped cargo flow to Singapore port due to congestion at the Indian ports.

"Much like the PSA-ABG deal at JNPT which cost the port time in developing the project and which is now forcing it to go for a re-bid, the intention of Sri Lanka ports needs to be ascertained clearly if they were to bid for projects in India," added BhattBhatt.

But the move to invest in port projects in India by the war-torn country also comes as a wake-up call for the shipping ministry, which has been struggling to create India Ports, a venture to invest in port projects outside the country.

According to the existing policy, the government allows 100 percent FDI in the port sector, but has barred Chinese companies from bidding for port projects in the country.

China, meanwhile, has invested more than US$50 billion in developing a number of port projects in Sri Lanka alone and is also developing port projects in Pakistan, Myanmar and Bangladesh.

China's interest in Sri Lanka could be the biggest challenge while seeking security clearance in India.

Sri Lanka's port sector, which remains an object of envy for Indian ports after the Colombo port emerged as the largest transhipment hub in the Southeast Asian region, was earlier looking for Indian companies to invest in Sri Lanka.

But after India decided to stay away from bidding for a number of port projects in the country, Chinese companies pledged investments to the tune of $50 billion spread over the next 10-15 years.

India is currently Sri Lanka's biggest trading partner, but China is its biggest donor.

The Sri Lankan port authority also played down the competition arising from India's first transhipment hub in Cochin, saying the Vallarpadam terminal is not likely to attract much cargo as the performance and cost effectiveness of the Colombo port will pose the biggest challenge and shippers will prefer to call at Colombo as it lies on the mainline shipping route.

"We do not think of Vallarpadam as a threat at all. There will not be any change in the cargo movement pattern," said Wickrama.

Source: Cargonews Asia