COLOMBO (Reuters) - China Communication Construction Company (CCCC) has dropped its claim against the Sri Lankan government for $143 million in compensation for delaying the $1.4 billion Colombo Port City development, in return for getting additional land for the project, the government said on Tuesday.
The news completes a U-turn on the Port City project on Colombo's new waterfront by President Maithripala Sirisena's administration, which had suspended the project in March last year because of concerns over the award of the contract to the Chinese construction giant by the previous government.
It will now award CCCC a minimum of 110 hectares of land out of a total 269 hectares that have been reclaimed from the sea in the commercial heart of the capital adjacent to the main port and the historic Galle Face Green.
The project is managed locally by CHEC Port City Colombo (Pvt) Ltd, which signed an agreement with the Sri Lanka Ports Authority (SLPA) in September 2014 in the presence of Chinese President Xi Jinping.
"The project company has agreed to withdraw all compensation claims for losses due to suspension of the project," the government said in a document seen by Reuters.
However, the government has stuck to its decision not to grant the freehold on 20 hectares of land to the Chinese firm, the cabinet document said, as India has strongly protested against the move. Instead, all the land will be held on a 99-year lease, a cabinet document said.
India, which uses the adjoining Colombo port to tranship 80 percent of its imports and exports, has raised strong concerns over granting freehold land to China.
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Since coming to power at the start of 2015, President Sirisena's administration has suspended most Chinese-backed infrastructure projects that, it says, were overpriced and financed on onerous terms harmful to the national interest.
Soon after the project's suspension CCCC estimated it was losing more than $380,000 a day as a result and had sought $143 million in compensation as of March 23, another document submitted to the cabinet showed.
(Reporting by Shihar Aneez and Ranga Sirilal; Editing by Douglas Busvine, Greg Mahlich)