Questions over SLLRDC's move to buy sea sand dredger costing Rs. 6.5bn

The Sri Lanka Land Reclamation and Development Corporation ( SLLRDC) is to sink billions of rupees into buying a ‘trailing suction hopper dredger’ ( TSHD)-- the same type of vessel that was used by the builders of Colombo Port City— to dredge sea sand for the local construction industry.

The TSHD is expected to cost around Rs 6.5bn, according to SLLRDC Chairman Roshan Gunawardena. But online reports show there are significant additional costs arising from deploying a hopper dredger.

There will be an international build-and-supply tender for which documents are now being drawn up, Mr Gunawardena said. Cabinet approval was granted on the basis that the demand for treated offshore sea sand was rising owing to a scarcity of river sand. The SLLRDC owns vast areas of the seabed and has been intermittently hiring TSHDs to dredge sand which is then pumped via a pipeline to a stockpile site in Kerawalapitiya where it is cleaned.

In his memorandum to Cabinet, Mega pol is and Western Development Minister Patali Champika Ranawaka says this now caters to less than ten percent of the total sand requirement of the construction industry. He justifies the purchase of a hopper dredger saying it will help meet “the high demand for sand anticipated in the future with the development of the construction industry”.

Mr Gunawardena said the SLLRDC hired a hopper dredger through international tender once in two years or so. One contract was typically priced at around Rs 4bn and usually yielded around three to four million cubic metres of sand. The numbers could not be independently verified as the Chairman refused requests for invoices.

He would also not disclose how much SLLRDC earned from the sand thus obtained.

Questions are also being raised internally at SLLRDC over why such a huge sum—the money will be drawn from the Corporation and banks— must be spent on a high capacity dredging equipment when hiring it has worked equally well. There were allegations that the institution “got its priorities wrong” and had set its sights on “a commission from the purchase”.

The SLLRDC does sell sand to the local construction industry but this is not among its main objectives. Those include preparing and executing development schemes in reclamation and development areas; formulating and executing any scheme of work in connection with infrastructure development of such areas; constructing harbours and anchorage and undertaking work in the field of irrigation; causing road building and of works for provision of public services in such areas including surface water drainage, sewage system and sewage disposal and water supply.

The Corporation is also tasked with building, engineering and construction work including the manufacture of any material required for such building, engineering or construction work; and providing advisory and consultancy services on engineering and technological matters, among others.

But Mr Gunawardena accepted that some in SLLRDC supported the initiative while some agitated against it. He dismissed these concerns saying they were the sign of a healthy democracy.

“Anybody can make any allegations,” he said. “Who cares? That is my response.” He also observed that such aspersions were being cast even before the tender was floated and assumed that parties with business interest were behind the criticisms being levelled.

“Our Corporation spends nearly US$ 20mn for every contract and we are speaking of procuring a dredger worth around US$ 40mn,” he said. ( Again, the numbers could not be immediately verified). It was better to own the vessel and use it for 25 years rather than pay Rs 4bn in foreign exchange once in two or three years to a foreign contractor.

The Chairman admitted, however, that “there may be some other expenses” that went into acquiring a dredger. Internet research established that there are other expenses. These include crew and labour, fuel and lubricants, repairs and maintenance, depreciation, insurance and bonding, says a paper on ‘Cost Estimation and production Evaluation for Hopper Dredgers’.

The ship will need a crew that includes usual deck and engineering personnel as well as specialist dredge operators. Fuel costs are deemed “another significant portion of the operating budget”. It will require routine maintenance and running repairs as well as major repairs and overhaul. “Along with the monetary cost of repairs and maintenance, a significant amount of delay can be experienced due to these problems and other inefficiencies,” the paper states.

Depreciation also accounts for the operator’s cost of purchasing the dredger with the capital cost of the vessel being paid off over its service life.

The TSHD is “very high capacity dredging equipment”, said a coastal engineer who did not wish to be named. “And whether or not it is profitable to buy one very much depends on the projects at hand and market demand.”

The sand extracted via a hopper dredger also has more than 50 percent water content, he said, questioning whether the SLLRDC had sufficient space for storage and treatment, should it significantly expand quantities.

A proper process involves washing the sand thoroughly with fresh water to avoid corrosion when used in concreting, sending it through several “ponds” in stages. It does not mean merely allowing it to be washed in the rain as the Corporation did previously because this causes the salt to sink to the bottom layer of sand which then becomes highly saline.

“It also depends on demand,” the engineer pointed out. “There is no point buying a dredger and extracting small quantities because the capital investment and operation costs are high, just as efficiency is high.”

A spokesman for the construction industry also asked how many months of the year the dredger would be put to use as it required fair weather—but the monsoons cause rough seas for five to six months.

“There is a demand for sea sand and it will increase,” admitted Nissanka Wijeratne, Secretary-General and Chief Executive Officer of the Chamber of Construction Industry of Sri Lanka. “The total annual sand requirement for the construction sector is about 21mn cubes but we can’t get more than 10- 12mn cubes from the river system. The lower the better owing to environmental concerns.”

Around 10mn cubes, therefore, have to be obtained from other sources. This includes crushed rock but, again, there are environmental issues. The least damaging option was sea sand mined at depth of about 20 metres and is properly washed and sieved.

“I cannot say whether investing in a dredger is feasible,” Mr Wijeratne said. “The demand can be handled in about two to three months and you anyway can’t do any pumping during the monsoons. Most of the year, there are enough dredgers around the place to hire. They charge per cube. We got the prices some time back and the pumping rate was not bad.”

He also speculated whether the SLLRDC, if it intended to one day rent out its own dredger, had contacts in the international market to do so. And he, too, raised the question of onshore storage capacity.

“They store and clean at Kerawalapitiya at present and it is sufficient for prevailing quantities,” he said. “Should supplies increase, you need a large land area close to the sea with a source of fresh water. If you are industrious enough, you can sell sand to the international market. I have my doubts that the State sector can undertake such a task. The private sector might.”

Mr Gunawardena confirmed that the dredger could only be used off-monsoon season. He could not say how many months of the year it would be deployed because weather patterns were now unpredictable. He insisted that a cost-benefit analysis had been done. And that there was “ample space” in Kerawalapitiya.

Meanwhile, Colombo Dockyard PLC (CDL), a listed company in which 49 percent of shares is held by Government institutions and Sri Lankan private sector, has indicated that it would like to participate in the tender but could be precluded from doing so by a clause that requires the bidders to have prior experience in building a hopper dredger.

The company, whose majority shareholder is Onomichi Dockyard Japan, in June delivered a cable laying vessel it built for Kokusai Cable Ship Co. Ltd. (KCS) Japan despite never having manufactured such a ship before. During a recent meeting at Prime Minister Ranil Wickremesinghe’s office, Megapolis and Western Development Ministry Secretary Nihal Rupasinghe indicated that CDL must be afforded the opportunity to bid for the contract.

Mr Wickremesinghe then instructed the parties at the meeting to inform SLLRDC to call for tenders in a manner that also allows CDL to participate. Mr Gunawardena reiterated that the documents were still in drafting stage.