A Study on profitability of port of Colombo

Abstract

In construction projects of a gigantic scale, the biggest and main problem to surmount is the provision of capital. If ready cash not in hand, then next option is to go for a long term or short term loan if no private investors or shares were issued to find equity. Last one and half decades Sri Lanka Ports Authority (SLPA) has borrowed nearly 550 Million US$ to develop the Port of Colombo mainly by container terminals, roads etc. The money has been borrowed from Overseas Economic Cooperation Fund (OECF) through Sri Lanka Government. The first loan was in 1980 and the amount of loan is continuously increasing since. And the repayment too is proportionality but dramatically uphill. This study is mainly focused to ascertain the impact of these loans repayment components to Port financial structure, with a view of forecasting the future profitability. In case of Sri Lanka Ports and Harbor field is very narrow and it is much specified comparatively to the others such as roads, electricity, irrigation etc. Hence, a broad introduction of Port Revenues, Port tariff etc were discussed prior to reach to analysis part of this report. Owing to the fact that SLPA as a body composed of not only Colombo but Galle and Trincomalee as well, profit and losses at all these Ports has to be equitably shared. As only Port of Colombo is running at a profit, the other two Ports are more or less parasites sucking off Port of Colombo. Hence, according to a necessity SLPA as a whole or Port of Colombo and other two ports data also analyzed. Among the three ports mentioned above, main revenue earning component of the Port of. Colombo is cargo handling which container traffic is the major one. But, present capacity of the Port of Colombo will be saturated in the year 2001. If no further development take place before the year 2001, then the stagnating revenue, and increasing fixed cost and variable cost will divert the financial situation to a crisis. New development projects to the Port of Colombo or new developments to Galle and or Trincomalle are the most important factors to be considered at this stage, to over come the said financial crisis in future.