Govt. resumes Outer Circular Highway phase 3 but reduces scope

The Ministry of Highways and Investment Promotion yesterday announced that the Outer Circular Highway Phase 3 was back on track, though on a reduced scope, saving cost and being more realistic.

The decision was conveyed though the following statement.

On 31 January 2013 the Mahinda Rajapaksa Government gave its approval to award the contract for the construction of the Outer Circular Highway phase 3 to the Metallurgical Corporation of China Ltd. 

On 16 September 2014 the Government signed a loan agreement with the Exim Bank (Export Import Bank of China) for Rs. 66.7 billion. 

Upon assuming office within the new Government in 2015, the Minister of Highways and Investment Promotion, Kabir Hashim, appointed a three-member committee, comprising the Ministry Secretary, Mr. Faiz Mohideen (former Deputy Secretary to the Treasury) and Mr. M B S Fernando (former Chairman of the RDA), to review the project.

The committee, considering the expert opinion of a review panel appointed by the University of Moratuwa, found that the project under its current cost was economically unfeasible. On the advice of the review committee, Minister Hashim ordered that the scope of work on OCH 3 be reduced. Under the new scope the Ministry will reduce the cost of work by approximately Rs. 24 billion (a 30% reduction from the original cost), this will ensure the Ministry eliminates any financial waste. 

Certain media organisations and members of the opposition have inaccurately claimed that the Minister has reduced the size of the highway from six (6) lanes to four (4) lanes and thereby has reduced the cost.

Under the Mahinda Rajapaksa government OCH 3 was to be a four (4) lane highway, with the provision to expand to six (6) lanes in 2027.

The plan to expand OCH 3 to six (6) lanes was based on traffic projection reports which have been found to have been exaggerated during the initial planning stages. According to the traffic forecasts prepared during the former regime, traffic was expected to increase by 14% on average per annum from 2017-2022 and by 10% on average per annum from 2022-2027. 

However, vehicle registration during that same period was expected to only increase by 6% on average per annum. As such the review committee is of the opinion that a six (6) lane highway would be underutilised and provisions for an expansion are an unnecessary accumulation of cost.

The removal of the provision to expand to six (6) lanes will ensure a reduction in the cost of the construction of expensive structures such as the viaducts and embankments. 

The committee is also of the opinion that the construction material, which was to be provided by the contractor, is between 20%-30% above market rate. 

Due to the diplomatic, legal and time constraints (it would take between 2-3 years for a new project to be initiated) the Minister has decided to go ahead with the project on a reduced scope. 

Due to contractual obligations signed by the former regime, the Government will obtain the loan of Rs. 66.7 billion from the Exim Bank. The savings accumulated from the reduction of the cost of this project would be redistributed into the upcoming road projects.