Japanese firm claims damages of Rs 5.8bn from Sri Lanka after LRT deal scrapped

A Japan-based firm involved in a scrapped light rail transit project had claimed 5,896 million rupees from Sri Lanka, the Auditor General revealed.

Sri Lanka suddenly scrapped a LRT project financed by Japan on which several years of ground work has been done following an administration change in 2020, triggering controversy.

Japan International Co-operation which has financed Sri Lanka’s ports and other infrastructure is known for conducting detailed feasibility studies before committing a project.

By the time the project was cancelled in 2020, a consultancy contract had already been awarded and some funds disbursed.

Sri Lanka’s Auditor General said after loan agreement number 2019011 linked to the LRT was scrapped following a policy decision, a consultancy contract was terminated.

“..[T]he relevant consultancy firm had made a claim of Rs5,896 million for losses and damages,” the AG said after auditing the government accounts.

“Nevertheless it had not been disclosed in the financial statements of the government.”

Sri Lanka had signed a 130 million dollar loan with the consultancy, an official said at the time.

The damage claim was among several matters on which the 2020 financial statements were qualified by the auditor general.

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