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The Hambantota Port Development Project looks set to proceed without any interruptions after the the Sri Lanka Ports Development Authority refuted recent media reports claiming the project is facing suspension due to a cash flow crisis, The Daily News reports.

Referring to news reports that have appeared over the last few days claiming that the government could suspend the Hambantota project due to the government's failure to pay the contractor its dues, the Ports Development Authority says these reports were based on a letter written to Ports and Aviation Minister Chamal Rajapaksa.

The letter, written by Q. L. Tang, Project Director of the China Harbour-Sinohydro Consortium is said to have highlighted certain difficulties that it had faced in proceeding with the project.

Media reports claimed that the government owed the consortium US$117 million for the work completed but was yet to make a payment despite a number of appeals.

Local newspaper The Sunday Leader said that in its letter to the Ports and Aviation Minister, the Consortium mentioned "we will be compelled to suspend work if the outstanding amount due to China Harbour is not made available to us by 30th September 2008."

Project Director Tang is understood to have written back to Rajapaksa this week stating that the Consortium's intention was only to draw his attention to the difficulties they were having in proceeding with the port development project.

“We did not have any intention to suspend work on the project. As you are aware, we commenced the work much prior to the release of initial payments and our present progress is well ahed of the schedule”, Tang stated in his letter to Minister Rajapaksa.

The Consortium is reported to have completed 100% of the mobilisation and preliminary works, 85 percent precast element construction, 85 percent cofferdam construction, 10 percent breakwater construction and 5 percent harbour basin excavation construction.

The project commenced on January 15th 2008 and is scheduled to be completed on April 15th 2011.

The new bunkering terminal at Hambantota is expected to provide a major boost to the Sri Lankan bunker market. The terminal will be designed to handle up to 500,000 metric tonnes of oil products a year. Depending on the requirement the terminal can be further expanded up to one million metric tonnes.

The entire port development project is expected to be completed in 15 years in four phases with the first phase alone costing close to US$450 million.