Colombo: In a deal seen as a strategic victory in its competition with China for influence in the Indian Ocean, India last week signed an agreement to set up hybrid power projects on northern Sri Lankan islands.
India's External affairs minister S Jaishankar, who was visiting Colombo, witnessed the signing along with former Sri Lankan foreign minister Gamini Peiris, the Indian embassy said.
In December, China had announced that it was suspending its own plan to build power plants on three Sri Lankan islands due to security concerns. An Indian official said that he couldn’t confirm if the plants in the new agreement are to be built on the same islands earmarked for the Chinese project. The power source and other details about the projects weren’t available.
India considers Sri Lanka, just across the narrow Palk Strait off India’s southeastern coast, to be within its sphere of influence. The island nation is in the middle of a key sea route connecting East and West and is important to China’s ambitious ‘One Belt One Road’ initiative. The cancelled Chinese power plant project would have been near India’s southern coast.
Sri Lanka is facing daunting problems with debt and is enduring its worst economic crisis in recent memory with shortages of medicine, fuel, fertilizer and milk power. Daily power outages are lasting for hours. The debt crisis partly stems from infrastructure projects that were financed with Chinese loans but are not making money. Sri Lanka’s foreign reserves are dwindling while it needs to repay $7 billion in foreign debts this year.
It has approached both India and China for help. India provided a $1 billion credit line to buy essentials and $500 billion to buy fuel. China is considering a request for $2. 5 billion in economic assistance but has been non-committal about restructuring billions in debt.
Sri Lanka's government previously scrapped a plan to allow China outright ownership to land on the Colombo Port City. It instead provided 62 hectares (153 acres) on a 99 -year lease.
