India plans power project in Sri Lanka after China’s shelved

India has agreed to set up power projects on northern Sri Lankan islands in a deal seen as a strategic victory in its competition with China for influence in the Indian Ocean

Sri Lanka Economy (Copyright 2022 The Associated Press. All rights reserved)

India has signed an agreement to set up hybrid power projects on northern Sri Lankan islands in a deal seen as a strategic victory in its competition with China for influence in the Indian Ocean.

India’s External Affairs Minister Subrahmanyam Jaishankar, who is in Colombo for bilateral meetings, witnessed the signing, along with Sri Lankan Foreign Minister Gamini Peiris, the Indian embassy said Tuesday.

In December, China announced its own project to build power plants on three Sri Lankan islands was suspended due to security concerns involving a “third party.”

An Indian official said Tuesday 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 on the projects weren't available.

India considers Sri Lanka, just across the narrow Palk Strait off India's southeastern coast, to be in it sphere of influence, while the island nation in the middle of a key sea route connecting the east and west, also is important to China’s ambitious “One Belt One Road” global infrastructure initiative.

“It is kind of substantial victory for India,” said Lynn Ockersz a senior journalist and foreign relations analyst in Sri Lanka.

“Overall it will be in a great position to influence Sri Lanka when it comes to policy issues affecting India,” he said.

Sri Lanka BIMSTEC (Copyright 2022 The Associated Press. All rights reserved)

Had the Chinese power plant project been realized, it would have placed China next to India’s southern coast. India and China already have running border disputes in other regions.

Jaishankar is also taking part in the BIMSTEC summit, a meeting of Bay of Bengal nations Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka and Thailand for economic cooperation.

The other agreements India signed include providing a maritime rescue coordination center and building fisheries harbors in Sri Lanka.

The agreements come amid Sri Lanka's worst economic crisis in recent memory with shortages of medicine, fuel, and milk power and daily power outages lasting for hours.

Sri Lanka has approached both India and China for help. India provided a $1 billion credit line to buy essentials following a previous $500 billion to buy fuel. China is considering a request for a $2.5 billion economic assistance from Sri Lanka.

Infrastructure projects that were built on Chinese loans but don't make money are blamed for its debt crisis. Sri Lanka's foreign reserves are dwindling but it has to repay $7 billion in foreign debts this year.

China has been non-committal to a request for debt restructuring.

Beijing has invested billions of dollars in building a sea port, airport, roads and a port city on reclaimed land near Colombo harbor which Sri Lanka’s government aims to develop into a financial city.

Sri Lanka’s government previously scrapped a plan to allow China outright ownership to land on the Colombo Port City and gave 62 hectares (153 acres) on a 99-year lease.