Expert Speak Raisina Debates
Published on Nov 05, 2016
With Indian Government reiterating commitment to facilitate investments in Sri Lanka and Maldives, the need for making case-studies of both
Investment lessons for India, from Sri Lanka & Maldives

Two developments, both in the southern neighbourhood, and questions may now once again be raised about the advisability and feasibility of the Government of India making big commercial investments in the region, either through public sector undertakings (PSU) and/or ‘facilitating’ such investments by the booming private sector in the country. In a way, it may be time the Government reviewed these cases and formulated a check-list for the self and also Indian corporate keen on making such investments, still.

One such development relates to the Sri Lankan Government notifying the nation’s Supreme Court about the near-unilateral decision to cancel the India-aided coal power-plant in eastern Sampur, a Tamil area. The National Thermal Power Corporation (NTPC) was tasked with working on the project as a joint venture with Sri Lanka’s Government-owned Ceylon Electricity Corporation (CEC).

Possibly conceived as a competitor to China-funded Norchcholai project, the Sampur scheme never really took off. Even as the ‘ethnic war’ was beginning to wind up, the eastern Tamils were identified as the core and immediate beneficiaries. Yet, the proposal met with a lot of resistance from the local Tamils over allegations that their lands were being taken away when others could have been found in the same region.

The then Rajapaksa regime too would move one step forward and two, if not three steps backward, on the Indian project. It would use the Power Ministry and at times the Attorney-General’s Office advising on documentation to raise queries and/or revisit aspects that India had clarified any number of times. At times, Sri Lanka would forward a repeat-query ahead of a consultation meeting, and record that the Indian response was ‘still’ awaited before finalising the agreement.

At the same time, China’s fast-tracked Norchcholai project went on stream without delays. It’s another matter that Norchcholai would continue to face never-ending teething troubles, which have continued to date, raising questions about the quality of Chinese technology and projects within Sri Lanka.

< style="color: #163449;">Right message

Recently, the ‘India-friendly’ reforms government of President Maihitirpala Sirisena and Prime Minister Ranil Wickremesinghe have decided to cancel the Sampur project, citing environmental concerns, purportedly attaching to coal-fired power-plants. ‘Green protests’ on Sampur had been flagged almost from day one, but India had sought to disprove them all.

More also, India also persisted with the proposal, if only to send out the ‘right message’ to all stake-holders in Sri Lanka. Having waited for over a decade even to get the project proposal off the ground, India now seems to have developed a weak-knee, whatever the benefit and/or consequences.

At the same time, Sri Lanka has also announced, obviously in consultation with India, a fresh decision to replace the same with a gas-based project. This would now involve going back to the drawing-board, sourcing gas and fixing transportation methods and routes, and thus starting almost from the scratch. It’s going to take time and a lot more of Indian effort.

Almost simultaneously, another forgotten proposal for under-water power-transfer from India to Sri Lanka has also been revived inside Sri Lanka. It’s again a pending proposal from the Manmohan Singh era, involving first the transfer of electricity from Sri Lanka to India in the interim, and in the reverse direction, from 2017 or so.

Nothing came of it, also because of anticipated opposition to the scheme from Tamil Nadu, which had to be the nodal-point in India, owing to the ethnic issue and fishers’ problems. It’s anybody’s guess if Sri Lanka continued to treat this and also the idea of an India-aided nuclear power-plant in that country as a ‘diversionary tactics’, or as additional sources for meeting the nation’s ever-increasing energy needs against costs.

< style="color: #163449;">‘No sovereign crisis’

In the second development that had covered media space in India in a big way through 2011, the Singapore-based arbitration tribunal has awarded GMR $ 250-270 million in compensation for the cancelled Maldivian construction and concession contract for the Male airport. The Maldives Government of President Abdulla Yameen has cited the lower figure, as flowing from the arbitration award while GMR has put the same higher.

The true figure lies in between, but is far less than the $ 1.4-billion originally claimed by GMR, but reduced to $ 803 million later on. The  Government has since cited the arbitration award to justify the cancellation, attributing it to the prevailing political circumstances in the country. It has also contested the Opposition Maldivian Democratic Party’s (MDP) claims of an impending ‘sovereign crisis’ against GMR’s original claims, after the party-led Government of President Mohammed Nasheed had struck the deal in the first place.

Independent of these aberrations, Indian PSUs and Indian private investors have a lot of good things going on in the neighbourhood, barring of course Pakistan. Yet, there are lessons to be learnt from India’s Sri Lankan and Maldivian experience – the first involving Governmental agencies on both sides, and the other a major Indian private sector.

The Sampur project fell on bad times especially after bilateral relations cooled in the months and years after the decisive end to the ‘ethnic war’ in Sri Lanka, when the absence of real vibes, if any, in the Rajapaksa-Singh combo, stood out more than national commonalities and neighbourhood realities. If the change of Governments in the two countries since was expected to clear the deck, the reverse is the truth now.

Looked from a purely political perspective, a quieter Sri Lanka under the Maithiri-Ranil leadership has done with the stronger Modi Government in India, what the ‘strong-arm’ Rajapaksa could not achieve with a seemingly ‘weak’ Manmohan Singh. It holds true even in near-strategic terms, after Sri Lanka stalled the China-funded Colombo Port City project, which Ranil had publicly committed to cancelling if elected to power, but has cleared since, though with certain/substantial modifications.

< style="color: #163449;">Direct stake-holder?

On the GMR front, despite the off-again-on-again shifting sands of bilateral relations between Maldives and India, for no fault of the Modi Government and entirely owing to the domestic politics in the Indian Ocean archipelago, there are lessons for Indian investors to learn. Almost from the start, the Singh Government seemed to have been confused if it was not a direct stake-holder but only a facilitator, but was making all claims of a direct investor, politically.

If this was a no-no, not only to the political Opposition in Maldives but also to the larger establishment outside of the ruling MDP – or, sections thereof – GMR, almost from the start took wrong decisions, and enforced them even more wrongly. If Maldives after the MDP Government had left felt wronged, there was a case, even if not justification for the same. It’s another matter even if MDP’s Nasheed had returned to power in 2013 presidential polls, it would have found it extremely difficult to restore GMR.

Whatever be the other controversies, President Yameen has since stuck to his promise to pay GMR the due compensation. He had made the promise to PM Singh during his maiden overseas visit to India, after taking over power. The Maldivian Government may have also made a point, when after the arbitration award, official spokesmen have said that the Male airport has made massive reserves after ‘nationalisation’ in 2012, and thus they had enough and more funds to make the compensation payment without strain.

It’s thus that Sri Lanka’s Sampur and Maldives’ airport deals provide details in contrast for the Indian Government and investors, but with common links that are all too visible. With the Indian Government reiterating its commitment to facilitate Indian private sector investments in Sri Lanka in a big way, there is an ever-greater need for making case-studies of both, before drawing up critical guidelines and crucial decisions. Maldives, despite a thaw in bilateral relations, cannot be ignored, either.

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