Expert Speak Raisina Debates
Published on Jun 05, 2024

The recent decision to award a wind power project to an Indian private sector player has sparked a wave of accusations in Sri Lanka, with claims that India is turning the country into a "virtual province".

Sri Lanka: A ‘virtual province’ or investment risk for India?

At a time when some Sri Lankan entities have moved the nation’s  Supreme Court, challenging a Cabinet decision to award a wind power project to an Indian private sector entity, some Colombo-based academics are seeing such investment initiatives aimed at finding a permanent solution to the island nation’s unmitigated economic woes, as an attempt to make their country a ‘virtual province’ of the larger northern neighbour. The petition in the Supreme Court was filed by the Wildlife and Nature Protection Society (WNPS) in the country which is one of the oldest environmental organisations in the world. At the receiving end is the Adani Green Energy Limited, India. Multiple issues, including energy pricing, have been flagged in other petitions before the Supreme Court. Given the judicial processes and proceedings, and also the presidential polls in September-October, possibly preceded by parliamentary elections, it could mean further delays. A clear-cut government decision, which will have to abide by the Supreme Court verdict, will thus depend on the outcome of the twin polls.  

The question, however, remains if by proposing massive investments in cash-strapped Sri Lanka, from both the Indian public and private sectors, New Delhi was seeking to make the southern neighbour a ‘virtual province’. Such a construct is flawed for multiple reasons. First and foremost, Sri Lanka is a sovereign nation and no other nation can interfere in its internal affairs, especially when the world has changed vastly since the end of the ‘Cold War’. Unfortunately, Sri Lankans have not changed their approaches and attitudes with such changes. This was also one of the major contributors to the economic crisis that gripped the country in 2022. 

The question, however, remains if by proposing massive investments in cash-strapped Sri Lanka, from both the Indian public and private sectors, New Delhi was seeking to make the southern neighbour a ‘virtual province’.   

Two, Indians should be asking the question if their investments would be safe and also produce profits for stockholders and stakeholders, be it the private or the public sector. Rather, the ‘risk factor’ of such investments is huge, in fiscal, economic and political terms. It is unlike what constructs like ‘virtual province’ entail. Instead, once Indian money is invested in Sri Lanka—or, elsewhere, the local government has a stronger say in the day-to-day administration of entities.  

The government, in this case, will be influenced by the local polity and society, change of presidents and parliamentary majorities, among other factors. If anything, Sri Lankans should have been pleasantly surprised by the very thought of India and Indians wanting to put their good money in a bad economic environment – and expect it to remain secure and also grow, over the short, medium and long terms. To put it mildly, Indian investments, once all made and before any profits had been earned out of them, would be sitting ducks. 

Doubly cautious

If not earlier, at least in the aftermath of emerging perceptions of the ‘virtual province’, others would have become doubly cautious, that too in a nation where the security agencies are yet to identify and/or apprehend arsonists who set ablaze the personal properties of about a hundred politicians, including the President during the Aragalaya protests.  Irrespective of who the Indian investor is or what the project is, Sri Lanka’s political class is at best vague in its ideas of developmental funding. 

In the long run-up to the Aragalaya protests, some cabinet ministers and other ruling party MPs under former President Gotabaya Rajapaksa's government had publicly flagged concerns about involving India in energy development projects of the future. During his week-long visit to Sri Lanka in early October 2021, months before the unprecedented street protests against the incumbent government, then-Indian Foreign Secretary Harsh Vardhan Shringla reaffirmed support for the island nation’s-post-COVID, revived talks on multiple energy and connectivity projects, all aimed at making the local economy self-reliant and resilient. 

In the long run-up to the Aragalaya protests, some cabinet ministers and other ruling party MPs under former President Gotabaya Rajapaksa's government had publicly flagged concerns about involving India in energy development projects of the future.   

All projects identified earlier got a clearer nod when they signed five MoUs during Sri Lankan President Ranil Wickremesinghe’s talks with Prime Minister Narendra Modi in New Delhi, in July 2023. Proposed as a part of the two nations’ ‘Vision Document’, the list included a revived proposal for a land bridge connecting the two nations, a pet project of Wickremesinghe since his second term as Prime Minister (2003-04). Unlike what he had visualised earlier, such a bridge would connect Sri Lanka not only to South Indian markets but also to the much larger Eurasian landmass, over time.

Of even greater economic significance should be the MoU for constructing an oil pipeline connecting the two nations. Together with the two refurbished oil tank farms in Trincomalee, it would all mean that Sri Lanka can boost its foreign reserves by importing refined oil to third nations. As may be recalled, the unprecedented dollar shortage led to the halt of all food, fuel, and medicines imports, among other essentials, which led to nationwide public unrest and the forced exit of President Gotabaya. 

Greater strains

Sri Lankan academics’ criticism of India-funded projects is steeped in past perceptions that they are unwilling to change. Yet, as some of them flag quite often, there are real issues, for instance, centred on the fishers’ dispute and the attendant ‘Katchchatheevu conundrum’, which continue to remain as thorns in bilateral relations. However, their arguments citing the loss of livelihood and rights of the Tamil fishers in the country read/sound hollow in the face of their continued posturing on power devolution, or the full implementation of the 13th Amendment that has been on the nation’s statute for 45 years, since 1987.

The Sri Lanka Navy (SLN) and the judiciary have been doing enough to discourage Indian fishers, especially from Tamil Nadu, from entering their waters and encroaching upon the fish reserves of the island’s Tamil fishers in the Northern Province. Colombo and New Delhi have been in constant consultations and talks with each other to smoothen out the implementation of the two bilateral pacts of 1974 and 1976, drawing the undefined International Maritime Boundary Line (IMBL) between the two nations and placing tiny Katchchatheevu islet on the Sri Lankan side. Those in Sri Lanka who often want to mix up these two issues with other aspects of what they want their whole nation to believe that it was a part of Indian hegemony are only doing a great dis-service to their nation’s India relations, which stood by them during the COVID-19  pandemic and post-COVID economic crisis.

The Sri Lanka Navy (SLN) and the judiciary have been doing enough to discourage Indian fishers, especially from Tamil Nadu, from entering their waters and encroaching upon the fish reserves of the island’s Tamil fishers in the Northern Province.     

However, the recent poll-time charge by Prime Minister Narendra Modi that the ruling DMK in Tamil Nadu and its Congress ally, which was in power at the Centre during the twin treaties, had betrayed the state, may have also helped clear some of the forgotten facts about the ‘Katchchatheevu issue’. The Sri Lankan Foreign Minister Ali Sabry stopped by saying that New Delhi had not taken up the issue with it for the cabinet to discuss. The political interest in Sri Lanka too was minimal though some academics still complained about ‘poaching’ by Indian fishers – which remained a live issue.  

Nearer home, however, most people, including the political class got to hear possibly for the first time, about the existence of a large swathe of sea, measuring up to 10,000 sq km south of Kanyakumari, India’s southernmost tip. Known as the Wadge Bank, India got these minerals and petroleum-rich waters as a part of the ‘Katchchatheevu accord’. It also needs to be noted that the accord deliberately did not give away or take away any part of anyone’s territory to the other but only drew the IMBL for publication under the UN Convention on the Law of Sea (UNCLOS), long before it came into being. 

Suffice it to say that the bilateral treaty has ensured that the Palk Strait and the Gulf of Mannar connecting the two countries remain the exclusive waters of these two nations without intervention by any third country, including extra-regional powers. This in a way should be the starting point for politicians, academics and the strategic community in the two countries to understand each other’s government and their strong positions on ticklish issues that could make or break the relations. 

On such strength, confidence, and understanding should they build future economic cooperation, which Sri Lanka, in particular, cannot do without – especially given the relatively lower component, transportation and insurance costs, given their physical proximity, cultural antiquity, and emotional dependability.


N. Sathiya Moorthy is a Chennai-based Policy Analyst & Political Commentator.

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