COLOMBO: 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.
Indian 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 late Monday.
In December, China announced the suspension of its own project to build power plants on three Sri Lankan islands due to security concerns involving a “third party.”
An Indian official said 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 its sphere of influence. The island nation in the middle of a key sea route connecting the east and west also is important to China’s ambitious “Belt and Road” global infrastructure initiative.
“It is kind of a 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.
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.
India also signed agreements on providing a maritime rescue coordination center and building fisheries harbors in Sri Lanka.
The agreements come as Sri Lanka is suffering its 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 $2.5 billion in economic assistance.
Infrastructure projects that were built using 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 noncommittal 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 the Sri Lankan government aims to develop into a financial city.
The government previously scrapped a plan to allow China outright ownership of land at the Colombo Port City and instead gave it 62 hectares (153 acres) on a 99-year lease.