Sri Lanka: A Story of China’s Consolidation and India’s Haste

By: Husanjot Chahal, Columnist

Photo Credit: NewsInAsia

On November 21, 2017, Sri Lankan Prime Minister Ranil Wickremesinghe arrived in India for a three-day visit.[i] The visit marked the eighth interaction between Indian and Sri Lankan heads of state since 2015—suggesting vigorous high-level political engagement. Expediting decisions on joint projects and “solving the problems that have emerged” was the main agenda as PM Wickremesinghe met his Indian counterpart, Narendra Modi.[ii] The spotlight remained on the joint venture to develop the World War II-era oil storage facility in Trincomalee, a port city in Sri Lanka’s Eastern Province. Given this recent emphasis on speeding up projects, this column analyzes India’s current economic position in Sri Lanka, with special reference to Trincomalee. Keeping in mind the entrenched resistance to India’s projects in the region, it analyzes the potential trajectory of these efforts.

Prior to the November visit, India and Sri Lanka signed a ‘Memorandum of Understanding (MoU) for cooperation in economic projects’ in April 2017. The MoU is the only significant economic arrangement realized by India and Sri Lanka since the Free Trade Agreement (FTA) of 2000. The MoU is in the form of a “roadmap for the future,” that sketches agreements in the power sector, namely a 50MW Solar Power Plant in Sampur, a re-gasified 500MW LNG Power Plant, an LNG Terminal/Floating Storage Regasification Unit in Colombo/Kerawalapitiya), and prominently, the joint development of the Upper Tank Farm in Trincomalee[iii]. Additionally, the MoU outlines a few broad agendas on the development of the transportation sector, agriculture and livestock, and other areas of joint interest.

The emphasis on pacing joint ventures comes in light of a growing Chinese economic presence in Sri Lanka. On July 29, 2017, China sealed the $1.12 billion Hambantota port agreement with Sri Lanka, trading Colombo’s debt for 70 percent stakes in the strategic port overlooking the Indian Ocean[iv]. Soon after the signing of the agreement, Beijing declared that Hambantota port is part of its Belt and Road Initiative (BRI).

In recent years, China has invested heavily in Sri Lanka’s infrastructure, particularly during the former pro-China Rajapaksa government, when Beijing had stepped in to provide its no-strings-attached loans to Sri Lanka, as India and the West focused on Colombo’s human rights violations. New Delhi’s chief concern has been the long-term impact of China’s state-owned companies securing equity in the Sri Lankan economy and the extent to which Beijing’s influence on Sri Lanka’s economy would affect Colombo’s ability to practice an independent foreign policy.[v] Sri Lanka’s November 2014 decision to allow China’s submarines to dock at the Colombo port despite India’s strong protests, relatedly, underlines India’s security fears in an environment where China’s naval presence has been increasing in the Indian Ocean.

India’s planned energy infrastructure investments in Sri Lanka are touted as an attempt to counter China’s growing strategic clout, primarily by creating a bigger economic footprint in the island and assisting in relieving some Sri Lankan debt. However, they have arrived after significant delay. Furthermore, despite the focus, India’s history of engagement in Sri Lanka tells a sad story. It has been bogged with significant bureaucratic delays[vi], projects have been held back due to political concerns, and there is a prevailing trust deficit among Sri Lankans vis-à-vis India. Around the time the MoU was signed, there were negative perceptions about India’s role on the island; for instance, with regard to tying “their only supply of cooking gas or petroleum” to New Delhi’s geopolitical games.

With special reference to Trincomalee, there is entrenched resistance to economic cooperation with New Delhi. April 2017 witnessed strikes by the workers of the Ceylon Petroleum Corporation (CPC)—the national oil and gas company of Sri Lanka—against the joint development of the Trincomalee oil farms[vii]. The protests practically prevented PM Wickremesinghe from signing the Trinco deal during his visit to India in April—resulting in the MoU instead—thereby indicating the political strength of such resistance.

Related to this are the issues of stakeholder concerns over ownership and operation. In 2003, India’s oil subsidiary in Sri Lanka, Lanka IOC (LIOC), had signed a 35-year lease with the CPC and the Sri Lankan government to develop the China Bay (Trincomalee) oil tank farm with a total of 99 tanks. The implementation of the resultant MoU has faced significant political confrontations against giving exclusive rights to the LIOC to run the installation. The lease agreement could not be fully implemented, such that LIOC has been able to use only 14 tanks in the lower farm area and the remaining 84 stay unused.

The CPC expressed reservations on the procedural aspects of the MoU and its Common Workers Union (CWU) alleges that it is illegal. On the other hand, India’s Ministry of External Affairs has clearly stated that it has had the right to develop the tank farm since 2003, and is now entering into a joint partnership with Sri Lanka to develop the upper tank farm in light of its “spirit of partnership.”[viii] This indicates a clear difference in narrative that could be a potential recipe for conflict, unless addressed sensitively.

As India enters this new phase of speeding projects and heightened investments in Sri Lanka, potentially driven by strategic concerns, it remains ignorant of past trends and current realities. The road to implementing ambitious proposals, such as projects in Trincomalee, will be a difficult one given the local opposition and existing complexities. Nothing short of a serious attempt to address these issues can enable the rapid forward movement that India currently seeks.

[i] The New Indian Express, “PM Modi, Sri Lankan counterpart Wickremesinghe to hold talks tomorrow”, November 22, 2017. Accessed November 30, 2017,

[ii] Suhasini Haidar, “India, Sri Lanka to expedite projects,” The Hindu, November 24, 2017. Accessed December 1, 2017,

[iii] Ministry of External Affairs, “Transcript of Weekly Media Briefing by Official Spokesperson (April 27, 2017),” April 27, 2017. Accessed December 1, 2017,

[iv] Al Jazeera, “Sri Lanka signs Hambantota port deal with China,” July 29, 2017. Accessed December 1, 2017,

[v] Smruti S. Pattanaik, “New Hambantota Port Deal: China Consolidates its Stakes in Sri Lanka,” IDSA, August 14, 2017. Accessed December 1, 2017,

[vi] Meera Srinivasan, “Concerns in Colombo over delay in Indian projects,” The Hindu, September 2, 2017. Accessed December 1, 2017,

[vii] Shihar Aneez, “Sri Lanka’s oil firm workers call off strike over India deal,” Reuters, April 24, 2017. Accessed December 1, 2017,

[viii] Ministry of External Affairs, “Transcript of Weekly Media Briefing by Official Spokesperson (April 27, 2017),” April 27, 2017. Accessed December 1, 2017,

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