On Tuesday, India and Sri Lanka struck a pact to build hybrid power plants on northern Sri Lankan islands, a deal considered as a strategic win in India’s struggle with China for influence in the Indian Ocean.
The signing was witnessed by India’s External Affairs Minister Subrahmanyam Jaishankar and Sri Lankan Foreign Minister Gamini Peiris, according to the Indian embassy.
Due to security concerns, China stated in December that it was halting its own proposal to build power plants on three Sri Lankan islands.
On Tuesday, an Indian official said he couldn’t confirm if the plants in the new arrangement will be built on the same islands as the Chinese project. The projects’ power source and other specifics were unavailable.
Sri Lanka, which is just over the tiny Palk Strait off India’s southern coast, is considered part of India’s sphere of influence. The island nation is strategically located in the middle of a major sea route that connects East and West, and it is a critical component of China’s ambitious “One Belt, One Road” global infrastructure program.
India and China are rivals in the region for influence, and their border tensions have erupted in recent years.
“For India, it’s a significant triumph,” said Lynn Ockersz, a senior journalist and foreign policy specialist in Sri Lanka.
He claimed that it would enable India to exert influence on Sri Lankan policy decisions that would have an impact on the country.
The Chinese power plant project, which was canceled, would have been located on India’s southern coast.
Jaishankar was attending the BIMSTEC summit, a gathering of Bay of Bengal countries Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka, and Thailand to discuss economic cooperation.
In addition, India and Sri Lanka signed agreements for a maritime rescue coordination center and a fisheries project.
Sri Lanka is beset by debt troubles and is experiencing its greatest economic crisis in recent memory, with shortages of medicine, petrol, fertilizer, and milk. Power outages are occurring on a daily basis and can persist for many hours.
Infrastructure projects that were financed with Chinese loans but are not profitable are contributing to the debt issue. Sri Lanka’s foreign reserves are decreasing, and the country faces a $7 billion debt repayment this year.
It has sought assistance from both India and China. India issued a credit line of $1 billion for necessities and $500 billion for petrol. China is reviewing a request for $2.5 billion in aid, but has been hesitant to restructure billions of dollars in debt.
On reclaimed territory near Colombo harbor, China and Chinese corporations have invested extensively in the construction of a sea port, airport, roads, and a port city, which Sri Lanka’s government hopes to turn into a financial center.
A plan to give China outright ownership of land in Colombo Port City was earlier abandoned by Sri Lanka’s government. Instead, it leased 62 hectares (153 acres) for 99 years.