The India Factor in Sri Lanka’s Renewable Energy Sector – The Diplomat

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On March 1, the Sri Lanka Sustainable Energy Authority, the Government of Sri Lanka, and U-Solar Clean Energy Solutions from India signed an agreement for the construction of hybrid renewable energy systems on Nainativu, Delft (Neduntheevu), and Analaitivu islands situated in the Palk Bay. The three facilities which will have a combined renewable energy capacity of 2,230 kilowatts will be funded by a $11 million grant from the Indian government.

A statement issued by the Indian High Commission in Colombo said that the project which integrates solar and wind energy will address the energy requirements of the three islands, which are currently not connected to the national grid.

The energy sector has been identified as a priority in the India-Sri Lanka Economic Partnership Vision document, a commitment established during President Ranil Wickremesinghe’s visit to India in July 2023.

The hybrid energy project was initially awarded to China. In January 2021, the Sri Lankan cabinet approved a collaborative effort involving China’s Sinosoar to implement “hybrid renewable energy systems” in the aforementioned three islands in Palk Bay. The joint venture deal, secured through a competitive bidding process adhered to the procurement guidelines of the Asian Development Bank (ADB), a pivotal supporter of the project.

However, India strongly objected to the deal as the three islands are located barely 50 km from the southern Indian coast.

New Delhi then proposed undertaking the same project, offering a grant instead of a loan from the ADB. Under pressure, the Sri Lankan government scrapped the agreement with the Chinese and is proceeding with the project in collaboration with India.

India has expressed heightened sensitivity toward foreign-funded development initiatives in Sri Lanka, particularly in the Northern and Eastern provinces. India has an interest in maintaining a foothold and dominating the two provinces given the proximity to India as well as Trincomalee harbor, which is located in a strategic area.

Notably, the 1987 Indo-Sri Lanka Accord, perceived by some as an agreement pushed on Sri Lanka by India, stipulates that if Sri Lanka engages in the development of Trincomalee Oil Tanks with a foreign partner, that partner must be India.

During the 1980s, when India was aligned with the Soviet Union, there existed a palpable concern that the J.R. Jayewardene administration would permit the United States to establish a foothold in Trincomalee.

Over the last couple of decades, India’s apprehensions have shifted to China, which it perceives as its primary strategic rival in Asia. It is concerned over China’s growing presence and influence in its neighborhood.

In this context, Sri Lanka’s mounting dependence on China has been a matter of grave concern to India. New Delhi has identified integrating Sri Lanka into a common energy architecture as vital to its geopolitical aims and made it clear to successive Sri Lankan governments that establishing energy projects in the north and east with other partners is out of the question.

Since Sri Lanka slipped into a severe economic crisis in 2022, India’s role in its recovery has been substantial. By extending the cash-strapped country loans and grants India has strengthened its hold over its renewable energy sector. It appears to have managed to completely sideline China in this sector, as evident from the way in which it was able to snatch the project to build hybrid renewable energy systems in three islands off the coast of Jaffna, from China.

The latest renewable energy deal is the third India-backed energy project coming up in Sri Lanka’s north and east. While the National Thermal Power Corporation is implementing a solar energy project in the eastern town of Sampur, where India had previously hoped to build a controversial coal power plant, the Adani Group is setting up renewable energy projects in Mannar and Pooneryn in the north.

Indian projects in Sri Lanka have often triggered controversy. This has been the case particularly with contracts handed to the Adani Group. The Samagi Jana Balawegaya, Sri Lanka’s main opposition party, had slammed the Rajapaksa administration for allowing the Indian company to gain entry through a “backdoor” approach. The Rajapaksa administration was accused of favoring Gautam Adani, a close associate of Indian Prime Minister Narendra Modi. In June 2022, M.M.C. Ferdinando, chairman of the state-run Ceylon Electricity Board, informed Parliament’s Committee on Public Enterprises that the Sri Lankan government faced pressure from the Indian prime minister to grant tenders for renewable energy projects to the Adani Group.

Following the wind power plant’s completion, Sri Lanka is set to procure a unit of electricity from Adani at a rate of U.S. 7.55 cents per unit which is twice the rate determined through competitive tendering. Ferdinando’s revelation came shortly after Sri Lanka amended its Electricity Act, eliminating the requirement for competitive bidding for energy projects, thereby facilitating the Adani Group’s involvement in renewable energy projects within the country.

Given Adani’s close ties with Modi the average Sri Lankan is suspicious of these projects and some opposition politicians have been quick to capitalize on this. On the other hand, the government has not been transparent about any of the power and energy agreements with Indian companies, which has deepened public suspicion.

In the intricate realm of strategic agreements with foreign nations, transparency emerges as a linchpin, particularly when steering crucial developments such as renewable energy initiatives. Sri Lanka’s forays into developing sustainable energy projects in its Northern and Eastern provinces underscore the critical need for clear, open communication in such ventures.

As it navigates partnerships with influential neighbors like India, the importance of transparency becomes paramount to build trust and mitigate concerns surrounding foreign involvement.

Sri Lanka’s north and east have significant potential for renewable energy and given that we can’t harvest these resources without Indian approval, the task at hand is to determine what a win-win situation is for the two countries.

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