Explained: This article explains the political background, key decisions, and possible outcomes related to Explained : Decoding the Challenges to India-Sri Lanka Connectivity and Its Impact and why it matters right now.
Introduction
The multifaceted crisis in Sri Lanka in 2022 marked a turning point in its bilateral relations with India.[a] As the country descended into chaos in late 2021, India adopted a four-pronged strategy involving: a) a line of credit for the import of food, medicines, and other essentials; b) lines of credit to cover fuel imports; and also to modernise the Trincomalee Oil Tank Farm;[b] c) a currency swap to help address Sri Lanka’s balance of payment problem; and d) investments across sectors to contribute to growth and generate employment in the country.[1] This assistance, worth over US$4.5 billion, coupled with an “investment-led approach”, were aimed at helping stabilise Sri Lanka’s economy.[2] India also converted some loan projects to grants to offer some relief to the country’s debt distress.[3]
At the same time, the crisis also compelled Sri Lanka’s civil society and political class to explore a new economic and political direction for their country. There was consensus that the crisis was caused by consistent mismanagement of the economy, poor governance, increasing debt, corruption, external shocks, and unresolved structural economic issues. India became a natural choice for engagement towards recovery due to its geographical proximity, economic growth, and strong technological base.
During President Ranil Wickremesinghe’s visit to India in 2023, the two countries signed their first-ever joint vision document to promote connectivity. The priorities were maritime connectivity (ferries, logistics, ports), air connectivity (airports and flight routes), energy connectivity (renewable and non-renewable), trade, and economic, financial, and people-to-people ties (tourism, education, and land connectivity).[4] Similar commitments were made by Wickremesinghe’s successor and current president, Anura Dissanayake, reflecting scope for further cooperation on development, connectivity, energy, digitalisation, education, trade, culture, and defence.[5]
This quest for connectivity and economic integration is not without challenges. Indeed, successive governments have made similar promises in the past and fell short of delivering them. This paper offers an overview of connectivity agreements between India and Sri Lanka. It then delves into key bilateral connectivity initiatives in the sectors of ports, airports, and energy since 2022, and records their progress. The final section of the paper assesses the broader trends and challenges in furthering these connectivity initiatives.
India-Sri Lanka Connectivity: An Overview
Domestic Politics
Since the spread of Buddhism around 3rd century BCE, Sri Lanka has maintained its identity as an island state that is keen on protecting the faith from the neighbouring “Hindu” India.[6] As the country witnessed an extreme wave of Sinhala nationalist politics in the 1950s, scepticism of India increased. Delhi’s extra-cautious attitude towards Sri Lanka’s relations with non-regional powers and concerns about the treatment of Tamils in Sri Lanka only exacerbated distrust.[c],[7] In a highly charged political environment, economic relations with India were seen as reflective of Indian domination.
Sri Lanka had also embraced protectionism since its independence in 1948 and followed an import-substitution strategy. The public sector dominated the economy, and there was a focus on being a welfare state. However, a series of economic challenges nudged the country to open up its economy in the late ‘70s,[8] deregulating and privatising the economy and encouraging exports. However, Colombo hesitated to reduce protectionist measures towards small and medium enterprises, reduce the size and role of government, end subsidies, and privatise service sectors and state-owned enterprises.[9],[d] This was largely because of the political risks associated with these changes. Among those who have opposed unfettered privatisation and championed economic nationalism are the trade unions, whose ability to muster support and win parliamentary seats has convinced political parties to appease them and make them part of mainstream politics.[10] In 1937, there were only 31 trade unions in the country, which increased to 237 in 1951. Currently, there are over 2,000,[11] with many of them opposing privatisation and promoting economic nationalism and protectionism. This mix of politics, protectionism, and unionism, with scepticism for India, gave very little opportunity—politically and economically—to increase economic cooperation between the neighbours.
Delayed Economic Awakening
Even after the economic reforms, Sri Lanka remained concerned that economic ties with India could give New Delhi additional leverage against Colombo. There was also concern about India’s economic cooperation, considering the rising ethnic tensions and the role Indian Tamil parties played in lobbying against Sri Lanka.[12] However, Sri Lanka faced a new set of economic challenges in the ‘80s. Inflation, budget and trade deficits, slow diversification, and poorly managed State-Owned Enterprises (SOE), together with the civil wars in the north and the south, impacted its growth.[e] Sri Lanka was now compelled to engage with India.
On the other hand, India’s relations with Sri Lanka till the ‘90s focused mostly on security and politics—largely because of domestic politics and preference towards a protectionist economy. However, the collapse of the USSR (Union of Soviet Socialist Republics) and domestic economic reforms in 1991 nudged it to explore other markets, including Sri Lanka. In 1991-92, trade amounted to a mere US$50 million, but by 1999 this had increased to US$500 million.[13] In 1998, the two countries signed the India-Sri Lanka Free Trade Agreement, their first economic agreement.[14] Following its implementation in 2000, Sri Lanka’s trade increased, reaching US$2,402 million in 2005. By 2021, it was worth US$5,454 million.[15] Yet, the poor trade infrastructure, higher tariff and non-tariff barriers on both sides, and the lack of willingness to create trade complementarities have hindered their trade potential.[16]
China Fills the Delivery Deficit
Even as India opened up on the trade front and development cooperation, the civil war slowed down its progress. A number of the proposed projects were also opposed on both sides because of high political costs, as seen with the India-Sri Lanka bridge project.[17] In other cases, India’s delivery deficit due to the lack of financial allocations, appropriate planning, and sufficient coordination with ministries and state governments impacted its projects. Procedural hurdles and bureaucratic red-tape in both countries also proved to be a challenge.[18]
Since the early 2000s, Chinese funding and investments have grown by leaps and bounds in Sri Lanka, attempting to address the gap in the infrastructure and development sector. Such investments in sectors like energy, railway, roads, airports, and ports largely shaped the latter’s postwar economic growth. This was further institutionalised by Sri Lanka joining the China-led Belt and Road Initiative (BRI) in 2014. By 2019, Chinese investments were valued at US$12 billion,[19] and it developed a close equation with the political elites as well. This economic and political clout gave Beijing leverage over Sri Lanka, often creating challenges for Indian security. Sri Lanka’s leasing of the Hambantota port to China, and subsequently, Colombo Port City and the International Terminal, increased Indian concerns of assistance and infrastructure, leading to debt-trap diplomacy and furthering Chinese presence in the Indian Ocean Region.
‘Neighbourhood First’
India, under Prime Minister Narendra Modi, mainstreamed its Neighbourhood First policy in 2014, by emphasising the 3Cs—commerce, culture, and connectivity.[20] The purpose was twofold: first, to counter Chinese presence and infrastructure projects by providing an alternative to its investments and assistance. Second, to promote connectivity and commerce across borders to enhance India’s economic growth and potential.[21] Sri Lanka has remained a major beneficiary of the policy, especially with the Indian government attempting to immunise foreign policy from domestic politics. Indeed, PM Modi was the first prime minister in nearly three decades to visit the country.
India has also attempted to resume old projects and initiate several new ones. It is exploring these opportunities beyond the Northern province to the rest of Sri Lanka[22] and offering development assistance in the form of currency swaps and credit lines to promote infrastructure. It is also actively looking for investment opportunities. Sri Lanka sees this as an opportunity to overcome its infrastructure gap and development aspirations. Trade has also increased over the last decade. While the economic crisis unfolded, India offered substantial assistance of US$4.5 billion to promote connectivity across sectors. There is a keen interest in also developing maritime ports, airports, and the energy sector.
Change in Government
In September 2024, Sri Lanka witnessed a dramatic change in its political landscape as Anura Dissanayake (AKD) of the Janatha Vimukthi Peramuna (JVP) led-National People’s Power coalition won the presidential elections. In the past, the JVP, a Marxist-Sinhala outfit, has staunchly opposed economic liberalisation and accused India of violating Sri Lanka’s sovereignty. During their electoral campaign, they politicised multiple projects with India and China and declared that if elected, they would review all ongoing connectivity initiatives.[23] They argued that the Sri Lankan political elites have used these initiatives to enrich themselves.
A year into power, the government has embraced pragmatism in their outreach and foreign policy. AKD has, in fact, bet on India to ensure that Sri Lanka’s economy continues to grow and recover. However, the new government is, to an extent, constrained by its ideology and composition. The NPP is composed of 21 groups that include political parties, religious organisations, youth organisations, women’s groups, trade unions, and civil society organisations.[24] Many of them have led protests in the past and are champions of nationalist economic policies. They have also opposed the privatisation and divestment of critical sectors and State Owned Enterprises, impacting connectivity initiatives.
Maritime Port Connectivity
India has, in recent years, pushed for a stronger presence in Sri Lanka’s port sector. It is anxious that extra-regional players’ interest in Sri Lanka and the Indian Ocean could lead to military threats, control of crucial sea lines of communication, and even cause supply chain disruption. India is thus asserting itself, especially after the Hambantota Port was leased to China in 2017. On the other hand, following the economic crisis, there is a perception in Sri Lanka that it could expand its own port capacities and trade potential by supplementing India’s growth. It anticipates that Indian capital and market access in the ports sector would finally help it tap into its own strategic location.[25] The 2023 joint statement between India and Sri Lanka emphasised the need for more maritime connectivity, especially in the development of ports and logistics infrastructure in Colombo, Trincomalee, and Kankesanthurai (KKS).[26] Table 1 lists the Indian port projects in Sri Lanka.
Table 1: India-Sri Lanka Maritime Connectivity
| Project | Stakeholder and Nature of Project | Interests | Status |
| Kankesanthurai Port | Grant from India |
· Upgrading the port to enhance capacity and operational capabilities to increase trade
· Boosting regional trade, connectivity and people-to-people engagements, especially with Tamil Nadu
· Developing the Northern province of Sri Lanka
|
In progress |
| Colombo Port | Private investment from Adani Ports |
· Countering Chinese Presence
· Participation in the logistics and ports sector, generating profits
· Enhancing trade relations and security
|
Operational |
| Trincomalee Port | NA |
· Fourth-largest natural deep-sea harbour – Indian influence could deter external influence and threats
· Tapping on an important shipping lane – crucial for connectivity with BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) and ASEAN (Association of Southeast Asian Nations), and trade engagements in the Indo-Pacific
· Developing the Eastern province in Sri Lanka
· Boosting regional trade, connectivity, and people-to-people engagements, especially with Tamil Nadu
|
Operational |
Source: Author’s own
Indian initiatives in the Kankesanthurai (KKS), Trincomalee, and Colombo ports vary in nature. In KKS, India has decided to develop the port through grants; in Colombo, investments are the tool of choice; and in Trincomalee, efforts are mostly concentrated in creating socio-economic infrastructure like education and health and backward linkages to the port especially in the energy sector, rather than developing the port itself.
Map 1: India’s Maritime Connectivity with Sri Lanka
Source: Author’s own, using Google Maps
Three factors—national security, geopolitics, and economy—have played a critical role in India’s interest in the projects. The KKS, located in the Northern province, and Trincomalee, in the Eastern province of Sri Lanka, are largely underdeveloped because of the four-decade-long civil war. The ports have the potential to develop the economies of these two provinces, especially with trade and investment. For India, this ensures reconstruction, growth, and peace in the Tamil-dominated region, securing its stability as well. They would also enhance mutual growth along with the South Indian states. External threats have also motivated India’s interest in Trincomalee and Colombo Port. Trincomalee is the world’s fourth-largest natural deep-sea harbour, and it is at the centre of the East-West shipping lane. India has largely remained anxious of external players having a foothold in the country. It aimed at restoring and operating oil tank farms, with Sri Lanka since 1987, amidst concerns of a US military base in the harbour.[27]
India’s interest in the Colombo Port had increased due to China’s growing presence in the ports sector since the early 2000s. China’s 85-percent stake and 35-year lease over the Southern Terminal, also known as International Container Terminal (ICT); a US$1.4-billion investment in the Colombo Port City project—a special economic zone where it enjoys a lease of 99 years; and a US$390-million logistics centre in Colombo Port, where it has a 70-percent stake, have aggravated Indian concerns. The port handles 42 percent of India’s total transhipments,[28] and has triggered anxieties about potential disruption in supply chains.
None of the above connectivity initiatives are new, but they have received attention following the crisis. For instance, India and Sri Lanka signed a Memorandum of Understanding (MoU) in 2011 to restore the KKS port, where Delhi agreed to fund the project with a US$20-million grant and cover the rest with lines of credit.[29] However, the subsequent phases of the project witnessed delays due to slow bureaucracy and clearances.[30] In May 2017, another MoU was signed to upgrade the harbour to a full-fledged commercial port, with India offering credit lines worth US$45 million.[31] However, logistical challenges and high costs, the COVID-19 crisis, and the subsequent economic crisis[32] continued to delay progress.
These delays caused substantial increases in the costs, and in 2023, India agreed to replace the loan with grants worth US$65 million.[33] Both countries are currently finalising an MoU for renovations and operations. Besides development and security, the KKS harbour will also be useful in connecting the Jaffna and Northern province to the Southern part of India, especially with the resumption of passenger ferry services between Tamil Nadu’s Nagapattinam and KKS.[34] Additionally, it helps India and Sri Lanka promote people-to-people ties and tourism.
India and Sri Lanka remain cautious of engaging extensively in the Trincomalee port despite its poor condition.[35] This is largely because of its strategic location. Sri Lanka remains hesitant to engage other partners to upgrade the harbour because of India’s sensitivities, and is reluctant to engage with the latter, as the public and the majority of political parties see the 1987 accord as a sign of Indian dominance. India, too, has shied away from investing in the region, fearing potential backlash. However, since the economic crisis, it has expressed interest in further supporting the region with backward linkages and socio-economic development.[36] India will be developing the region into an energy hub and creating an industrial zone,[37] following which the demand for the port infrastructure could increase. It will also be funding 33 development projects in the region worth 2.3 billion SLR (approx. US$8 million), particularly in the education, health, and agriculture sectors.[38]
To counter China’s investments in the Colombo Port, India, with the help of Japan, agreed to develop the East Container Terminal (ECT); a trilateral agreement to this effect was signed in 2019.[39] (See Map 2 for a representation of the Colombo Port). However, trade unions, politics, nationalist concerns over leasing the terminal, and alleged Chinese pressure influenced the Sri Lankan government to unilaterally cancel the project in 2021. As India expressed its displeasure over the unilateral suspension of the ECT, the Sri Lankan government invited India to invest in the West Container Terminal (WCT) on a public-private partnership (PPP).
India reportedly shortlisted Adani Ports to invest in the project.[40] With a majority stake (51 percent), the company will have a lease over the terminal for 35 years.[41] For the Indian company, this project would enhance its profits and likely supplement its other port project in Vizhinjam. The US International Development Finance Corporation (DFC) agreed to fund US$553 million for the WCT project, but the Indian firm later withdrew from the funding, with the US accusing it of corruption.[42] Nonetheless, the terminal has been operational since April 2025. In 2024, the Adani Group also requested the Sri Lankan government for space to set up a logistics centre to capitalise on its strategic location and promote transshipment.[43] A year later, India gained a foothold in the Colombo Dockyard—the only dry dock in the country and Sri Lanka’s biggest ship builder and repair company. The Indian government shortlisted Mazagaon Dock Shipbuilders, a company under the Ministry of Defence, to invest and acquire a 51-percent stake in Colombo Dockyard PLC worth US$53 million.[44]
These projects will have substantial economic benefits. At large, infrastructure has taken precedence, even as negotiations about trade opportunities and facilities continue. At present, two major proposals are being discussed: a land bridge to connect India and Sri Lanka, and upgrading the FTA to an Economic and Technology Cooperation Agreement (ETCA).[45] Both agreements will enhance port sector connectivity and trade between India and Sri Lanka, especially with the Colombo and Trincomalee ports.
The bridge is expected to bolster business, connectivity, interactions between people, and trade.[46] It would, for the first time in Sri Lanka’s history, connect the island nation to another sovereign nation, greatly reducing travel and trade time and costs. The revival of the ETCA also demonstrates Sri Lanka’s interest in becoming a sub-manufacturer of Indian products and services, to supplement, rather than competing with, India’s industrial base.[47]
Both these proposals, however, have raised concerns in Sri Lanka. While there is some optimism regarding the bridge project, critics assert that it would only facilitate drug and arms trafficking. Concerns about sovereignty and Indian political and religious dominance have provoked criticisms from the church and Buddhist Sangha as well. Meanwhile, nationalists and trade unions are worried about Indian labourers, services, and goods flooding the Sri Lankan market.[48] Senior officials have withdrawn statements on the bridge,[49] and the president’s recent public statements not having any reference to the project could indicate the slowing down of negotiations.[50] The government has also asserted that the ECTA will be finalised only if Sri Lanka can secure favourable terms. [51]
Map 2: Infrastructure at the Colombo Port
Source: Author’s own, using Google Maps
Air Connectivity
Since the onset of the economic crisis, airport infrastructure development has become a pressing need for Sri Lanka, something that got very little importance in the past due to prolonged civil war and slow bureaucracy. The government realised that this would boost the island nation’s foreign reserves through trade and tourism, bolstered by expanded airport capacities and infrastructure. In 2023, Sri Lanka’s Cabinet approved the amendment of the civil aviation law to allow PPPs—with the government having a majority holding—in aviation services, including fuel provision, navigation, and ground handling.[52] The Joint Vision Document with India also aimed to increase people-to-people connectivity, the resumption of flights, and the exploration of new air routes.[53] Table 3 and Map 3 show air connectivity initiatives between the two countries. Progress has been slow, with three out of four projects faltering.
Table 2: India’s Air Connectivity with Sri Lanka
| Project | Stakeholder and Nature of the Project | Implications | Status |
| Jaffna International Airport | Grant by India | Boosting regional trade, connectivity, people-to-people engagements, and developing the Northern province of Sri Lanka. | 1st phase – completed 2nd phase – yet to commence |
| Mattala Rajapaksa International Airport | Management; lease of 35 years – joint venture between Shaurya Aeronautics and the Airports of Regions Management Company | Strategic overview of Chinese activities in the Hambantota Port, and generating profits through management. | Cancelled |
| Bandaranaike International Airport | Management by Adani Ports | Stake in the main international airport. Generate profits via management. | Relinquished |
| Ratmalana airport | Management by Adani Ports | Stake in another airport in Colombo. Revive the airport and generate profits via management. | Relinquished |
Source: Author’s own
Map 3: India’s Air Connectivity with Sri Lanka
Source: Author’s own
India’s interest in these projects is motivated by national security, geopolitical, and economic reasons. The Jaffna airport will boost the local economy, tourism, and business of the Northern province, and help with post-war recovery and reconstruction.[54] The airport will also help facilitate people-to-people ties, business, and economic exchanges between the Northern Province and the rest of India, especially Tamil Nadu. This would also help ensure India’s security. Meanwhile, the Hambantota airport, dubbed “the world’s emptiest airport”,[f],[55] is just 30 km away from the China-built and managed Hambantota port. Having a stake in the airport would give India the ability to assess and track China’s presence and activities at the port.[56] Finally, the Bandaranaike (main) and Ratmalana International Airports, located in the capital, Colombo, will help create additional leverage vis-à-vis Sri Lanka. For the private sector, these three projects have the potential to generate profits.
Given the stakes, India has invested in some of these projects even before the economic crisis. The Jaffna (or Palali) airport suffered extensive damage during the civil war, and India expressed interest in restoring it. In 2019, it was upgraded to an international airport, and essential facilities like runways, water supply, waste management, sewerage, and departure control were expanded, using both government funds and grant assistance from India (worth 300 million Sri Lankan rupees/US$1 million).[57] In the case of the Hambantota port, India expressed interest in buying a 70-percent stake in 2018, and convinced Sri Lanka that this could ease its economic burden.[58] However, the deal fell short with the return of the Rajapaksas and their insistence on looking for homegrown solutions to the country’s domestic economic challenges.
The economic crisis reinforced the importance of divesting loss-generating airports and upgrading the airport infrastructure. In 2023, the Sri Lankan government announced that it would upgrade the Jaffna airport by extending the runway and providing a more suitable terminal.[59] A feasibility study for expanding the Jaffna International Airport was conducted, and Expressions of Interest were solicited to run the port on a Build Operate Transfer (BOT) arrangement.[60] India expressed interest in developing and upgrading the airport infrastructure.[61] While it is not yet clear how this assistance would take place, the Sri Lankan government has withdrawn the BOT proposal to manage the airport and hinted at fully funding the project itself.[62]
Although the Hambantota airport was recording losses of US$10 million every year since its operationalisation in 2013,[63] the Sri Lankan government was exploring commercial partners for management purposes.[64] After initial negotiations, India’s Shaurya Aeronautics and Russia’s Airports of Regions Management Company decided to invest and manage the port for 30 years through a joint venture.[65] While they would invest and upgrade facilities, Sri Lanka would be handling all key functions related to security, such as air navigation, fire services, national security, and search and rescue operations.[66] This arrangement would have helped India expand its presence in the region, and Russia to tap into a popular tourist destination, and even assuage nationalist as well as Chinese concerns of complete Indian control over the airport.
However, the venture invited much domestic and external pressure. The Wickremesinghe government faced criticism for selling a national asset, and the US pressured Sri Lanka for dealing with a sanctioned Russian firm.[67] While slow progress over the partnership had already created issues, the US Department of Treasury’s sanctioning of Shaurya Aeronautics for supplying advanced technology and equipment to Russia appeared to be a final nail in the coffin.[68] For the new Sri Lankan government, which had expressed reservations about divesting critical assets to external players, this presented an opportunity to cancel the project.[69] The government now plans to utilise the airport for aircraft and flight maintenance, and solar projects,[70] even as it incurs losses.
The Wickremesinghe government seems to have also engaged with Adani Ports for potential divestment and management of two airports in Colombo – the main Bandaranaike airport (BIA) and Ratmalana International airport. These discussions indicated Sri Lanka’s interest in the divestment of loss-making state-owned entities/ enterprises and attracting Indian investments and capital. The comments also came at a time when the Ratmalana airport needed major upgrades,[71] and the BIA, renovation and expansion.[72],[g] While officials and ministers of the government later dismissed these claims, it did indicate that such options were being explored and later relinquished. This could have also been due to the nationalist backlash about airports being privatised and handed over to India.[h],[73]
Efficient airports and direct flights will contribute to connectivity, culture, and commerce between India and Sri Lanka, further aiding the latter with its economic growth and recovery. In 2024, India contributed 20 percent of Sri Lanka’s tourist arrivals and has consistently been the top source of tourists; Sri Lanka has also been in the top ten sources of tourists to India. Ninety-nine percent of this commute happens through air travel. Table 4 shows the number of people visiting India and Sri Lanka every year. Acknowledging the importance of these engagements, both countries have committed to enhancing air routes. At present, per week, over 80 Sri Lankan flights operate between Colombo and 11 Indian cities, and 147 Indian flights operate between India and Sri Lanka. This increased from 129 Indian flights in June 2023. Sri Lankan airlines are also planning to increase their flights to India. [74]
Table 3: Tourists in India and Sri Lanka
| Year | Indian Tourists to Sri Lanka | Share in All Tourists in Sri Lanka (%) | Sri Lankan Tourists to India | Share in All Tourists in India (%) |
| 2021 | 56,268 | 29 | 25,989 | 3 |
| 2022 | 123,004 | 17 | 183,459 | 3 |
| 2023 | 302, 844 | 20 | 280,000 | 3 |
| 2024 | 416,974 | 20 percent | – | – |
Source: The Government of Sri Lanka[75] and the Government of India[76]
Energy
The economic crisis also revealed the need for energy security and sufficiency. Witnessing India’s efforts to promote energy connectivity with the other BBIN nations (Bangladesh, Bhutan, and Nepal), Sri Lanka has been keen to promote bidirectional trade and become a hub of energy exports. This will create more foreign reserves for the country and reduce the costs of fuel imports.[77] For India, this would mean safe, reliable, and secure supplies to fuel its economic growth. Since the crisis, India and Sri Lanka have discussed several initiatives like wind projects in Mannar and Pooneryn, a solar project in Sampur, grid connectivity, a multi-product oil pipeline, the development of Trincomalee port, and hybrid energy projects in the Palk Strait. Table 5 highlights bilateral projects in the energy sector, ranging from investments and grants to joint ventures.
Table 4: India’s Energy Connectivity with Sri Lanka
| Project | Nature of Project and Stakeholder | Implications | Status |
| Mannar wind farm project | Investment by Adani | Energy security and trade, development of northern Sri Lanka, and creates leverage via energy trade and dependency | Cancelled |
| Pooneryn wind project | Investment by Adani | Energy security and trade, development of northern Sri Lanka, and creates leverage via energy trade and dependency | Cancelled |
| Sampur Solar Power Plant | Joint venture between state-owned entities, National Thermal Power Corporation (NTPC), India and Sri Lanka’s Ceylon Electricity Board (CEB) | Energy security, development of eastern Sri Lanka, and creates leverage via energy trade and dependency | In Progress |
| Undersea Transmission line | NA | Energy security and Trade, creates leverage via energy trade and dependency | NA |
| Trincomalee Oil Tank Farm | Joint venture between the United Arab Emirates (the UAE), India, and Sri Lanka | Energy security and Trade, creates leverage, entrenches Indian influence in Trincomalee, and develops the eastern province, and the Trincomalee port | NA |
| Multi-product pipeline | NA | Energy security and Trade, creates leverage | NA |
| Hybrid Projects | Grant by India | Development of Tamil people in these provinces, Keeping extra-regional powers away from the sensitive Palk strait | In Progress |
Source: Author’s own
Map 4: India’s Energy Connectivity with Sri Lanka
Source: Author’s own, using Google Maps
India’s interest in these projects is again related to its economic interests, national security, and geopolitics. Development initiatives and the oil refinery project in Trincomalee gives India a foothold in the strategic region. Similarly, Indian interest was triggered in 2019 when Sri Lanka offered Delft, Nainativu, and Analativu islands—just off the Jaffna coast and 50 km from Tamil Nadu—to China.[78] Furthermore, all other energy projects are located either in the north or the east of Sri Lanka, helping these provinces with their post-civil war transition and integrating better with Indian markets. For India, it would also mean reliable and relatively cheaper electricity from one of its neighbours to sustain its economic growth. Energy trade, and the possibility of accessing or denying the market to Sri Lanka, will also create additional strategic leverage for India. This also meant the possibility of generating profits for private sector investments.
Some of these projects had been proposed in the past given the aforementioned strategic bilateral interests. In Trincomalee, India and Sri Lanka agreed in 1987 to develop 99 oil tank farms. In 2003, the two countries finalised an agreement to refurbish and develop the oil tanks with which Lanka Indian Oil Corp. (LIOC, a subsidiary of Indian Oil Corp.) would be operating 14 of 99 container tanks for 35 years.[79] However, limited political will, coupled with concerns related to sovereignty, the civil war, and legal issues, have slowed down progress. Similarly, the proposal for connecting power grids through an undersea transmission line has been under discussion since 2002.[80] Studies and reviews were conducted in 2006 and 2010, but little progress was made. The Sampur energy power project too, was first proposed in 2006 as a coal power plant but then changed to an LNG (Liquefied Natural Gas) plant in 2016. Legal, environmental, and licensing issues hindered its progress, and led to its cancellation in 2016.[81]
It was during the crisis that Sri Lanka realised the need to further enhance its energy security. The Trincomalee energy project gained momentum again, as the population struggled with fuel shortage. In 2022, a deal was finalised wherein 24 oil tanks would be managed by state-run Ceylon Petroleum Corporation (CPC), and the remaining 61, by Trinco Petroleum Terminal Pvt Ltd—a joint venture of the LIOC (49 percent stake) and CPC (51 percent stake).[82],[83] This is besides the 14 operational tanks of LIOC. The refurbishment of oil tanks and export of oil could transform Trincomalee into a bunkering hub to supply fuel and could make way for the further development of the harbour.
India and Sri Lanka have also begun discussing the need for a bi-directional multi-product pipeline to trade petroleum products. The pipeline is currently planned to link India’s Nagapattinam to Sri Lanka’s Trincomalee.[84] A feasibility study for the project was completed in 2023.[85] Sensing the possible benefits from Trincomalee emerging as an energy hub, the UAE has expressed interest in participating in the project. During PM Modi’s recent visit, India, Sri Lanka, and the UAE signed a trilateral MoU to cooperate on the development of Trincomalee as an energy hub.[86] This will lead to the identification and nomination of entities that could then explore business opportunities and the multi-product pipeline between India and Sri Lanka.[87]
Additionally, power grids through an undersea transmission line, estimated to cost around US$1.2 billion, is being discussed by the Power Grid Corporation of India and Ceylon Electricity Board, potentially connecting Madurai and Mannar.[88],[89] This also gives Sri Lanka the opportunity to explore new energy markets such as Nepal, Bhutan, and Bangladesh. The project’s first phase is intended to develop 500 MW of transmission capacity, and the second phase will see an expansion to 1,000 MW.[90] An MoU was signed, and a joint technical feasibility study report was submitted to the Ceylon Electricity Board for further consideration in 2025.[91]
The Sampur solar power project is a government-to-government project between[92] India’s National Thermal Power Corporation (NTPC) and Ceylon Electricity Board (CEB) under a 50:50 joint venture.[93] It aims to build a 120-MW solar power plant in two phases, replacing previously failed proposals.[94] The project will be on a build, own, and operate basis.[95] While there were initial concerns due to inflated costs, the new government negotiated with India for a reduction, from US$7 cents per unit to US$5.97 cents.[96] During his recent visit, PM Modi virtually laid the ground for the project.
The Hybrid energy projects in Delft, Nainativu, and Analativu islands were put forth as a counter proposal to Chinese projects. Grants worth US$11 million were offered to help the islands with solar-wind hybrid projects.[97] An MoU was finalised in 2022, with India leveraging its assistance to cancel earlier projects with China and replace them with Indian projects. The project is led by India-based U Solar Energy Solutions. India handed over the first payment installment for the project in August 2024.[98]
The Mannar and Pooneryn wind projects in Jaffna were also critical for the promotion of renewable energy. In 2023, Sri Lanka’s Board of Investment approved the two investments worth US$440 million. The firm—affiliated with Adani Green Energy Ltd—was shortlisted by the Indian government as Sri Lanka expressed interest in attracting Indian investments through a government-to-government arrangement.[99] The projects were on a build-own-operate basis. A 20-year power purchase agreement was signed, whereby the government would pay US$8.26 cents per kilowatt-hours to the Indian company. However, this was said to be higher than what other local investors proposed. The project faced challenges, including lawsuits, corruption charges, and environmental concerns, placing it at the centre of debates during the 2024 presidential elections.[100],[101] With the election of the new government, consistent political pressure on the firm to reduce the tariffs led to the project’s cancellation.[102]
Key Observations
Mixed Record: Three factors, often interlinked, largely shape India’s connectivity efforts in Sri Lanka: geopolitics, national security, and economy. For Sri Lanka, connectivity primarily has an economic rationale. Indeed, several projects— such as the KKS Port, Colombo Port, Trincomalee harbour, Jaffna International Airport, Hambantota Airport, Sampur energy project, Trincomalee oil storage facilities, land bridge, grid connectivity, ferry services, and ETCA—have been under discussion for a long time and have failed to fructify.
While projects related to maritime ports have made progress, three of the four projects related to air connectivity have been cancelled or relinquished, and the second phase of development of Jaffna Airport is yet to commence. As far as energy projects are concerned, two have been cancelled, two are in progress, and three others are still in their planning/negotiation phase.
Sri Lanka’s Agency and Politics: While Sri Lanka’s interest in promoting connectivity could be genuine and necessary, it is not completely immune to domestic politics. In the past, a number of projects had been cancelled due to economic protectionism, pressure from trade unions, scepticism about India, nationalism, and bureaucratic red-tape. The current government is not entirely immune from these structural issues, even as it has attempted to counter corruption. Given that it is a coalition of leftist parties, religious leaders, and unions, they remain vulnerable to nationalist and protectionist sentiments and factions. The government has thus held back on negotiations on the ETCA and the land bridge, two proposals that were expected to supplement bilateral trade and port connectivity. This is likely because of the lack of consensus between the coalition partners on how to balance economic realities with ideological constraints.
They also remain committed to the policy of not divesting critical infrastructure projects. While the previous government tolerated American pressure on Russia’s participation in the Hambantota airport project, the current government found it an opportunity to cancel the same. They have also withdrawn the previous government’s BOT proposal for the Jaffna airport. With their branding as a corruption-free government, they have continued scrutinising existing arrangements and engagements and are negotiating for moderations. While they were successful in reducing tariffs for the Sampur Project, the same demands compelled the Adani Group to cancel the Mannar and Pooneryn projects. The JVP-NPP also remains vulnerable to public pressure on foreign policy, development partnerships, and nationalism, considering its relatively smaller voter base.[i]
Government and Private Sector Engagements: Considering India’s interests and commitment, Sri Lanka enjoys reasonable agency with the Indian government. It has, in fact, exercised its agency and leverage in convincing India to bring more investments, offer grants and convert some loans to grants, rather than seeking new credit lines and loans. This was also evident in its negotiations on the Sampur project. India is also expected to play a role in funding the land bridge project and the petroleum pipeline and give more concessions on trade, if these negotiations do proceed. In line with its Neighbourhood First policy, India is doing most of the heavy lifting in the connectivity initiatives as long as Sri Lanka demonstrates sensitivity to Indian red-lines and concerns, especially on security.
However, such agency cannot be exercised with the private sector. While India has encouraged the private sector in its connectivity initiatives, there is little interest and success for the private sector (apart from Adani’s investments in Colombo Port). Politics, protectionism, legal cases, corruption, bureaucratic red-tape, and inconsistent policies have continued to keep the Indian private sector at bay.
India’s Development Cooperation Needs Reforms: The slow implementation of projects and disbursement of funds on India’s part are a crucial concern. Owing to this, several of the projects that were prolonged or lapsed at first have now reappeared on the table. India will have to fast-track its development cooperation before the window and support for connectivity gets shut in Sri Lanka again.
India will also have to be more transparent with these initiatives, especially in government-to-government engagements. Investments from the Adani Group and the Mazagaon Dock Shipbuilders fructified only after India nominated or shortlisted them based on its own processes and criteria. These investments align commercial interests with India’s strategic goals and are largely being seen as a beneficial for both governments and the private sector. However, post-crisis, Sri Lanka, given its experience with China, is largely suspicious of government-to-government deals that have no transparent bidding process. Policymakers and stakeholders have occasionally questioned India’s intentions for assistance and connectivity projects. There is a need for more transparency on loans and the establishment of robust procurement frameworks based on competitive bidding, even if Sri Lanka directs the project to a singular country.[103] This also makes the private sector immune to turbulent Sri Lankan politics and policymaking. Little transparency at a time of public distrust can leave the projects vulnerable to politicisation, as seen with the Mannar and Pooneryn projects.
A notable trend in India’s push for connectivity is its ability to convince like-minded extra-regional powers like Japan, the US, Russia, and the UAE to invest in Sri Lanka. This helps India ease the financial and technical burden and, at the same time, assuage concerns in Sri Lanka of Indian control over the project. However, these initiatives have had limited success (barring the UAE), largely because of domestic politics. There is a need for India and Sri Lanka to think differently about these trilaterals. Imperatives include making investments immune to political shifts and promoting transparency.
Bilateral Relations: Connectivity projects cannot be separated from other facets of the bilateral relationship. While there is increased interest in connectivity, domestic politics will play a defining role in their success. India will continue to see how Sri Lanka proceeds with these projects. The government’s ability to implement them will lead to more connectivity efforts. However, its hesitancy to do the same has the potential to disrupt bilateral ties and India’s confidence in Sri Lanka. This could be detrimental to Sri Lanka’s future connectivity ambitions.
Progress will hinge on how India and Sri Lanka attempt to sort their differences on various issues. Most importantly, it will depend on Sri Lanka’s ability to balance India and China. With China attempting to embrace a grants- and investment-led approach in Sri Lanka, India is likely to face tough competition. Talks of the FTA, ship-dockings, and push for projects could harm Indian interests and will continue to drive a wedge between the two. The Sri Lankan government should also be mindful to not scrutinise only Indian projects under its good-governance banner. It will have to follow a similar approach towards China. This balancing will thus determine Sri Lanka’s ability to exercise agency and relations with India.
Conclusion
This paper sought to underscore the uneven outcomes of connectivity initiatives between India and Sri Lanka. While some have been implemented, others have already been cancelled. This reveals that despite the opportunity to enhance ties, challenges remain. Many of these issues are long-standing. Politics, nationalism, and protectionism have continued to hinder the prospects of better connectivity.
While Sri Lanka does enjoy relative agency with India, where the government is involved, this does not seem to be the case with the private sector. Private investments and interests in Sri Lanka are scant unless the Indian government is involved. The pace of the projects is also slow, calling for dire reforms in India’s development cooperation. Implementing this will also help make promising bilateral initiatives immune to consistent politicisation. Finally, the Sri Lankan government’s ability to proceed with the projects and balance India and China will shape its agency and future connectivity ambitions.
Aditya Gowdara Shivamurthy is Associate Fellow, Neighborhood Studies, Strategic Studies Programme, ORF.
All views expressed in this publication are solely those of the author, and do not represent the Observer Research Foundation, either in its entirety or its officials and personnel.
The author thanks Ananya Gaur, former intern at ORF, for helping with the initial stages of the project, and Uditi Lunawat, intern at ORF, for helping with the citations.
Endnotes
[a] Years of unresolved structural issues, together with the Rajapaksa government’s economic mismanagement, contributed to a shortage of foreign reserves and necessities like food, fuel, and medicine. This resulted in the Aragalaya protests and a subsequent political crisis in the country. See:
[b] India’s interest in developing Trincomalee into an energy hub dates back to the 1980s. For this, India is keen on upgrading the oil tank farms developed by Great Britain during their colonial rule in Sri Lanka. However, the project has made little progress over the years for various reasons.
[c] During colonial rule, Great Britian emphasised increasing connectivity between India and Sri Lanka for their economic interests and access. Grand plans of connectivity, including a proposal for rail connectivity were placed at the forefront, and India’s trade with the Colombo Port also increased. See:
[d] In Sri Lanka, subsequent governments used subsidies, schemes, bureaucracy, and state-owned enterprises to promote clientelism and enhance their voter base.
[e] Increasing ethnic tensions between the Sinhala and Tamil communities led to a civil war in 1983. In 1987, India intervened in the conflict to restore peace in the island nation. Indian presence triggered another civil war in the South of the country by extreme-left Sinhala nationalists. The civil war was led by the Janatha Vimukthi Peramuna (JVP), the current ruling party of Sri Lanka.
[f] The port was operationalised in 2013 and built with a US$200-million Chinese loan.
[g] The BIA is being upgraded with Japan’s assistance and aid; the project was paused during the economic crisis.
[h] The backlash emerged at a time when India-registered VFS and IVS firms won the contract to issue visas in the BIA. The Government of India later denied any involvement in the deal.
[i] JVP-NPP were elected to power for the first time in history in 2024. It has a very minimal voter base and receives support from voters who were hoping for systemic and structural changes following the crisis.
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[77] Ministry of External Affairs, Government of India, July 21, 2023 https://www.mea.gov.in/bilateral-documents.htm?dtl/36864/Promoting+Connectivity+Catalysing+Prosperity+IndiaSri+Lanka+Economic+Partnership+Vision.
[78] Meera Srinivasan, “Sri Lanka clears Chinese energy project, 50 km off Tamil Nadu,” The Hindu, February 09, 2021, https://www.thehindu.com/news/international/sri-lanka-clears-chinese-energy-project-50-km-off-tamil-nadu/article33785609.ece.
[79] Suri, “Trincomalee: India’s Call”
[80] “Sri Lanka-India Power Link Moves Ahead with Key Grid Connectivity Plans,” Lanka News Web, July 06, 2025, https://lankanewsweb.net/archives/97092/sri-lanka-india-power-link-moves-ahead-with-key-grid-connectivity-plans/.
[81] “Indian PM to launch Sampur power project 19 years after signed,” Economy Next, March 29, 2025 https://economynext.com/indian-pm-to-launch-sampur-power-project-19-years-after-signed-212355/.
[82] David Brewster, “India’s takeover of the Trincomalee Oil Tank Farm will help build energy interdependence with Sri Lanka,” The Interpreter, April 16, 2024, https://www.lowyinstitute.org/the-interpreter/india-s-takeover-trincomalee-oil-tank-farm-will-help-build-energy-interdependence; Meera Srinivasan, “India inks deal with Sri Lanka to develop Trincomalee oil tank farm,” The Hindu, January 07, 2022, https://www.thehindu.com/news/international/india-inks-deal-with-sri-lanka-to-develop-trincomalee-oil-tank-farm/article38162574.ece.
[83] Brewster, “India’s takeover of the Trincomalee Oil Tank Farm will help build energy interdependence with Sri Lanka”
[84] “Sri Lanka will expedite Indian projects: President,” Economy Next, June 22, 2024, https://economynext.com/sri-lanka-will-expedite-indian-projects-president-169028/.
[85] P K Balachandran, “India denies talks are on to take over development of Sri Lanka’s Trincomalee port,” The New Indian Express, January 21, 2017, https://www.newindianexpress.com/world/2017/Jan/20/india-denies-talks-are-on-to-take-over-development-of-sri-lankas-trincomalee-port-1561714.html.
[86] “Minister denies agreement on Indian oil pipelines in Sri Lanka,” Ada Derana, December 20, 2024, http://www.adaderana.lk/news.php?nid=104377.
[87] Narendra Modi, “PM Modi and President Dissanayake at the joint press meet in Colombo, Sri Lanka,” YouTube video, April 05, 2025, https://www.youtube.com/watch?v=WqjI0paz5IY.
[88] “Infra, connectivity to be key focus during Modi’s Sri Lanka visit – report,” Ada Derana, March 27, 2025, http://www.adaderana.lk/news.php?nid=106922.
[89] “Sri Lanka-India Power Link Moves Ahead with Key Grid Connectivity Plans”
[90] “Sri Lanka, India working to link power grids via $1.2bn undersea transmission line,” Ada Derana, March 5, 2024, https://www.adaderana.lk/news.php?nid=97754.
[91] Rezaul Laskar, “India, Sri Lanka ink 10 agreements including in defence, power, energy,” Hindustan Times, April 5, 2025, https://www.hindustantimes.com/india-news/india-sri-lanka-ink-10-agreements-including-in-defence-power-energy-101743842882186.html.
[92] “Sri Lanka will expedite Indian projects: President”
[93] “Sri Lanka negotiating PPA for J/V solar power plant with India’s NTPS,” Economy Next, March 17, 2024, https://economynext.com/sri-lanka-negotiating-ppa-for-j-v-solar-power-plant-with-indias-ntps-154920/.
[94] Rathindra Kuruwita, “The India Factor in Sri Lanka’s Renewable Energy Sector,” The Diplomat, March 07, 2024, https://thediplomat.com/2024/03/the-india-factor-in-sri-lankas-renewable-energy-sector/.
“EAM Jaishankar to visit Sri Lanka on June 20; will discuss bilateral partnership, connectivity projects,” India News Network, June 19, 2024, https://www.indianewsnetwork.com/en/20240619/eam-jaishankar-to-visit-sri-lanka-on-june-20-will-discuss-bilateral-partnership-connectivity-projects.
[95] “Sri Lanka & India to jointly establish 120 MW Solar Power Plants in Sampur,” Newswire, February 20, 2025, https://www.newswire.lk/2025/02/20/sri-lanka-india-to-jointly-establish-120-mw-solar-power-plants-in-sampur/.
[96] “Sri Lanka India Sampur solar power at 5.97 US cents: President,” Economy Next, January 20, 2025, https://economynext.com/sri-lanka-india-sampur-solar-power-at-5-97-us-cents-president-200304/.
[97] Sulochana Ramiah Mohan, “Hybrid energy project begins on three Northern islands,” Ceylon Today, May 31, 2025, https://ceylontoday.lk/2025/05/31/hybrid-energy-project-begins-on-three-northern-islands/.
[98] High Commission of India in Sri Lanka, Government of India, https://www.hcicolombo.gov.in/section/press-releases/handing-over-of-first-payment-for-hybrid-power-projects-in-delft-nainativu-and-analaitivu-islands/.
[99] Suhasini Haidar, “Adani project is like a government-to-government deal, says Sri Lankan FM: Sri Lankan Foreign Minister Ali Sabry,” The Hindu, March 06, 2023, https://www.thehindu.com/news/international/adani-investment-has-come-in-we-are-not-panicking-about-projects-sri-lankan-foreign-minister-ali-sabry/article66583333.ece.
[100] “Adani wind power project sparks concern in Sri Lanka,” Newswire, March 16, 2024, https://www.newswire.lk/2024/03/16/adani-wind-power-project-sparks-concern-in-sri-lanka/.
[101] “Adani’s ‘Power’ in Sri Lanka,” The Island, November 13, 2024, https://island.lk/adanis-power-in-sri-lanka/.
[102] “Adani Group withdraws from Sri Lanka wind project, citing delays,” Ada Derana, February 13, 2025, https://www.adaderana.lk/news.php?nid=105764.
[103] Interaction with Economics Team of Verite Research, Sri Lanka; inferences from interaction with Sri Lankan civil society and think tanks during a field visit in September 2024.
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