India, Sri Lanka sign MoU on cooperation on economic projects

India and Sri Lanka have signed a Memorandum of Understanding (MoU) on “Cooperation in Economic Projects” during the on-going visit of the Sri Lankan Prime Minister Ranil Wickremesinghe to India.

Wickremesinghe and his Indian counterpart, Narendra Modi, welcomed the signing of the MoU on Wednesday and expressed satisfaction over the implementation of projects already agreed upon.

They hoped that the various projects mentioned in the MoU would also be executed expeditiously.

Controversial

Though the draft of the MoU signed on Wednesday was approved by the Sri Lankan cabinet, it became controversial with petroleum sector trade unions going on a crippling strike on Monday, a day before the departure of Wickemesinghe to India.

Indian officials regretted that the Sri Lankan public were not made aware of the fact that the projects are “Joint Ventures” between Indian and Sri Lankan government entities and are not outright sales to Indian entities.

Trincomalee oil tanks issue

For example, the proposed deal between India and Sri Lanka on the management of the 99 oil tanks in Trincomalee, envisages a Joint Venture between the state-owned Indian company Lanka Indian Oil Corporation (IOC) and the Sri Lankan public sector entity, Ceylon Petroleum Cooperation (CPC). But the agitation against the deal was based on the wrong notion that the tanks were to be given away wholesale to India on a throw away fee of $100,000 per annum.

The Maithripala Sirisena-Ranil Wickremesinghe government did not think it was necessary to correct this impression. In fact, to get the unions to call off the crippling strike, the Prime Minister assured that he will not sign any agreement on the tanks during his four-day visit to India beginning on Apr 25.

However, the areas for cooperation envisaged in the MoU signed in Delhi are:

A Liquefied Natural Gas (LNG) fired 500 Megawatts capacity LNG Power Plant as well as LNG Terminal or Floating Storage Re-gasification Unit (FSRU) in Kerawalapitiya. India will assist Sri Lanka in the enhanced use of Natural Gas, including the setting up of a piped gas distribution system in Colombo and in suburban areas in Sri Lanka; help set up retail outlets for the supply of Compressed Natural Gas (CNG) to the transportation sector in Sri Lanka; and convert fuel-based power plants to LNG power plants. All this will be done jointly with the Ceylon Petroleum Corporation (CPC).

India will set up a 50 MW (extendable to 100 MW) Solar Power Plant in Sampur; form a Joint Venture to develop the 84 oil tanks in the Upper Tank Farm in Trincomalee, and sign a land lease agreement for 50 years in favour of the Lanka Indian Oil Corporation (LIOC) Ltd. India will also make joint investments in the development of ports, a petroleum refinery and other industries in Trincomalee.

India will set up Industrial Zones or Special Economic Zones in identified locations in Sri Lanka. It will also develop the Dambulla-Trincomalee road as an Expressway through joint investments with Sri Lanka. The development of the Mannar-Jaffna and Mannar-Trincomalee highways is also on the cards.

India will help develop the railway sector in Sri Lanka through projects relating to track upgrading and the purchase of rolling stock. India and Sri Lanka will encourage Indian companies to invest in a container terminal in Colombo Port (the Eastern Terminal), considering that 70 percent of the Colombo port’ business is Indian trans-shipment.

Ethnic and fishing issues

Prime Ministers Modi and Wickremesinghe touched on two other controversial issues. Modi requested his counterpart to see that Sri Lanka deals with Tamil Nadu fishermen who stray into Sri Lankan waters in the Palk Bay in a humanitarian way. In turn he explained to Wickremesinghe the steps taken by India to wean Tamil Nadu fishermen men away from shallow water fishing and get them to do deep sea fishing.

Modi congratulated Sri Lanka for co-sponsoring the resolution on the human rights situation in his country at the last session of the UN Human Rights Council and hoped that the commitments made therein will be met in the given time period of two years.