India, Sri Lanka agree to boost economic and energy ties

The leaders of India and Sri Lanka have agreed to improve their countries’ economic and energy ties, as well as consider building a land link between them.

The announcements on Friday came during Sri Lanka President Ranil Wickremesinghe’s visit to India where he held talks with Prime Minister Narendra Modi.

Wickremesinghe arrived in New Delhi a day earlier for the official visit, his first since taking up the top job last year after an economic meltdown forced his predecessor to flee.

India’s support of nearly $4bn between January and July last year was critical for Sri Lanka after it almost ran out of dollars and sank into a financial crisis that left it struggling to fund essential imports including fuel and medicine.

“The past one year has been full of challenges for the people of Sri Lanka. Being a close friend, as always, we stand shoulder-to-shoulder with the people of Sri Lanka,” Modi said in his remarks on Friday.

He said the two leaders “adopted a vision document for our Economic Partnership” to strengthen maritime, air, energy and people-to-people connectivity, to accelerate mutual cooperation in tourism, power, trade, higher education, and skill development.

Modi also said the two sides would work quickly to connect their electricity grids and study the feasibility of building a petroleum pipeline and a land bridge between the countries.

Establishing “land connectivity” across the Palk Strait, which in places is only about 25km (15 miles) wide, would give India access to the key ports of Trincomalee and Colombo and strengthen a “millennia-old relationship”, the neighbours said in a strategic document.

The projects to connect the power grids through undersea cables and the oil pipeline were expected to cost about $4bn in total, according to officials on both sides. Few details were released on the agreements on renewables.

Wickremesinghe said that “constructing a multi-product petroleum pipeline from the southern part of India to Sri Lanka will ensure an affordable and reliable supply of energy to Sri Lanka.”

‘New chapter’

The two countries also will soon restart negotiations on a more expansive trade deal known as the Economic and Technological Cooperation Agreement.

Wickremesinghe said he had updated Modi about the reform measures being taken by his government to resolve the island nation’s financial crisis and expressed appreciation for the support provided by India for the “most challenging period in modern history”.

India is part of a common platform established with Japan and other Paris Club members to help Sri Lanka restructure its debt. It remains a key creditor with $1.9bn in outstanding debt.

Wickremesinghe’s visit to the regional powerhouse was “a clear signal that India’s support over the last year is appreciated”, said Constantino Xavier, a fellow at the Centre for Social and Economic Progress.

It showed that India “will be the most important partner for Sri Lanka to reset its economy, its bureaucracy, its decision-making systems for future economic partnerships”, he added. “This visit marks, in that sense, a new chapter.”

While New Delhi has traditionally had strong ties with its southern neighbour, Sri Lanka has become a jousting ground between India and China due to its strategic location in the Indian Ocean.

The two leaders also expressed support to fully implement an India-backed scheme to share power with Sri Lanka’s ethnic minority Tamil population in the island’s north and east provinces. The minority holds linguistic and cultural ties with Tamils in southern India.

A civil war between the majority Sinhala-controlled Sri Lankan government and ethnic Tamil rebels killed at least 100,000 people, according to United Nations conservative calculations, before it ended with the rebels’ defeat in 2009.

“We hope that the government of Sri Lanka will fulfil the aspirations of the Tamils,” Modi said.

Wickremesinghe said he presented Modi with a proposal for reconciliation and power sharing, saying he has urged his parliament to reach a consensus and resolve the long-running conflict. His delegation also included two Sri Lankan Tamil ministers.