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Political issues overshadow trade ties between India and Sri Lanka

Political issues overshadow trade ties between India and Sri Lanka
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First Published: Sat, Apr 26 2008. 12 53 AM IST

On their guard: Sri Lankan army soldiers patrol the de facto frontline at Nager Kovil in the Jaffna peninsula. With the LTTE taking a beating from the army, the possibility of Tamil refugees from Jaff
On their guard: Sri Lankan army soldiers patrol the de facto frontline at Nager Kovil in the Jaffna peninsula. With the LTTE taking a beating from the army, the possibility of Tamil refugees from Jaff
Updated: Sat, Apr 26 2008. 12 53 AM IST
New Delhi: On the face of it, India’s economic relationship with Sri Lanka is going swimming along smoothly—Sri Lanka Airlines became the first foreign carrier to clock a hundred flights a week to 11 destinations in India in December—but analysts say there is a dark political undertone that continues to torment both sides.
Earlier this week, Tamil Nadu chief minister M. Karunanidhi called upon New Delhi to mediate in the ongoing war between the LTTE and the Sri Lankan government, that has been going on since 1983 and has claimed the lives of several leaders on both sides, including former prime minister Rajiv Gandhi.
On their guard: Sri Lankan army soldiers patrol the de facto frontline at Nager Kovil in the Jaffna peninsula. With the LTTE taking a beating from the army, the possibility of Tamil refugees from Jaffna streaming across the Palk Straits into Tamil Nadu is seen rising.
Moving a resolution in the state assembly, which asked the Centre to play a proactive role in ending the island country’s ethnic strife, Karunanidhi also urged the Tamil parties in Sri Lanka to unite, instead of warring with each other.
“Had the groups fought together, they would have succeeded by now, like in the case of Nepal,” Karunanidhi said, referring to the Maoists’ success in unseating the monarchy in the Himalayan kingdom which went to the polls on 10 April.
“The inter-group fighting has left many dead, which has actually weakened the cause of the Tamils,” Karunanidhi added, immediately setting off speculation whether India was intending to play a role similar to the one it had played after the Rajiv Gandhi-inspired accord in 1987, which brought the Indian Peace Keeping Force (IPKF) to fight the Liberation of Tamil Tigers for Eelam (LTTE) in the island nation.
While Sri Lankan defence spokesperson Keheliya Rambukwella downplayed Karunanidhi’s statement, saying Colombo “understood” political compulsions in India, the ministry of external affairs (MEA) in Delhi predictably kept mum on the affair.
But former IPKF commander Gen. Ashok Mehta pointed out that with the LTTE taking a beating by the Sri Lankan army, the possibility of thousands of Tamil refugees streaming across the Palk Straits from Jaffna into Tamil Nadu had become bigger than ever.
“While there is no popular upsurge in Tamil Nadu yet,” Mehta said, “fact is, pro-LTTE parties in Tamil Nadu (who are critical of Karunanidhi) like Vaiko’s MDMK will also take full advantage of the situation. In the end, they are all Tamils and blood is thicker than water.”
Senior MEA officials concede the security situation in Sri Lanka’s Trincomalee, Vavuniya, Killinochhi, Mannar and Jaffna areas is worrying. In 2006-07, officials estimate that as many as 25,000 refugees came into Tamil Nadu. They don’t know how many went back home.
Indian army officials privately expressed dismay at India’s policy, since the IPKF’s humiliating return in 1990, of not selling arms to Colombo. But they admitted they couldn’t possibly argue against Sri Lanka sourcing its defence supplies from Pakistan and China, traditionally considered hostile to India, if India was not going to do this itself.
Sri Lanka bought $50 million (Rs201 crore) worth of mortar ammunition, radio sets, hand-grenades, naval ammunition and tanks from Pakistan last year, the IANS said, adding that there has already been a big jump in orders this year.
And even though India trains as much as 53% of Sri Lanka’s armed forces—giving it 870 training slots in 2006-07, according to MEA sources—Colombo hardly seems to be paying heed to Delhi’s security concerns.
“We have to ensure that India’s pre-eminent position in the region is not compromised by Sri Lanka seeking arms from elsewhere,” national security adviser M.K. Narayanan said in the Capital recently.
But if President Mahinda Rajapakse’s government continued to believe that a military solution, without any devolution of political power, was the answer, Narayanan added, “this could lead to a flashpoint.”
Security analysts who sought anonymity said India, having tied its own hands on the supply of military supplies to Colombo, was seeking to compensate its weakness by seeking economic partnerships, especially in the Tamil-dominated regions of Sri Lanka’s north-east.
On the back of a $450 million coal-based 500MW electricity plant being jointly set up by India’s NTPC Ltd and the Ceylon Electricity Board in Trincomalee, Power Grid Corp. of India Ltd has taken up a feasibility study to link Sri Lanka with the southern Indian electricity grid. People in Sri Lanka familiar with the development said a protective cable under the seabed of the Palk Straits, from Madurai to Anuradhapura in central Sri Lanka, is being envisaged.
Meanwhile, Indian Oil Corp. Ltd (IOC) manages 170 petrol pumps in Sri Lanka, including the Trincomalee Oil Tank Farm, and Oil and Natural Gas Corp. Ltd is exploring for oil and gas in the Mannar region.
“The Saarc (South Asian Association for Regional Cooperation) idea to promote connectivity within the region, especially to harness our common energy flows, is now beginning to take real shape,” said Sri Lanka’s high commissioner to India, Romesh Jayasinghe.
The India-Sri Lanka growth story is powered by a free trade agreement (FTA) that came into being in March 2000 (when bilateral trade was a lowly $600 million), and is reaching its logical conclusion in a Comprehensive Economic Partnership Agreement (Cepa) likely to be finalized soon. Cepa will also allow trade in services, especially in the hospitality and tourism sectors.
India is Sri Lanka’s highest trading partner. Trade already touched $2 billion last year. FDI (foreign direct investment) by India in Sri Lanka is also significant and India is the fourth largest investor in Sri Lanka. Bharti Airtel Ltd, Gujarat Ambuja Ltd, Ashok Leyland Ltd and the Tata group are major players in that country. Mahindra and Mahindra Ltd is building an IT part in Kattunayake, outside Colombo. And the Aditya Birla group is exploring for carbon black in the country. Arvind Mills Ltd and the Vardhaman group already have investments in apparel units.
In turn, a major Sri Lankan company called Brandings has received permission to set up a $200 million facility to produce readymade garments and apparel in Tamil Nadu. And the hotel industry is eyeing an expansion in three-and-four star hotels as the Indian middle class explodes.
Four government-to-government credit lines are also under way: $100 million for capital goods, consumer durables and consultancy services, $31 million for 300,000 tonnes of wheat, $150 million for purchase of petroleum products and $100 million for refurbishing the Colombo-Matara railway after it was destroyed by the tsunami.
Indian officials point out that the Indian Navy was the first to assist Sri Lanka when the tsunami struck in December 2004.
With the Saarc summit scheduled to be held in Sri Lanka in August this year, Sri Lanka foreign minister Rohitha Bogollagama is expected in the Capital soon with a formal invite.
“While economic ties are going very well, it is the political relationship between India and Sri Lanka that occupies the mind,” Mehta said.
He pointed out that Sri Lanka had so far separated its ethnic Tamil politics from its war against the LTTE. While India believes the two are interrelated, Sri Lanka argues that the LTTE war is part of the global war against terrorism, Mehta said.
Karunanidhi’s statement in the Tamil Nadu assembly earlier this week may now change all that. “India has so far refused to tell Colombo to stop fighting and start talking to the LTTE. But with politics in Tamil Nadu hotting up, Karunanidhi may possibly have forced its hand,” Mehta added.
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First Published: Sat, Apr 26 2008. 12 53 AM IST