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The government has asked state-run NHPC Ltd, the country’s largest hydropower generator, to explore developing projects in Sri Lanka, a person aware of the talks said.

India’s ministry of external affairs (MEA) recently called a meeting as part of an economic diplomacy initiative to engage with Sri Lanka, which is facing an unprecedented economic crisis, including lengthy power outages. The foreign ministry is expected to provide grants to set up these projects.

This comes after an earlier plan to set up a 500MW joint venture coal-fuelled thermal power plant in Sri Lanka fell through because of differences between NTPC and Sri Lanka’s Ceylon Electricity Board over payment security and sovereign guarantee. Sri Lanka has an installed power generation capacity of around 40GW compared with India’s over 401GW.

India is also looking at building an overhead electricity link with Sri Lanka after an earlier proposal to set up an undersea power transmission link to supply power to the island nation turned out to be prohibitively expensive. That plan involved state-run Power Grid Corp. of India Ltd setting up a link for 1,000MW between India and Sri Lanka, of which 30km would be under the sea. The transmission link was to run from Madurai in Tamil Nadu to Anuradhapura in Sri Lanka’s north-central province.

“A meeting was recently called by MEA about a proposed hydropower plant in Sri Lanka to be developed through the grant route. It is at a very preliminary stage," the person cited above said, requesting anonymity.

India is looking to build a South Asia-focused energy security architecture, Mint reported earlier. India’s energy diplomacy ranges from cross-border electricity trade to supplying petroleum products and setting up liquefied natural gas terminals.

Queries emailed to spokespeople for India’s ministries of external affairs, power, as well as NHPC and NTPC on Wednesday remained unanswered till press time.

In a recent post on Twitter, Sri Lanka’s Prime Minister Ranil Wickremesinghe said, “As a quarter of electricity is generated through oil, there is a possibility that the power outages will increase to 15 hours a day."

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