India, Sri Lanka to work for economic, tech agreement

New Delhi and Colombo also unveiled plans to establish power grid connectivity, possibly boosting electricity trade in the neighbourhood.

Shashank Mattoo
Updated21 Jul 2023
Indian Prime Minister Narendra Modi shakes hand with Sri Lankan President Ranil Wickremesinghe. (AP)
Indian Prime Minister Narendra Modi shakes hand with Sri Lankan President Ranil Wickremesinghe. (AP)

IIndia and Sri Lanka on Friday agreed to start discussions on an Economic and Technology Cooperation Agreement (ECTA) and unveiled plans to cooperate on power, digital payments, connectivity and green energy. The ECTA with Sri Lanka will focus on tariff and non-tariff barriers as well as investment rules.

The development came during the visit of Sri Lankan President Ranil Wickremesinghe to New Delhi.

The two countries agreed to operationalize India’s Unified Payments Interface (UPI) to ease digital payments across borders. Foreign secretary Vinay Mohan Kwatra told reporters that the initiative could kick off in two to three months. Bhutan and Nepal have already adopted India’s signature digital payments platform.

New Delhi and Colombo also unveiled plans to establish power grid connectivity, possibly boosting electricity trade in the neighbourhood. According to the India-Sri Lanka Economic Partnership Vision released by the Ministry of External Affairs, this development “has the potential to not only bring down the costs of electricity in Sri Lanka but also help create a valuable and dependable source of foreign exchange for Sri Lanka.”

The two sides will also construct a multi-product petroleum pipeline for steady supplies to Sri Lanka. Last year, the island nation saw widespread fuel shortages as it grappled with a crippling economic crisis.

According to the vision document, New Delhi and Colombo will look to “undertake mutually agreed joint exploration and production of hydrocarbons in Sri Lanka’s offshore basins with an aim to develop Sri Lanka’s upstream petroleum sector.” Besides this, work on the Sampur Solar power project and cooperation in emerging green technologies related to green hydrogen and green ammonia will also drive the partnership on renewable energy.

Both countries agreed to resume passenger ferry services between Nagapattinam in India and Kankesanthurai in Sri Lanka and will look to resume similar services in other locations. An expansion in air connectivity is also on the cards.

A key issue to watch will be the role played by Indian companies in Sri Lanka’s divestment programme. Colombo is looking to divest its stake in state-owned enterprises as part of a push to reform its economy. According to reports in Sri Lankan media, the Tata Group has been eyeing Sri Lankan Airlines, the state-owned carrier, which is in line for divestment. Tata Sons Chairman N. Chandrasekaran was in Sri Lanka prior to President Wickremesinghe’s visit and met with India’s High Commissioner to Sri Lanka, Gopal Baglay. The economic partnership vision mentions India’s support for Sri Lanka’s divestment process.

Political issues also featured in the discussions when Wickremesinghe met Prime Minister Narendra Modi on Friday. The sensitive issue of the rights of Sri Lankan Tamils, which has been of particular concern to New Delhi, was discussed by the two leaders.

“We hope that the government of Sri Lanka will fulfil the aspirations of the Tamils. Will drive the process of rebuilding for equality, justice and peace. Will fulfill its commitment to implement the Thirteenth Amendment and conduct the Provincial Council Elections. And will ensure a life of respect and dignity for the Tamil community of Sri Lanka,” Prime Minister Narendra Modi said.

China’s military presence in the Indian Ocean and its use of Sri Lankan facilities for naval activities has been a key concern for New Delhi. India was upset by the presence of Chinese spy vessels, notably the Yuan Wang-5, which docked in Hambantota port in August 2022 despite Indian objections. Yuan Wang-6, another research vessel, entered the Indian Ocean even as India planned a test launch of its nuclear-capable Agni-ballistic missile.“We are neighbours. We naturally have a very long-standing and comprehensive relationship. When the leaders of the two countries meet, it is very natural for them to speak about their concerns,” Kwatra said. Discussions on these “challenges”, presumably related to China, were brought up during the meetings, he added.

“The Sri Lankan side did convey to us their sensitivity and respect for our security and strategic, sensitive concerns relating to what happens in our maritime domain,” Kwatra concluded.

Wickremesinghe returned to Sri Lanka on Friday after his meetings with Prime Minister Modi and President Droupadi Murmu.

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