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India and the UAE have agreed to jointly develop an energy hub in Sri Lanka, India’s foreign ministry announced on Saturday, a significant step in New Delhi’s growing strategic engagement with Colombo amid intensifying competition with China in the region.
The trilateral pact was signed during Indian Prime Minister Narendra Modi’s visit to Sri Lanka—the first by a foreign leader since President Anura Kumara Dissanayake assumed office in September.
India and Sri Lanka have been strengthening ties as Colombo continues its recovery from the 2022 financial crisis, during which India extended $4 billion in support.
Saturday’s agreement boosts New Delhi’s competition with China, whose state energy firm Sinopec (600028.SS) has signed a deal to build a $3.2-billion oil refinery in Sri Lanka’s southern port city of Hambantota.
The energy hub in the strategically important city of Trincomalee, a natural harbour in the Sri Lanka’s east, will involve construction of a multi-product pipeline and may include using a World War Two tank farm partly held by the Sri Lankan subsidiary of Indian Oil Corp, Indian Foreign Secretary Vikram Misri told reporters in Colombo.
”The UAE is a strategic partner for India in the energy space and therefore was an ideal partner for this exercise that is being done for the first time in the region,” Misri said. ”The exact contours of UAE’s role will be elaborated once the business to business discussions kick off.”
Impact Shorts
More ShortsThe three nations will next choose business entities that will consider the financing and feasibility of projects for the hub, he said.
Modi also inaugurated a $100 million solar power project, a joint venture between Ceylon Electricity Board and India’s National Thermal Power Corp.
India and Sri Lanka also concluded their debt restructuring process, Foreign Secretary Misri said. Sri Lanka owes about $1.36 billion in loans to EXIM Bank of India and State Bank of India, according to Sri Lanka Finance Ministry data.
Colombo kicked off debt restructuring talks after it defaulted on its debt in May 2022, signing a preliminary deal with bilateral creditors Japan, India and China last June.
India and Sri Lanka also signed pacts on power grid connectivity, digitalisation, security and healthcare.
With inputs from agencies