Gautam Adani meets Sri Lankan President Rajapaksa, eyes green investments

Adani Group Chairman Gautam Adani called on Sri Lankan President Gotabaya Rajapaksa in Colombo earlier this week, days after his company inked a deal with the state-owned Sri Lanka Ports Authority (SLPA) to develop and run the strategic Colombo Port’s Western Container Terminal (WCT).

“President Rajapaksa has recorded in his diary that he met with ‘an Indian friend’,” said Kingsley Ratnayaka, media advisor to the President.

The Adani group did not confirm the meeting. Emails sent to the group elicited no reply. However, Adani tweeted on Tuesday: “Privileged to meet President @GotabayaR and PM @PresRajapaksa. In addition to developing Colombo Port’s Western Container Terminal, the Adani Group will explore other infrastructure partnerships. India’s strong bonds with Sri Lanka are anchored to centuries’ old historic ties.”

Local media quoted senior Sri Lankan officials as saying that not just ports, the group had evinced an interest in investing in the island’s energy and wind sector. “The Adani group yesterday (Monday) explored the possibility of investing in Sri Lanka’s wind and renewable energy sector,” Nalinda Ilangakoon, the vice- chairman of CEB, said speaking to reporters in Colombo.

Ilangakoon said Gautam Adani and a 10-member delegation of senior officials travelled on a Sri Lanka Air Force helicopter to the northeastern district of Mannar on Monday to inspect the wind power farm there. Local media showed video grabs of the team boarding the helicopter.

The visit — and possible further investment — marks the formal beginning of a reset in India-Sri Lanka relations. The $700-million build-operate-transfer (BOT) West Container Terminal (WCT) at the Colombo Port that the Adanis have got will likely be the largest foreign investment ever in Sri Lanka’s port sector.

“In Sri Lanka, we see this as India’s move to contain China in this region,” said influential political analyst Jehan Perera from Colombo. The trilateral joint venture ropes in Sri Lanka’s biggest private sector infrastructure company, John F Keells (JFK), and the state-owned Sri Lanka Ports Authority (SLPA). JKF has a share of 34 per cent and SLPA 15 per cent, with the Adani group holding the rest.

A former Chief of Naval Staff, Sri Lanka, told Business Standard: “The WCT is a win-win for both India and Sri Lanka. It is right next to the China-developed China International Container Terminal (CICT) and it will be a precious vantage point for India inside a facility developed by China. It can take even the biggest container carrier in the world,” The WCT is the biggest of the three terminals in the Colombo Port.

Former Sri Lanka Chief of Defence Staff, Adm Ravindra C Wijegunaratne said Colombo Port’s Eastern Terminal was to have been developed jointly by India, Japan, and Sri Lanka’s state-owned Sri Lanka Port Authority. But because of the pressure from trade unions, the project had to be scrapped.

Both Japan and India were furious and it took intensive diplomatic work, including a Colombo visit at the height of the Covid-19 pandemic by Foreign Minister S Jaishankar, to get India the Western Container Terminal in lieu of the scrapped project. However, as the government in Sri Lanka had changed, new Prime Minister Mahinda Rajapaksa felt it was better not to drag governments into it and the Adani group was invited to invest.

“As 60 per cent of India’s container traffic transits through Colombo, it will be a very useful place for India to have a footprint,” said Wijegunaratne. “The work involved is not much: the harbour is deep and all that needs to be done is to build a jetty and the harbour where the containers have to be kept.” He added: “This is a very important milestone for India in the trans-shipment sphere.”

The Sri Lankan government is aware that the Adani group is working in Vizhinjam, which is a deep harbour and eventually could even be a threat to Colombo harbour.

“But there are problems because of political opposition faced by the Adani group from the Left Front in Kerala. So the Vizhinam project is delayed. There are no such problems in Sri Lanka,” said Wijegunaratne.

However, this is only a part of the reality. “The government wants to play down the Adani investment because the very forces that prevented India from getting the Eastern Container Terminal are still around,” said Perera. Many of the trade unions in Colombo Port are ‘supported’ by China.

Once it is developed, the WCT facility will cut the cost of goods transported via container carriers from India to Europe or the US by 15 per cent, Wijegunaratne said.

He added that as Chinese companies, backed by their government, had been controlling facilities in Colombo harbour, India’s reach was curtailed. This will no longer be the case, once the WCT is ready.

With the Adani investment, Sri Lanka’s cash-strapped economy will also get a reprieve.

Because of past debts — mainly repayment of sovereign bonds — and the catastrophic impact of Covid-19 on the main revenue earners for the island — tourism and foreign remittances — Sri Lanka’s economy is against the ropes. Though the country has resolutely ruled out an IMF loan, doubts persist about the nation’s ability to service debt amounting to $1.5 billion that matures next year.

Sri Lanka’s risk premium for a default is the highest in Asia. The country’s forex reserves are around $3 billion, up marginally from $2.8 billion in July because of $787 million from the International Monetary Fund’s special drawing rights allocation. But even then, barely enough to cover six weeks of imports. Inflation is hovering near 6 per cent and food prices are up more than 11 per cent over the same period last year.