Sidelined in Sri Lanka

In March, India voted in favour of a UN resolution demanding stronger investigation and action on the human rights violations against Tamils living in Sri Lanka. China voted with Sri Lanka. Soon after, the Sri Lankan government said it was taking back part of an oil depot in Trincomalee from Lanka IOC, the local arm of Indian Oil Corporation.

Next, there were reports that SupremeSAT, the first Lankan satellite operator, had signed a $320 million (Rs 1,740.2 crore) deal with the Chinese state-owned China Great Wall Industry Corporation to launch the island’s first communication satellite.

“One by one, the Chinese are getting into every area that is strategic for India,” says Brahma Chellaney, professor of strategic studies at Delhi-based think tank, the Centre for Policy Research. He says India is being squeezed out of infrastructure and telecommunications, which are militarily important because the island lies a mere 31 km from India’s southern tip.

So, while India is spending $270 million to build homes across five northern Lankan districts—its most expensive single-project assistance to any country—China is building the $100 million Lotus telecommunications tower in Colombo. While India is fixing the 90 km Pallai Railway line for $185 million, China has its grip on vital energy projects, including the $455 million Puttalam coal project, the $209 million Mattala Rajapaksa International Airport, and the $1.5 billion Hambantota port, one of the largest in the world and located in a way to potentially control shipping through the busy Palk Strait.

The Sri Lankan government insists that Chinese assistance has no strategic depth, and President Mahinda Rajapaksa said most projects were first offered to India, which dithered, after which the Chinese stepped in.

India claims that the Hambantota Port project had no commercial viability when it was offered. “The Sri Lankans have played an astute game,” says former Indian foreign secretary Kanwal Sibal. “India has been given a consulate in Hambantota, which allows us to monitor that the port is not used for military purposes. But the Chinese have expanded their scope and reach into Sri Lanka at India’s expense in every way.”

Another incident causing concern is that land in Colombo, earmarked in 2010 for an Indian Cultural Centre, was given to a Chinese aircraft maker in 2012. Diplomatic channels are also abuzz with rising negativity for India among Lankans.

“India is seen as a weak nation, embroiled in domestic politics, with a government that is willing to talk to Pakistan even after 26/11, so what is a piece of land for a cultural centre?” says Sibal. “India inspires neither fear nor awe. The Chinese inspire both.”

Sri Lanka-India trade reached an all-time high of $5 billion last year, and the island nation’s trade with China is $2 billion lower. However, Chinese financial assistance exceeds India’s contribution by millions of dollars. In the last stages of the civil war, Chinese arms to the Sri Lankan Army helped end the 25-year conflict. (Experts say that the Sri Lankan victory memorial has a statue of a soldier carrying a Chinese-made rifle.)

The one bright spark for India is private investments. In 2011, Indian companies invested $98 million in Sri Lanka, while Chinese companies brought in only $3.5 million. However, Chinese investments in heavy infrastructure are led by its state-run companies, and in every sector, Lankan trade with China is growing faster than with India.

“Sri Lanka is playing us against China,” warns Chellaney. “At some point, the Indian government will have to guard its interests.”