India takes on China with $700 million port deal in Sri Lanka

The Sri Lanka Ports Authority (SLPA) said it has signed an agreement with India’s Adani Group to build a new terminal, next to a $500 million Chinese-run jetty at the sprawling port in the capital Colombo.

“The agreement of over $700 million is the largest ever foreign investment in Sri Lanka’s port sector,” the SLPA said in a statement.

It said Adani would partner with a local group John Keels and the Sri Lankan government-owned SLPA as a minority partner.

John Keels said the company will own 34 per cent while Adani will have a 51 per cent controlling stake in the joint venture known as Colombo West International Terminal.

The new container jetty will be 1.4 kilometers long, with a depth of 20 meters and an annual capacity to handle 3.2 million containers.

The first phase of the project with a 600-metre terminal is to be completed within two years, the company said. The terminal will return to Sri Lankan ownership after 35 years of operation.

India’s plans to enter the strategic Colombo port go back several years, but they failed in February when trade unions affiliated with the ruling coalition opposed New Delhi’s grant of a partially built terminal within the port.

Later, the government asked Indians to build a new terminal adjacent to the Chinese-run Colombo International Container Terminal (CICT).

Colombo is located in the Indian Ocean between the major hubs of Dubai and Singapore, which means its ports are in high demand for influence.

Two Chinese submarines landed at CICT in 2014, raising concerns in India, which considers neighboring Sri Lanka within its sphere of influence.

Since then, Sri Lanka has refused to allow more Chinese submarines to be deployed there.

In December 2017, unable to repay a large Chinese debt, Sri Lanka allowed China Merchants Port Holdings to take over the southern Hambantota port, which straddles the world’s busiest east-west shipping route.

The deal, which granted the Chinese company a 99-year lease, raised fears about Beijing’s use of a “debt trap” to expand its influence overseas.

India and the United States have also expressed concerns that a Chinese foothold in Hambantota could give Beijing a military advantage in the Indian Ocean.