| by Col R.
Hariharan
 |
There is no point in either blaming China for this development or Sri Lanka’s kid glove treatment of China in comparison with India. Chinese style of operation makes it free from political issues that usually clutter up any deal between India and Sri Lanka. Moreover, China is Sri Lanka’s is biggest creditor while India is a large benefactor of Sri Lanka’s grants.
( December 23,
2012, Chennai, Sri Lanka Guardian) Some of the recent policy decisions of
Sri Lanka affecting Indian commercial interests are sending disturbing signals
that have the potential to affect Indo-Sri Lanka relations. Will these storm
signals add to the political stress created by the non implementation of the
much maligned 13th Amendment to the Constitution?
Sri Lanka
watchers are probably already debating this question.
India-Sri Lanka
relations, despite occasional hiccups have remained cordial all along because a
sense of pragmatism among the national leadership in both countries prevailed
over petty agendas and emotional hang-ups. This has given the relationship a
unique character in South Asia. However, this had not precluded stress building
up in times of national crisis in either country. The Eelam War IV (2006-09)
was a recent example of when the two countries successfully managed it, though
Indian government’s credibility within India had suffered because of it.
If the present
policy trend is left unchecked, it could affect Sri Lanka’s credibility among
the Indian non-political segment particularly the trading community. The loser
would be Sri Lanka, as it needs India’s whole-hearted economic support to keep
a burgeoning economic down slide within manageable proportion in the coming
months. Of course, this is in addition to the need for India’s political
support to handle when the ghosts of Sri Lanka’s aberrations of governance
catch up at the UN Human Rights Council session in April 2013.
The first issue
relates to the Sampur thermal power project hanging fire since December 2006
when the governments of India and Sri Lanka, and National Thermal Power Corp
(NTPC) of India and Ceylon Electricity Board (CEB) signed a memorandum of
understanding to construct a coal-fired 500 Mega Watt power plant in Eastern
Province. The time-plot of the
disastrous progress which has not yet left its paper trail is given below. It
shows how casually such a huge project has been handled:
Up to September 7, 2011: Sampur is chosen
as site for the plant but discussions go on a number of issues including
technology, pricing, acquisition of 500 acres of land, and organizing coal
supply for the plant carried on in interim etc.
Sept 7, 2011: NTPC and CEB sign the
agreement to set up a joint venture - Trincomalee Power Company to manage the
project. The partners to contribute $75
million each towards equity and rest was to be met from borrowings. According
to CEB website the Project started in Sept 2011 was expected to complete it by
July 2014. Now it will be behind schedule by one year as the project has not
started on ground.
May 10, 2012: Power and Energy Minister
Patali Champika Ranawaka announces in parliament “decision to set up the
plant.” [This internal decision has taken 8 months!] He adds “the new Sampur
power plant is not an Indian project. It is done by us. We have taken measures
to acquire [emphasis added] 500 acres of land.”
June 21, 2012: On India’s concern at the
delay in the project taking off, Minister Ranawaka explains to the Indian Prime
Minister Dr Manmohan Singh that the project was awaiting approval by the new board,
jointly appointed by India and Sri Lanka, and “the ball was now in India’s
court.”
December 2012: A Sunday Times report quoted
Power and Energy Secretary that the CEB wanted the NTPC to lower its operation
and maintenance cost estimates. Engineers were also urging the Indians to
reduce the “heat rate” so that less coal would be burned up per unit of
electricity. The CEB would have to bear these expenses. Minister Ranawaka says
the CEB was concerned about some interest rates cited in NTPC’s feasibility
report. Power sector officials said the NTPC wanted an “exorbitant” return on
investment while quoting steep rates of interest on loans for the project. He
further says discussions were still going on. “The CEB and NTPC must reach a
consensus. Otherwise it will be a huge loss for the CEB and the country and
will create a bad name for the Indian government as well.” The land in Sampur
has been sectioned off. Result: Construction cannot start till the power
purchase and the implementation agreements are signed.
The surprising
thing is that nobody is worried about the paper war continuing without
productive results when Sri Lanka is facing a crippling power shortage. Not the
least Champika Ranawaka, the Minister responsible for this Sri Lankan project.
What could be
the real reason for the delay? Minister Ranawaka, an electrical and power
engineer by qualification, provides the answer in one of his interviews: “My reading is that an assortment of reasons
has contributed to this development.
They range from India’s general antipathy towards Sri Lankan nationalist
movement, to a fear psychosis that I am backing the Chinese against the
Indians, the latter mainly due to the Norochcholai power plant.”
He goes on
further: “As for the nationalist movement in Sri Lanka, it is no exaggeration
that there’s a JHU supporter in every patriot. Ours is not just a political
party with paltry three seats in parliament but a massive effort that leads the
patriotic movement and especially the Sinhala consciousness. The Indian
agencies and the section of the media backed by it are alive to this reality.
They hate Sri Lanka’s patriotic movement as it strongly resists any form of
Indian intervention – be they political ones in the form of forced policy,
economic pressure in the form of CEPA or any other. Hence they see a need to
malign me, the general secretary of the party and perhaps many others.”
If the key
minister responsible for the project has this underlying mindset about India,
how could this Indian-assisted project progress? Logically, with the present
set up the whole the future looks bleak for the project. President Rajapaksa is
fully aware of India’s concern at the highest level on the delay. India cannot
advice him on his course of action on a matter that could be interpreted as
internal. So there is no need for India to politicise this issue at all, as
some would like to do, but take a call on commercial merits of the investment.
India must take
action to ensure its investment in this public sector project funded by Indian
tax payers’ money is productively used. Already the project is one year behind
schedule and delay means wasted interest cost of investment. India cannot
afford to incur this cost on a non-starter project due to the pet aversions of
a Sri Lankan minister. The least India can do is to make known its deadline to
go ahead with the project or pull out of it.
Tata’s did this
after their investment proposal for a 4 billion plus was incubating with
Bangladesh government for four years. And after incurring a loss while waiting
for a decision, they pulled out to make profitable investment elsewhere. With
the signing of the Free Trade Agreement with ASEAN yesterday, investment opportunities in Indo-ASEAN trade
will increase.
The second
irritant relates to India’s automobile exports.
India is a dominant player in Sri Lanka’s automobile industry for some
time now. Indian cars, particularly in the subcompact category, have 80 percent
market share. They have established themselves both on competitive price and
quality. Indian motor cycles and three wheelers are equally popular.
According to
LiveMint report datelined New Delhi “Through 2012, Sri Lanka has made it
difficult for Indian auto exporters, first by increasing import duty
significantly in April, and following up with the increase in excise duty. Sri
Lanka has increased excise duty on utility vehicles to 173% from 100%
previously. Total duty on cars less than 1,000cc increased from 120% to 200%,
including a 47% increase in excise.” Sri Lanka business media quoted the
managing director of Associated Motorways Pvt Ltd, Colombo to say that “A 50%
drop on sales came in style after April, not only in automotive sales but a tremendous
slowdown in the industry itself.”
According to him a Maruti 800 cc that cost SL
Rs 1.25 million increased to SL Rs 1.6 million after April 2012. But after the
increase in excise duty imposed in November 2012, the price of the same car
went up further to SL Rs 1.75 million. The same is the case with three-wheelers
and motorcycles. The import duty increase in April 2012 also killed the second
hand Japanese imported car business and the dealers suffered heavy loss. The price increases have now placed the most
popular subcompact cars out of the reach of common man.
Even as the
excise duty in November was crippling Indian automobile business, it was
amusing to see Sri Lanka ministers and bureaucrats promoting Sri Lanka as a
business destination while receiving a 13-memebr high power Indian business
mission (the fourth one this year!) in Colombo. The delegation headed by Adi Godrej and
included doyen of Indian automobile industry Rahul Bajaj. They would not have
failed to notice the glaring disconnect between Sri Lanka’s talk and action.
The anachronism
is that even while Indian cars were being elbowed out of the market by fiscal
measures, the government had cleared a Chinese proposal to set up car assembly
plants in Hambantota and Gampaha with an investment of $ 20 million.
India-Sri Lanka
bilateral trade is now worth $5.1 billion in 2011-12, with India exporting $4.3
billion worth of goods to Sri Lanka in 2011-12 (over 22% of Sri Lanka’s
imports.) Indian investment in Sri Lanka has doubled from $ 78 million in 2009
to $ 147 million. Tata, Bajaj, Godrej, Bharti, and RPG are already well
established in Sri Lanka. It makes sense for India and Sri Lanka to further
their business and trade links so that investment flow from India would
increase economic opportunities for the people of Sri Lanka just as India
benefits from Sri Lanka’s strengths. But it is for Sri Lanka to take a call on
this as India’s options as a fast growing economic power are many more.
There is no
point in either blaming China for this development or Sri Lanka’s kid glove
treatment of China in comparison with India. Chinese style of operation makes
it free from political issues that usually clutter up any deal between India
and Sri Lanka. Moreover, China is Sri Lanka’s is biggest creditor while India
is a large benefactor of Sri Lanka’s grants. It is natural for the creditor to
get preference over donor when it comes to deal making. Otherwise, the lender
would demand his pound of flesh; and probably China is already doing it.
To put it in a
nutshell, probably time has come for Government of India to carry out a serious
reappraisal and review of its policy options in Sri Lanka.
(Col R
Hariharan, a retired Military Intelligence specialist on South Asia, is
associated with the Chennai Centre for China Studies and the South Asia
Analysis Group. E-Mail: colhari@yahoo.com Blog: www.colhariharan.org )
Subscribe Us
