The two countries are also considering restarting the ferry service between Thalaimannar in northwestern Sri Lanka and Rameswaram in Tamil Nadu.

Amid financial difficulties facing the island of Sri Lanka, the two countries, India and Sri Lanka, signed a USD 1 billion credit line on Thursday. The LOC was signed in New Delhi for the supply of food and essential goods and this is one of the key elements of the aid package being provided by India to that country.

The LOC was signed in the presence of Indian Foreign Minister Dr. S Jaishankar, Finance Minister Nirmala Sitharaman and other senior officials and Sri Lankan Finance Minister Basil Rajapaksa, who was accompanied by senior officials.

After Rajapaksa’s last visit in December 2020, India has provided $1.4 billion to Colombo since January. This includes a $500 million credit line, a $400 million currency swap and $500 million for deferral of loans with Asian Clearing Union.

Focus of the minister’s visit

During his meetings with the top leaders in India, the focus was on pushing Colombo to complete the joint development of Palaly Airport and Kankesanthurai Port. These two projects in the pipeline are located on the Jaffna Peninsula, close to the coast of Tamil Nadu.

Once completed, these projects will boost that country’s tourism industry, which has been badly affected by the Easter bombings in 2019 and beyond from the global COVID-19 pandemic.

More connectivity

The two countries are also considering restarting the ferry service between Thalaimannar in northwestern Sri Lanka and Rameswaram in Tamil Nadu.

According to the Foreign Ministry, the visiting minister also met Prime Minister Nrarendra Modi and briefed him on the initiatives the two countries are taking to increase bilateral economic cooperation.

The visiting minister also expressed his gratitude for India’s support for Sri Lanka’s economy.

Pointing to the potential for increasing bilateral tourist flows, including through joint promotion of Buddhist and Ramayan circuits, Prime Minister Modi said Sri Lanka plays a central role in India’s Neighborhood First policy and the maritime SAGAR doctrine ( Security and Growth for All in the Region).

In recent weeks, several Indian projects have been given a green signal and Colombo has already started the process of an IMF bailout based on New Delhi’s advice. During the talks, India is reported to have asked Sri Lanka to implement the 13th Amendment to the Constitution on political decentralization to the Tamil-dominated north and east in letter and spirit.

Palaly Airport (now Jaffna International Airport)

India has been instrumental in extending the runway at Palay before it reopened to civilian flights from Chennai in October 2019. Sri Lanka has shown interest in the further development of this airport.

Port of Kankesanthurai

In 2018, both countries signed a Memorandum of Understanding on the development of this port with Exim bank providing funds to conduct feasibility studies and prepare a detailed project report. The agreement was to also conduct geospatial surveys and remove wreckage. However, no progress has been made so far.

As previously reported, Indian companies signed two other major deals for projects in the region this month. These were between National Thermal Power Corporation and Ceylon Electricity Board and are for setting up a solar power plant at Sampur in Trincomalee.

This post Neighborhood First: India Supports Sri Lanka; extends USD 1 billion LOC

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