After the strong opposition from within, the Sri Lankan government was forced to revoke a 2019 agreement with India and Japan to develop the strategic East Container Terminal (ECT) at the Colombo Port.

Map Reading: Note all these major ports and try recalling their sequences in the clockwise and counter-clockwise direction.

What is the news?

• PM Mahinda Rajapaksa made a statement that the operation of the east terminal would be done by Sri Lanka Ports Authority on its own.
• Its cabinet has approved a proposal to develop the West Terminal at the Colombo Port as a PPP with India and Japan, which is seen as a bid to compensate India.
• It is unclear whether India would accept the latest proposal.

What is the Project?

• The tripartite agreement, signed by India, Sri Lanka and Japan, proposes to develop the ECT, which is located at the newly expanded southern part of the Colombo Port.
• The ECT is located 3 km away from the China-backed international financial city, known as Port City, currently being built in Colombo.
• A Chinese company was behind the controversial 2018 Hambantota port project, signed its first contract in the Port City last month.
• It is also on the map of China’s Belt and Road Initiative (BRI).

India’s reaction

• A few weeks ago EAM S. Jaishankar visited Sri Lanka where he discussed the development of the stalled project.
• India’s first response was that the island nation should not be taking a decision in a unilateral manner on an existing tripartite agreement.

Compensatory offer to India

• After the decision on revoking the 2019 agreement, SL has approved another proposal to develop the west terminal of the Colombo port with Japan and India.
• Commercially, the west terminal offer is better for India as it gives 85% stake for developers of the West Terminal against the 49% in ECT.

Sri Lanka expects India to rethink. Why?

• Indian response to this compensatory offer is unclear since there was no formal communication by SL authorities.
• Geo-politically, west terminal is almost the same India considers the security aspect and the necessity to have a port terminal in Sri Lanka.
• There is no difference between East and West Terminals except for the fact that development of the ECT is partially completed while the development of the West Terminal has to start from scratch.

SL version of the revocation

• Incumbent PM Mahinda Rajapaksa said the pressure was immense on the President Gotabaya Rajapaksa to cancel the 2019 agreement.
• The pressure was brewing so much that he was becoming so unpopular among the people.
• As per the agreement signed by the former Maithripala Sirisena-Ranil Wickremesinghe administration, India and Japan together were to hold 49% stake in ECT.
• What had finally made the government surrender before trade unions were the increasing support of many more sections in the society for the protests against privatization.

The inevitable factor: China

• This move can be easily interpreted as a reaction to Chinese communication to Sri Lanka.
• China has reportedly instigated trade unions and civil societies against this project.

Q.The threat of Chinese presence in South Asia can be tackled more effectively if India changes course in its dealings with its neighbours and becomes more sensitive to their concerns. Critically analyse.

Outcome: Souring of the ties

• For India, the strategic ECT project was important. Even the EAM has visited Colombo in January in this regard.
• Critics of the Sri Lankan government anticipate many national and international impacts surrounding the latest decision on ECT.
• Meantime, internationally an offended India can make life tough for Sri Lanka, isolating the tiny island nation, geo-politically and on the economic front.
• The economic isolation will not help Sri Lanka at a time when the country is taking steps to revive the economy amid a pandemic.

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