The Colombo port setback for India

Description

Context: After strong opposition from trade unions across the country, Sri Lanka has unilaterally pulled out of a 2019 agreement with India and Japan for developing the strategic East Container Terminal (ECT) at the Colombo Port.

Background:

In 2019, India and Sri Lanka signed a memorandum of understanding for co-operation on economic projects.
The MoU did not mention the Eastern Container Terminal, but India and Sri Lanka had already been in discussion for its development and operation.
Unlike Chinese projects, big projects by India have always faced opposition in Sri Lanka.
Sinhala-Buddhist politicians either ride such opposition opportunistically when it suits them, sometimes using this as a pretext over the real reason, or are reluctant to go counter to the public sentiment for fear of being attacked for surrendering to “big brother India”.
For this reason, India had roped Japan into at least two of the projects listed in the MoU – the ECT, and an LNG Terminal/Floating Storage Regasification Unit (FSRU) in Kerawalapitiya/Colombo with a piped gas distribution system along with retail outlets for CNG etc — believing this would ensure the project comes through.
Japan was the biggest donor to Sri Lanka through the years of conflict. The Geoffrey Bawa-built Sri Lankan parliament, which came up at the height of the conflict, was funded by Japan.

Sri Lanka’s consolation offer:

ECT would be developed and operated as a wholly owned container terminal of the Sri Lanka Ports Authority (SLPA), a cabinet meeting approved a proposal to develop the West Terminal at the Colombo Port as a Public Private Partnership with India and Japan, seen as a bid to compensate for taking away the ECT.
The Sri Lankan side believes it can persuade India and Japan that the West terminal is strategically no different from the East, and commercially even better.

Importance for India:

For India, the ECT deal was important as between 60 and 70 percent of transhipment that takes place through it is India-linked.
The ECT is also considered more strategic than any other in Colombo Port.
It is located next to the Colombo International Container Terminal (CICT) project, a joint venture between China Merchants Port Holdings Company Ltd. and SLPA.
India had been offered the Western Container Terminal earlier, but had refused. The ECT is already operational, while the WCT has to be built from scratch.
The implementation of the ECT agreement was high on Jaishankar’s agenda when he visited Colombo in January.