India Boosts Energy and Defense Ties in Strategic Sri Lanka Visit
Prime Minister Modi’s Sri Lanka visit deepens India-Sri Lanka energy and defense ties as both nations counter China’s growing regional influence.
India Deepens Strategic Ties with Sri Lanka in Key State Visit
As regional power dynamics shift in South Asia, India is stepping up efforts to strengthen its foothold in the Indian Ocean by expanding energy cooperation and defense ties with neighboring Sri Lanka. In a symbolic and strategic move, Indian Prime Minister Narendra Modi arrived in Colombo for a high-profile state visit—his first to Sri Lanka since Anura Kumara Dissanayake assumed the presidency in September 2024.
The two-day visit underscores not only India’s commitment to bilateral cooperation but also its growing concern over China’s deepening influence on the island nation. The Indian Prime Minister’s presence marks a turning point in regional diplomacy, with energy investment and defense collaboration at the heart of the talks.
A Post-Crisis Opportunity for Investment
Sri Lanka, still reeling from its 2022 financial collapse, views Modi’s visit as a springboard to economic recovery. The island nation has been actively courting foreign investors to reboot its economy, which was paralyzed by soaring debt, dwindling foreign reserves, and a devastating fuel crisis just three years ago.
During the height of the economic emergency, India stepped up as a crucial partner, delivering nearly $4 billion in financial aid in the form of credit lines, currency swaps, and humanitarian supplies. That support not only bridged immediate gaps but also helped cement India’s image as a reliable neighbor amid mounting Chinese loans and projects that had drawn criticism for lack of transparency.
Now, as Sri Lanka eyes a more stable financial future, Indian capital is once again being welcomed—not just as a bailout but as a long-term stake in the country’s revival.
Energy Deals That Power Geopolitical Influence
One of the major highlights of Modi’s trip is a renewed focus on energy cooperation. India and Sri Lanka are expected to finalize agreements spanning solar power, liquefied natural gas (LNG) supply, and critical infrastructure development.
A symbolic groundbreaking ceremony for a 120-megawatt solar power project—jointly developed by India’s National Thermal Power Corporation (NTPC) and Sri Lanka’s Ceylon Electricity Board—signals a green pivot in bilateral energy policy. The project is part of a broader vision to transform Sri Lanka’s eastern port of Trincomalee into a regional energy hub, complete with LNG terminals, cross-border electricity grids, and export-oriented oil-refining capacity.
“Energy cooperation is no longer just an economic issue—it’s a geopolitical one,” says energy policy analyst Dr. Shalini Das from the Observer Research Foundation. “For India, helping Sri Lanka diversify away from fossil fuels while competing with Chinese-backed oil refinery projects is a two-pronged strategy: climate diplomacy and regional influence.”
Trincomalee vs. Hambantota: The New Strategic Battleground
India’s push to develop Trincomalee, a naturally sheltered deep-water port on Sri Lanka’s east coast, is seen as a direct counter to China’s strategic footprint in the southern port of Hambantota.
While India explores a joint-venture oil refinery in Trincomalee, China’s state-owned Sinopec has already inked a $3.2 billion deal to build a competing refinery in Hambantota. This growing competition highlights how infrastructure development in Sri Lanka has become a microcosm of the broader India-China rivalry playing out across South Asia.
India is also looking to boost the role of Indian Oil Corporation (IOC), currently Sri Lanka’s second-largest fuel supplier, to challenge China’s grip on the island’s energy logistics.
Digitalization, Healthcare, and Defense on the Agenda
Modi’s visit isn’t limited to energy. A suite of pacts covering digital infrastructure, healthcare collaboration, and military cooperation is also expected.
According to the Indian Ministry of External Affairs, one of the top priorities is wrapping up a new defense agreement aimed at enhancing Sri Lanka’s maritime security and border control. While specifics remain under wraps, earlier discussions hinted at the supply of Indian-made arms and technology to modernize Sri Lanka’s defense forces.
In the digital sphere, plans are underway to expand India’s Unified Payments Interface (UPI) into Sri Lanka, following successful implementation in countries like the UAE, Singapore, and France. If completed, the agreement could revolutionize cross-border transactions and strengthen India’s digital diplomacy in the region.
A Delicate Balancing Act for Colombo
President Dissanayake faces a tightrope walk: welcoming Indian investments while managing existing obligations to China. More than 10% of Sri Lanka’s external debt is owed to Chinese creditors, and projects like Hambantota Port and the Colombo Port City remain Beijing-backed flagships.
Yet, recent debt restructuring talks have pushed Colombo closer to New Delhi. India, one of Sri Lanka’s largest bilateral lenders, agreed to restructure roughly $1.36 billion of its loans—a critical step that helped unlock IMF support and opened doors to new investment.
Experts say Dissanayake’s administration is now leaning toward a more balanced foreign policy after years of heavy Chinese involvement during the previous regime.
“Sri Lanka learned the hard way about overdependence on a single external actor,” said Harsh V. Pant, professor of international relations at King’s College London. “The pivot toward India reflects both necessity and strategy.”
U.S. and Global Implications
Washington is watching these developments closely. With the Indian Ocean emerging as a critical theatre in the Indo-Pacific strategy, enhanced India-Sri Lanka ties could complement U.S. efforts to counterbalance China’s influence in the region.
In 2023, the U.S. State Department pledged over $553 million in development assistance to Sri Lanka, including support for democratic governance, civil society, and economic resilience. A stronger India-Sri Lanka relationship could align with American interests by fostering regional stability and reducing Beijing’s leverage.
A New Chapter in Regional Diplomacy
Prime Minister Modi’s visit to Sri Lanka is more than a diplomatic formality, it is a signal of India’s renewed intent to shape the region’s future through partnership, infrastructure, and mutual development.
From clean energy projects to defense pacts, the visit lays the groundwork for a deeper bilateral relationship that extends beyond crisis aid into long-term strategic collaboration. As Sri Lanka seeks stability and growth and India aims to secure its sphere of influence in the face of rising Chinese power, the outcomes of this visit may well shape South Asia’s geopolitical landscape for years to come.
Source: (Reuters)
(Disclaimer: This article is based on currently available public reports and government statements as of April 2025. Developments may evolve and should be verified through official channels for real-time accuracy.)
Also Read: Trump Tariffs Shake Global Markets, Hit Japan Banks