Advertisement Sri Lankan Foreign Minister Mohamed Ali Sabry recently told The Hindu’s Suhasini Haidar that the Adani project in Sri Lanka “is like a government-to-government deal.” He went on to say that it was the Indian government that “identified the Adani Group for infrastructure projects including Northern Sri Lanka wind power project.” Apart from the renewable energy projects in northern Sri Lanka, the Adani Group is also involved in the development of the U.S. $700-million West Container Terminal (WCT) project at the Colombo Port. Ali Sabry added that his government is also “very, very confident” that the Adani Group has the necessary funding to finalize these projects despite the conglomerate losing over $145 billion in one month following a critical report by investment research firm Hindenburg Research LLC. “So, we are not panicking at all. And we are very, very confident they will be able to complete the project. And this will become a precursor for much more investment to come from so many diverse investment institutions in India. So, we are definitely not worried,” Sabry said. Diplomat BriefWeekly NewsletterN Get briefed on the story of the week, and developing stories to watch across the Asia-Pacific. Get the Newsletter   The Sri Lankan foreign minister’s interview seems to confirm speculations about the special treatment that the Adani Group received in Sri Lanka in recent years, allegedly due to the pressure exerted by the Indian government on its Sri Lankan counterpart.

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The Adani Group is closely associated with the Narendra Modi government in India. This was the main reason for the opposition of Sri Lankan trade unions and opposition groups to its investments in Sri Lanka’s strategic industries. They see Adani’s presence in the country as geostrategic, not commercial. Currently, Adani is involved in two main sectors – port development and energy – in Sri Lanka. Its involvement in both sectors is controversial. Regarding Adani Group’s involvement in Sri Lankan port development, in early 2021 reports emerged of Adani Ports and Special Economic Zone Ltd being offered a 49 percent stake at the East Container Terminal (ECT) of Colombo port. This announcement came at a time when Sri Lanka, its economy in tatters due to the COVID-19 pandemic, appealed to “international investors to roll over bonds maturing this year.” Advertisement Given that then-President Gotabaya Rajapaksa announced the deal a week after Indian External Affairs Minister S. Jaishankar visited Colombo, many speculated that the agreement with Adani came with the backing of the Indian government. Colombo Port generates significant revenue and almost two-thirds of its transshipment business is linked with India. As The Hindu said, “New Delhi’s strategic interest in having a presence at the Port, located along one of the world’s shipping lanes, is no secret.” The Port at that time had four fully operational terminals – Jaya Container Terminal, Unity Container Terminal, South Asia Gateway Terminal, and Colombo International Container Terminal (CICT). The fifth, the ECT, was completed in 2015. However, its operations began only in late 2020. The proposed agreement on the ECT was opposed by the trade unions, who pointed out that the Sri Lankan government had earlier planned to build the terminal through a public-private partnership (PPP) and the private sector partner was to be selected through an open and competitive process. But the agreement with the Adani Group was not done openly and competitively. In mid-2020, India’s Observer Research Foundation (ORF) published a report showing that the Modi government indeed pushed Sri Lanka to sign a deal with the Indian company in exchange for aid. A few weeks later, Hindu Business Line published an article stating that the Adani Group would be the Indian government’s nominee for the project. The Rajapaksa government scrapped the decision in the face of mounting pressure from the unions and political parties but decided to authorize the Adani Group to develop the WCT. However, a Sunday Times report stated that the Adani Group is developing the Vizhinjam international deep-water multi-purpose seaport project in Kerala in India. The port lies only 176 nautical miles from Colombo port. Given the competing nature of the two projects, Sunday Times pointed out that “Adani Port coming into the ECT would not be beneficial for Sri Lanka since the Vizhinjam port is also being developed as a regional transshipment hub.” Adani Group’s involvement in Sri Lanka’s power and energy sector has also been mired in controversy. The energy projects are the Group’s second major venture in Sri Lanka and followed the above-mentioned strategic port terminal deal.

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In late February, Sri Lanka awarded two renewable energy projects, both wind power plants, worth $442 million. The plant in Mannar is to produce 250 megawatts of electricity while the other one, in Pooneryn, is to produce 100 megawatts. The agreement for the two projects was initially signed in March 2022. Sri Lanka’s main opposition party, the Samagi Jana Balawegaya (SJB), alleged that the Indian company has a “backdoor entry” to Sri Lanka and that the Rajapaksa administration was pampering “notorious friends” of the Indian prime minister. In June 2022, Chairman of the state-run Ceylon Electricity Board M.M.C. Ferdinando told Parliament’s Committee on Public Enterprises that the Sri Lankan government had been subject to pressure from Modi to award tenders to build renewable energy projects to the Adani Group. Upon the completion of the wind power plant, Sri Lanka will purchase a unit of electricity from Adani at U.S. 7.55 cents, paying twice the rate under competitive tendering. Ferdinando’s statement came soon after Sri Lanka amended its Electricity Act, removing the need for competitive bidding for energy projects, to allow the Adani Group to carry out renewable energy projects in the country. Advertisement The growth of the Adani Group from a medium-scale enterprise to an economic powerhouse within the span of two decades is closely tied to the owner’s relationship with Modi. Like Modi, Adani is from Gujrat and he stood by Modi at a time when Indian big business sentiment was decidedly anti-Modi, following the anti-Muslim pogrom in the state in 2002. For example, in 2003, leaders of Bajaj and Godrej, two of India’s oldest business groups, were critical of the law-and-order situation in Gujarat. This formed a lasting connection between Modi and Adani and over the years. As a result, Adani’s company has grown with government projects and by mobilizing financial capital through his contacts with banks and markets. Adani is a key player in ports, air mobility, and electricity generation – sectors that are priorities of the Modi government. Adani has also branched out into the media sphere and philanthropy. Given that the popularity of Modi doesn’t seem to be subsiding anytime soon, India’s neighbors will have to continue to deal with Adani’s footprint in the foreseeable future.