India-Sri Lanka Relations, Areas of Cooperation and Concerns

Table of Contents

Areas of Cooperation Between India and Sri Lanka

Economic and Infrastructure Development:
- Projects like the Kankesanthurai Port and the Trincomalee Oil Tank Farm.
- Indian financing for an undersea oil pipeline and an electricity transmission line for Sri Lanka’s energy security.
- Conversion of seven Line of Credit projects worth $20 million to grants.
Trade and Investment: Sri Lanka is one of India’s largest trading partners in SAARC.
- India and Sri Lanka reached USD 5.5 billion in FY 2023-24.
- Tourism is another important component with India being the leading tourist source market.
Energy Cooperation: India to supply LNG gas to Sri Lanka to support energy needs.
- Sri Lanka is dependent on India for refined petroleum
Defence and Security: Sri Lanka’s strategic role in India’s SAGAR (Security and Growth for All in the Region)
- India continues to be the largest provider of foreign training assistance to Sri Lankan Armed Forces.
- Bilateral SLINEX (Naval Exercise) and MITRA SHAKTI (Army Exercise) held every year alternatively in India & Sri Lanka, Sri Lanka participates in MILAN, the multilateral naval exercise hosted by the Indian Navy.
Community and Social Support
- India supports the aspirations of all communities in Sri Lanka, including the Tamil minority.
- India has provided multi-faceted assistance to Sri Lanka, close to USD 4 billion, during the economic crisis in 2022.
- Buddhism, spread by Ashoka is one of the strong pillars connecting both Nations.
- Cooperation in education and technology exchanges to boost social development.
Multilateral: Sri Lanka is a member of regional groupings like BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) and SAARC in which India plays a leading role.

Need to Enhance Ties With Sri Lanka

Enhanced cooperation with Sri Lanka is crucial given the challenges India faces in its immediate neighborhood.

Strained Relations with Bangladesh: Ties with Bangladesh are currently strained, limiting strategic options for regional collaboration.
Maldives’ Economic Vulnerability: Maldives, facing economic distress, accepted a short-term liquidity inflow of an RBI swap after China cooled its request for aid.
Nepal’s Alignment with China: Nepal’s PM K P Sharma Oli has signed a framework agreement with China to advance Belt and Road Initiative (BRI) infrastructure projects.
Instability in Afghanistan: Under Taliban rule, Afghanistan is grappling with economic hardship, making it a potential hub for narcotics trade and illegal migration.
Myanmar’s Regional Risks: Myanmar’s instability also increases risks of illegal migration and cross-border issues for the region.
Stalemate with Pakistan: India’s relations with Pakistan remain largely frozen, with little progress towards normalization.

Concerns

China’s Influence: China’s involvement in developing strategic assets like the Hambantota Port raises security concerns for India.
Tamil Minority Issues: The need to address the aspirations of Sri Lanka’s Tamil minority, especially concerning the implementation of the 13th Amendment for devolution of power.
Fishermen Dispute: Frequent disputes over Tamil Nadu fishermen straying into Sri Lankan waters (such as near Katchatheevu Island), leading to arrests and tensions.
Economic Vulnerabilities: Sri Lanka’s heavy reliance on external debt and need for continued IMF support pose challenges for economic stability.

Katchatheevu Island

Katchatheevu is an uninhabited off-shore island in the Palk Strait.
It was formed due to volcanic eruptions in the 14th century.
The 285-acre land was jointly administered by India and Sri Lanka during British rule.

Katchatheevu Island

It has been used by fishermen from both countries for centuries as a resting point during fishing expeditions in the Palk Strait.
The island lacks fresh water sources, making it unsuitable for permanent habitation.
The Indo-Sri Lankan Maritime Agreement of 1974
Aimed to definitively resolve the maritime boundary between India and Sri Lanka.

Katchatheevu Island1

The Indian Government ceded Katchatheevu to Sri Lanka, deeming it of minimal strategic value, to strengthen ties with Sri Lanka.
The agreement allowed Indian fishermen access to Katchatheevu for rest, drying nets, and shrine visits without a visa, though it left some issues regarding fishing rights unresolved.
Subsequent developments:
- 1976: The fishing vessels and fishermen of India shall not engage in fishing in the historic waters, the territorial sea and the Exclusive Economic Zone of Sri Lanka, creating ambiguity over fishing rights near Katchatheevu.
- Impact of Sri Lankan Civil War (1983-2009): The conflict put border disputes on hold, with Indian fishermen often encroaching into Sri Lankan waters, leading to tensions over fishing practices and resources.
- The Sri Lankan navy began strictly enforcing maritime boundaries, leading to the arrest and, in some cases, allegations of mistreatment of Indian fishermen.

Way Forward

Strategic Balance with China: Continued Indian investments and infrastructure support to counterbalance China’s influence.
- Ensuring Sri Lanka’s maritime policies are aligned with India’s security interests.
Resolving Tamil Minority Issues: Supporting the implementation of Sri Lanka’s 13th Amendment.
- Engaging diplomatically to ensure the rights of the Tamil minority are respected.
Coordinated Fishing Agreements: Establish a coordinated fishing model to reduce tensions over fishing disputes.
Governance and Anti-Corruption Initiatives: India can assist in governance reforms, digitization, and modernization of agriculture in Sri Lanka.
Strengthening Economic Ties: Expediting an upgraded Free Trade Agreement (FTA) by 2025 and a comprehensive trade deal by 2026.
- Piloting a regional Production-Linked Incentive (PLI) 2 scheme in Sri Lanka to boost mutual business interests.
- Broaden business collaboration to include more sectors (food processing, textiles and garments, auto parts, and IT-related services) and regions (all four southern Indian states).
Enhanced Connectivity: Improve physical connectivity for trade and tourism.
Economic Stability Initiatives: Providing aid and trade-related assistance to bolster economic recovery.