Top Indian sources have denied that India is to participate in the setting up of a 1000 MW coal-fired power plant at Sampur, an area in Trincomalee district in Eastern Sri Lanka, which was recently captured from the LTTE after heavy fighting.
Sources in New Delhi told Hindustan Times on Wednesday, that India was interested in a power plant in China Bay, where the Trincomalee harbour is located, and not in Sampur, which is across the Koddiyar Bay.
Political observers say that if India were to participate in the Sampur power project, it would be of tremendous political and strategic significance for both Sri Lanka and India.
Sampur is strategically located overlooking the Trincomalee harbour, and has been, and is likely to continue to be, a bone of contention between the Sri Lankan government and the separatist militant group, the LTTE.
Military analysts say that Sampur is a potential theatre of war.
The Sri Lankan media on Tuesday had quoted the Power and Energy Minister John Seneviratne as saying that India had agreed to provide a loan of $500 million (SLRs 50 billion) for the Sampur plant, and that a MOU was going to be signed shortly.
Daily Mirror further reported that the decision to locate the plant in Sampur had been taken at the instance of the Sri Lankan Army chief, Lt Gen Sarath Fonseka and the Navy chief, Vice Admiral Wasantha Karannagoda, who said that the plant should be in Sampur and not China Bay, as originally planned.
The military top brass had told the government, that the China Bay site was unsuitable because the high tension lines emanating from the power plant there would interfere with the activities of the air base and other defence installations in China Bay.
China Bay project is itself stuck
Even the India-Sri Lanka power project in China Bay is nowhere near being finalised. Indian sources said that the MOU for this joint venture was still to be signed because the Sri Lankan side was still to agree to the inclusion of an arbitration clause.
Indian investors, whether public or private, have become cautious following the none-too-happy experience of other leading Indian investors like the Indian Oil Corporation and Apollo Hospitals.
Apollo has quit Sri Lanka after the local corporate raider, Harry Jayawardene, acquired a controlling stake in the company recently. And the $75 million IOC, has been constantly battling the Sri Lankan authorities on the issue of subsidy and pricing.
Both Apollo and IOC were running at a loss.
Given the fact that the proposed joint venture in China Bay envisages an Indian investment of $450 million, New Delhi is naturally wary.
Tatas to continue in Lankan tea industry
Informed Indian sources denied media reports here saying that the Tatas were withdrawing from the Sri Lankan tea industry.
"It's an absolute no!" said a well-placed Indian source when asked whether Sri Lankan media reports were right in reporting that the Tatas were moving out of the joint venture Wattwala Plantations.
Wattawala Plantations, with interest in tea, rubber and palm oil, manages 12,442 hectares in the island.