India offered Sri Lanka $100 million on Sunday to help war refugees return home and rebuild the country's ravaged north, as New Delhi seeks to engage in the island nation's post-war reconstruction and retain influence.
Home Minister Palaniappan Chidambaram said India was willing to provide the aid package to Sri Lanka if it submitted a "plan of action" on rehabilitation of Tamil civilians.
"Our concern is that the displaced Tamils should be resettled in their homes as early as possible," the minister told reporters in Tamil Nadu.
A similar aid package was given by New Delhi to its southern neighbour in July after the Sri Lankan government announced victory in a 25-year war against Tamil Tiger separatists.
The Indian Government faces pressure to protect Sri Lankan Tamils, closely linked to about 60 million Tamils in the Indian state of Tamil Nadu.
Some 260,000 Tamil refugees who fled fighting in the waning months of the war are now being held in military-run camps. Western countries, India and the United Nations are pressing the government to send them home.
Though the rehabilitation process was slow in the beginning, it was likely to pick up, Chidambaram said after a meeting with Tamil Nadu chief minister M Karunanidhi.
Sri Lankan President Mahinda Rajapaksa has said 70-80 per cent of the refugees will be resettled by January. So far, about 15,000 have been sent home.
India, which once wielded undisputed leverage over the Sri Lankan conflict, maintained a largely hands-off approach over the last two years because of the concerns of Tamils at home.
New Delhi is now keen to ensure that it retains influence in the island and keeps rivals China and Pakistan at arm's length.
While New Delhi could not be seen openly arming the Sri Lankan military to fight the Tamil Tigers, China and Pakistan had no such difficulty and are known to have helped the Sri Lankan army build up its offensive capabilities.
China is also helping Sri Lanka build the Hambantota port, which many see as part of Beijing's "String of Pearls" strategy of building relations with countries along sea lanes from the Middle East to the South China Sea.