India and Sri Lanka on Friday signed an agreement in Colombo to set up a
2X250 MW coal fired power plant in the Trincomalee district of eastern Sri Lanka.
But the much talked about plant, to be built by the National Thermal Power Corporation (NTPC) of India, has two key issues to be settled before work gets underway.
One relates to the location, and the other to equity participation by a third party to supplement the funding already pledged by India and Sri Lanka.
Official sources told Hindustan Times that the Sri Lankan government is very keen that the plant be located in Sampur — a strategically important area across the Koddiyar Bay, which was recently captured from the LTTE.
But the Indians prefer a site in China Bay, near the Trincomalee harbour.
The agreement itself leaves the issue of location open, though in early 2006, a feasibility study had proposed three sites, and the NTPC had opted for a site in the China Bay area near the Trincomalee harbour. Sampur was brought into the picture subsequently, after the Sri Lankan forces captured it from the LTTE in the middle of the year.
Though there are technical arguments for and against the preferences of the two sides, there are important political reasons also, reasons which are understood but not stated openly, because they are sensitive.
The Mahinda Rajapaksa government is keen on getting India to develop an economic and strategic stake in Sampur by building and running the high cost plant there. India is expected to bear 30% of the cost of the plant which is $500 million.
By getting India into the project in Sampur, the Sri Lankan government expects to build a deterrent against the LTTE, which may try to retake the place by force.
Colombo hopes that the LTTE will not dare to indulge in any adventurism in the area for fear of annoying India, a country which it can ill-afford to annoy.
As for the Sri Lankan Security Forces, they need Sampur desperately because it dominates the entry to the Trincomalee civil harbour and naval base.
The Indians, on the other hand, do not want to antagonise the Tamil minority by readily agreeing to the proposal to set up the plant in Sampur.
The Tamils claim the northeast as their traditional homeland and have been agitating for autonomy for that region both peacefully and militarily. Leading Tamil political parties and the LTTE feel that by establishing the plant in Sampur, New Delhi will only be aiding and abetting the Sri Lankan state which, according to them, has been stubbornly denying the Tamil minority its legitimate political rights.
The Tamils suspect that the development of Sampur as a major security and economic centre envisaging an influx of Sinhalas from outside, will help implement an alleged plan to further reduce the proportion of Tamils in Trincomalee district.
They also say that these demographic and strategic developments will drive a wedge between the Tamil East and the Tamil North as Trincomalee lies in between the two.
The Tamils point out that, already, Sampur has been denuded of Tamils following the seizure of that area from the LTTE earlier this year. The Tamil refugees from Sampur have little or no hope that they will be allowed to re-settle in this high security zone-to-be.
Following a recent Supreme Court judgment which annulled the merger of the Northern Province and the Eastern Province into a single Tamil dominated North-Eastern Province, Colombo has established two separate administrations in the northeast.
The Tamils have protested against this. India too has expressed its displeasure because it was India which had brought about the merger through the India-Sri Lanka Accord of 1987.
Indians favour China Bay
The Indians favour China Bay to Sampur because China Bay, unlike Sampur, has a settled population which can supply the necessary manpower. China Bay is also adjacent to the harbour, unlike Sampur, which is across the Koddiyar bay. Proximity to the harbour is necessary because the coal for the plant has to be imported.
The other issue is funding. The project envisages a third party equity participation apart from India and Sri Lanka. India has pointed out that any international institution seeking equity participation will have to be satisfied that the project is secure, politically acceptable, and economically feasible.
While the Sri Lankans believe that Sampur will meet all the criteria, it is not certain if the international lending agencies will commit themselves to such a project, at this point of time, when a war is being fought in the vicinity, and war is openly touted as the best way to tackle the Tamil Tiger militants and solve the ethnic problem in the northeast.