New Delhi
India is keeping a close watch on the Sri Lankan government’s move offering an airport near the southern city of Hambantota to foreign investors, given the facility’s strategic location and proximity to a Chinese-controlled port, people familiar with the matter said.
The Sri Lankan government has sought expressions of interest from domestic and international investors by June 9 for taking over the Mattala Rajapaksa International Airport in Hambantota under a flexible 30-year build-operate-transfer (BOT) model.
New Delhi has for long had misgivings about mega infrastructure projects taken up in neighbouring countries with loans from Chinese state-run banks in view of the experience with Sri Lanka’s Hambantota port, which was handed over to Chinese control under a 99-year lease in 2017 after Colombo couldn’t pay off debts related to the project. A total of 15,000 acres around the port were also handed over along with the facility.
The Mattala Rajapaksa International Airport — located about 250 km from the capital Colombo and built at a cost of $209 million, including $190 million in loans from China’s Export-Import Bank — has had a complicated history since it was opened in 2013. Despite having a modern terminal building and a 3,500-metre runway capable of handling widebody aircraft such as Airbus A350s, Boeing 777s and A380s, the airport struggled to attract airline interest and passenger volumes.
The airport has registered losses of nearly $130 million, according to Sri Lankan government figures, and currently handles only charter flights.
{{/usCountry}}The airport has registered losses of nearly $130 million, according to Sri Lankan government figures, and currently handles only charter flights.
{{/usCountry}}A move to hand over the airport under a 30-year lease to a joint venture between India’s Shaurya Aeronautics and Russia’s Airports of Regions Management Company in 2024 fell through following a change in government in Colombo, the people said.
The Sri Lankan government’s current offer presents two independent investment tracks for aerodrome operations and landside operations, making it an attractive proposition for potential Indian investors, the people said. Investors can enter either track or both, allowing flexibility to build a derisked portfolio.
The airside operations include a management contract for civil airport operations and require relevant aviation experience of five years or operation of at least one international airport handling more than one million passengers annually. The landside operations, offered on a BOT model with a 30-year lease and extension provisions, cover the development of 238 hectares, which the people said is comparable in scale to the Chinese-developed Colombo Port City but without the attendant political risks.
The land can be used for maintenance, repair and overhaul (MRO) facilities, a flying school, logistics or industrial parks, solar installations, and resort hotels.
“The landside opportunity is attractive as it offers 238 hectares of government-leased land in Sri Lanka, which is actively courting Indian FDI and where India enjoys preferential trade access,” one of the people said.
“There is also a strategic dimension to the project. An Indian presence in Hambantota will be a tangible expression of India’s Neighbourhood First policy and Vision Mahasagar commitment to the Indian Ocean region, especially as a confidence-building investment in a close partner,” the person said.