New Delhi proposes to invest $205 million in the project near Hambantota

India has expressed interest to operate Sri Lanka’s second international airport situated in Mattala, about 40 km from the southern town of Hambantota, where China has majority stake in a strategic port it built.

The Sri Lankan government earlier this week cleared Civil Aviation Minister Nimal Siripala de Silva’s request for a committee to study the Indian government’s proposal. India proposes to “operate, manage, maintain and develop” the airport through a joint venture, holding 70% of the equity for 40 years. According to the Minister’s Cabinet paper, India is to invest $205 million in the venture, while Sri Lanka would pitch in the balance $88 million.

The development comes less than a fortnight after Sri Lanka signed a $1.1 billion deal with China, giving the state-run China Merchants Port Holdings a 70% stake in a joint venture to run the port. Additionally, Colombo also roped in China to help develop an industrial zone in the adjoining land, spanning some 15,000 acres.

Chinese loans

Built in 2010 by the government of former President Mahinda Rajapaksa with Chinese loans, the port was deemed commercially unviable by his successor government, which decided to sell a majority stake to service part of the $8-billion debt Sri Lanka owes China. Beijing sees the port as a useful link in its ambitious One Belt One Road initiative.

Amid New Delhi and Washington’s known apprehension over the Hambantota agreement — given the town’s strategic location on the island’s southern coast — Colombo tweaked the port deal last month and said no foreign naval ship could call at the port without prior clearance. With India expressing interest to run the Mattala Rajapaksa International Airport (MRIA) nearby, Hambantota appears poised to become a hub of rival strategic interests in the Indian Ocean region.

Financial strain

As in the case of the port, it was Mr. Rajapaksa who built the airport with a $190 million loan from the Exim Bank of China. Opened in 2013, the airport has proved a major financial strain, with barely two daily flights. As operational losses persisted, Sri Lanka in December 2016 sought expressions of interest to operate the airport through a public-private partnership. The government received a total of eight proposals, but the recent Cabinet committee has been asked to evaluate India’s proposal alone.