Dangers of India’s business in Sri Lanka
Posted on August 8th, 2011

Shenali Waduge

With the dawning of peace upon a nation that withstood 3 decades of terror, Sri Lanka is looking towards development & aiming at economic revival. While lobbying foreign investors to invest in Sri Lanka, it is no surprise to see India engage its neighbor “”…” this time from the economic front.

 Indians are no strangers to Sri Lanka & with peace Indian companies are keener than ever to put their foot into Sri Lanka through various development projects in the goods & service sectors as well as through Indian labor into Sri Lanka. Most of these projects have had land identified & Government approvals already obtained much of the time without taking into consideration the opinions of country-proud businessmen or professionals.

 Should we then be surprised that over 50% of Indian investments in SAARC countries are located in Sri Lanka. Of these joint ventures 54% are with Sri Lankans & located in Sri Lanka. Principle sectors attracting Indian investment in Sri Lanka are steel, rubber, cement, power & energy, oil exploration, production, telecom, real estate, tourism, computer software, IT training & other professional services. The better question is to wonder what sectors Indians have not ventured into in Sri Lanka!

 India is undoubtedly Sri Lanka’s largest trading partner & India desires to maintain that status quo & would not like it being enjoyed by any other nation. This is evident in India’s competition with China. While Sri Lanka understands the power of both these nations, it must be reiterated that Sri Lanka does not want to nor desires to compete with either except to continue the friendly ties that ought to exist with mutual respect. India also is Sri Lanka’s largest source of imports & Sri Lanka’s fourth largest export destination. In 2008, foreign direct investment to Sri Lanka was $889m & $126m came from India.

 Indian companies had been operating in Sri Lanka post-war but the present numbers have certainly doubled. Previously Indian companies operating in Sri Lanka included John Keells Institute of Information Technology, CEAT-Kelani Associated Holdings, Mackwood Infotec, GTB Colombo, Ceylon Ambuja Cement, Taj Lanka Hotels, Bensiri Rubber Products. Asian Paints & Ceylon Glass Company.

 Post-war means a boom for the construction industry & Indians desire to secure a large chunk of investments being given to foreigners.

 Lets take a look at some of these projects taking shape in Sri Lanka.

Larsen & Toubro is constructing a commercial complex which is to cost US50m.

Lalith Gangadhar Constructions is constructing residential villas outside Colombo. Power Grid Corporate India, National Thermal Power Corporation, Lanka India Oil Corporation (Lanka IOC), Cairn Lanka, Lanka Ashok Leyland & Mphasis have all drawn out plans with Sri Lanka. Similarly, Cairn India has begun a seismic survey in Mannar Basin. Mphasis the Indian IT services company has set up a facility in Sri Lanka that aspires to hire 2000 professionals.

 Compared to 1990 when only 12 Indian projects with a total investment of LKR 177 million, today there are over 100 Indian companies doing business legally in Sri Lanka, this number is likely to increase in view of the other activities Indians with Sri Lankans are involved in illegally. Indians have so far invested $400million in Sri Lanka & the additional investments are said to be around $300million. The energy projects are amounting to USD1billion & the project will involve the installation of power transmission lines between India & Sri Lanka to pave the way for eventual trading of electricity between the two countries & linking power grid in Tamil Nadu to the transmission system in Sri Lanka. NTPC, India’s biggest power company is in the process of signing a jv with the Ceylon Electricity Board to set up a 1000 mw coal-based power unit with an investment of US500million in East Trincomalee. Some investments are however somewhat questionable & certainly advises signatories to be cautious about what they are signing & the need to look at long term repercussions first before committing a whole country & its people just for political mileage. Sri Lanka should be in no hurry to develop if it is going to be at the cost of loosing our sovereign status!

 Already India has a presence in Sri Lanka in terms of lubes, bunker & fuel retailing & India is attempting to make further inroads. The tie up with Lanka Ashok Leyland is likely to lead to the sale of 1300 vehicles sooner than later. No sooner India realized the Government was opening highways, India was quick to capture the market by making available commercial vehicles to transport construction equipment. With the end of the war, India has also pledged to build 50,000 houses for IDPs in the North of Sri Lanka & RPP Intra Projects has been awarded USD11.3m pilot project to build the first 1000 houses.

Every step Sri Lanka is taking, India is quick to ensure its companies are present vis a vis investment.

 In the arena of agriculture too Indians have made in roads. Sri Lanka does not domestically produce enough raw materials for the production of 3 lakh tonnes of vanaspati. Palmoil is imported from Malaysia or Indonesia duty free (FTA under rules of origin & value addition) & since India announced zero duty on crude oil imports, Indian businessmen have lobbied the Indian Government to allow import of refined palmolein from Sri Lanka at zero-duty. Ultimately Indian businessmen in Sri Lanka will purchase refined palmolein from Malaysia & bring it to India at zero duty & no one will know the oil came from Sri Lanka!

 India is assisting with reconstruction by extending grants to build railway projects. Various business associations are also frequently visiting including those from different Chambers in India. An MOU was signed after a visit by the Federation of Chambers of Commerce & Industry of Sri Lanka with the Indus Entrepreneurs (TIE). Businessmen from Kerala were invited to invest in agro processing units, educational institutions & even setting up of universities.

 Another area that Sri Lanka enjoys potential profit is in the Tourist industry & Sri Lanka is targeting 2.5m tourists by 2016.

 Indian investments are eyeing all areas in Sri Lanka. Even Sri Lanka’s footwear industry is to be assisted by India since the bulk of raw materials are imported from Chennai. This means Sri Lanka is likely to grant further tax concessions in exchange for skills building & training for the local footwear & leather industry. Demand for designer footwear in Sri Lanka is an area that Indian sellers are planning to exploit.

 Indian banks have also opened in Jaffna in early January this year while in May India & Sri Lanka signed a MOU on Bilateral Air Services between the countries revising the original agreement signed in 1948. The agreement will entail more flights in & out of each country destination. Already Sri Lankan Airlines operates 98 weekly flights to various destinations in India while Sri Lanka’s budget carrier Mihin Air operates season flights to Varanasi & Gaya.

 Sri Lanka’s Ministry for Industry & Commerce claims Sri Lanka has crossed the US8billion export earnings mark in 2010 & that they foresee it reaching US9billion by 2011. The example was to encourage further Indian investment & the offer of space in industrial zones while also negotiating with other ministries to allocate lands for cultivating fruits & vegetables in the country.

 India’s coconut exports have also seen a 30% surge following the ban on shipments from Sri Lanka. Indian coconuts are making their way to Middle East wherein Sri Lanka was the previous main exporter of fresh coconuts. Coconuts are grown in more than 86 countries worldwide producing 54billion nuts annually. India’s annual production is 13billion nuts & cultivated in Kerala, Tamil Nadu, Karnataka & Andra Pradesh. India has taken Sri Lanka’s place in the market.

 Caution again is requested of the Government in the light of imports coming from India. 29 companies in India had been supplying substandard drugs to Sri Lanka for the past 6 years. The question is why are these companies not being blacklisted? What good is foregoing the cash bond in the terms of supply contract for Sri Lankans whose health is likely to be affected by taking these substandard drugs? Who is going to be accountable?

 It is not only economically that India is present in Sri Lanka. Politically too, India now has 2 Indian consulates in Jaffna & Hambantota. We are also reminded of how Indian diplomats tried to coerce a Jaffna magistrate to freeing Indian fishermen. The seriousness of the issue is that Indian fishermen are increasingly intruding into Sri Lankan waters & this is impacting the livelihoods of 22,000 families in Jaffna who are dependent on fishing. Most of these fishing incidents have taken place close to the Tamil Nadu assembly elections & naturally makes any wonder what type of timing & what type of response was really aimed at by purposely creating the issue?

 There are numerous cultural tie-ups also taking shape. The India-Sri Lanka Parliamentary Friendship Association was recently commemorated.

 In December 2010 Sri Lanka began to receive the first ever chicken & egg commercial consignment imported frrom India to meet shortages in Sri Lanka’s domestic market. As such 500 tonnes of chicken & 50million eggs from one supplier was sent during the christmas season.

 The Bank of Ceylon is also planning to have Indian businessmen invest in organic agriculture in the North & East as well as to provide financial services to 60,000 Sri Lankan refugees in Tamil Nadu. The exercise means that BOC will open 4 branches in India & invest US$25million as per Indian banking regulation to set up the four branches. The branche also plans to assist Indian businessment to start dairy projects & cultivation of fruits & vegetables using organic fertilizer with modern agro techniques.

 Thus the calls for a joint economic zone to agreeing to the Comprehensive Economic Partnership Arrangement (CEPA) should spell caution for Sri Lanka & India’s insistence should also spell the need to take inputs from professionals & businessmen before taking a decision purely to support political goodwill. Most agreements in reality benefit only India as Sri Lanka’s investment in India remains relatively very small.

 CEPA “”…” a threat to Sri Lanka

 We all know that CEPA or the Comprehensive Economic Partnership Agreement was a sequel to the Free Trade Agreement. The FTA operational since 2000 did not reap the benefits to Sri Lanka. This is evident in the statistics. Whereas Indian exports to Sri Lanka grew from USD1billion to USD2.9billion, Sri Lanka’s exports to India saw a small leverage from USD100m to USD500m. Much of Sri Lanka’s exports to India was vanaspati oil, marble & copper handled by Indian businessmen from Sri Lanka thus the FTA had only given Sri Lanka USD150m increase whereas India’s increase when into billions. The FTA had conceded 1351 duty-free items for Sri Lanka yet only 68 has an export value for the country. In contrast Sri Lanka has given India 319 duty free concessions which have favorable export interest to India. Therefore Indian businessmen are having it easy with Sri Lanka which is evident in over 50% Indian joint ventures in the SAARC region set up in Sri Lanka. It simply cautions Sri Lanka to be alert. A good example is the IOC which initially invested Rs700m from a local bank & then went for a public share issue & later diluted 30% of shares & keeps the remaining 70% within Indian control. For IOCs investment it controls 30% OF local petroleum distribution, has over 100 petrol stations & has been given land worth Rs.1billion in Colombo &  has 40 Indian manufacturers operating in Sri Lanka. Their profits crossed Rs.7billion in 2007 alone. How has this benefitted Sri Lanka?

 So while Sri Lanka has been accepting Indians & Indian ventures with open arms Sri Lankan investors in India have not been afforded similar receptions.

In 2004, Ceylon Biscuits Limited bought over the 3rd largest biscuit factor in India but an Indian court order in 2008 declared the sale “null & void”. Similarly when the Export Development Board ventured to open a Sri Lankan showroom in Chennai in 2004 wherein 17 local businesses participated the Indian authorities imposed a ban on retail sales prohibiting the sale of products & authority to only exhibit.

 In defense the cases that India will cite would be the treatment given to Sri Lankan apparel trade & tea. By allowing Brandix & MAS Holdings Group to operate in India, India has been able to capture overseas markets traditionally held by Sri Lanka. India is not at fault for this & behoves the Sri Lankan Government to question why it could not have provided similar support. Also, of the total garment quota of 8m conceded by India to Sri Lanka, 6m have to be produced with Indian fabric while only 2m are subject to NTBs which equates in reality to only 1% of garment quota being utilized. Similarly tea quota is 15m kg which is also subject to NTBs & entry points are restricted to Cochin & Calcutta. This again equates to only 2.7% quota going to India.

 How can CEPA be of any benefit to Sri Lanka when thus far all agreements ventured into between the two countries has merely benefited India while a few insignificant benefits have been afforded to Sri Lanka just for whitewashing purposes? CEPA covers both goods & services & also the free movement of people & this spells clear dangers for Sri Lanka “”…” its people & its businesses & even the country’s integrity going forward. Moreover, CEPA is proposing to offer Indian film industry the right to own cinema halls & reserve cinema time to air Indian films which would again dilute Sri Lanka’s culture further. Indian labor would swamp Sri Lanka & be engaged in all sectors even presently without any agreement there are many Indians who are even overstaying their visas but nothing is being done about it. It is said that over 35000 Indians are currently in Sri Lanka with valid visas”¦& it behoves to ask how many Indians are in Sri Lanka without valid visas. In time to come Indians will be having a stake in every sphere of life. Has this being thought of by our policy makers & is Sri Lanka prepared to handle the disadvantages that are likely to take place as a result.

 India & China will remain tomorrow’s powerhouses. Sri Lanka is important to both in terms of its geographical location. Sri Lanka has its own aspiration of developing overcoming the travails that existed during 3 decades of conflict. Do we envisage a country with high GDP as a result of vices being legalized or do we desire to keep our cultural identity & remain a country belonging to the ethnic races that make up Sri Lanka? That the country is experiencing enormous shifts economically is evident but it behoves any Government to first consider where these investments are likely to lead before signing on any dotted lines, commitments for which we may be sorry later & we would not be able to reverse.

 Doing business with India is one thing, but the most important aspect of this bilateral involvement is India’s political maneuverings which have in the past & likely in the future to deny the respect it should give to a sovereign nation. India cannot deny its involvement to destabilize Sri Lanka. That single policy remains a reminder to Sri Lanka that India can never be trusted. A combined trade investment as is envisaged by officials may be good but we must all the while remember that India has the ability to economically & with people to engulf us if we are not careful enough to allow only a limited & controlled Indian presence in Sri Lanka. Allowing India to have a say & stake in every aspect of Sri Lankan life would spell the non-requirement for Sri Lankan leaderships “”…” even politically in time to come.

 All stakeholders of Sri Lanka need to be aware of this.

 Shenali Waduge

19 Responses to “Dangers of India’s business in Sri Lanka”

  1. Ramanie Says:

    Thank you Shenali! I am also thiking about the vast Indian film industry returns India is getting by exporting their movies and music to SL. Not only the money outflow but the adverse cultural impact we have had is my main concern. In specific, I would like to know the status of the Tamil film imports to Sri Lanka at present. In the 1950s, 60s, 70s we kept importing Tamil films with absolutely no concern about the Tamil racist and terrorist propaganda that crossed the borders from Chennai with absolutely no hindrance from authorities. MG Ramachandran, Jayalalitha and Karunanidhi the main culprits not only made their money from these exports they at the same time exported Tamil chauvinism and Sinhala-hatred to Sri Lanka. I believe this is continuing to this very day- even after 30 years of endless suffering through the fruits of Tamil chauvinism and the resulting Tamil terrorism Sri Lanka still imports Tamil films and music. Filthy worms like Seaman openly show aggression against Sri Lanka while also earning mega bucks exporting films to SL; the likes of Mani Ratnam are more subtle and devious- they take the circular route- for instance the Ratnam film that showed the “human side” of a suicide bomber!!!! Are we even close to stopping this madness? At the time of IIFA boycott organised by Chennai film thugs, some people in the Eastern SL protested against showing a Tamil film in an Eastern cinema- but the cinema owner, a Tamil thug himself got his way- because he had all the human rights in the world to show anti-national films in his cinema but the protesting Sinhala public had no rights at all!!!! This is the story- at every turn in Sri Lanka!!!!!!! WHEN ARE WE GOING TO LEARN!!!!!!!!!!?

  2. Ramanie Says:

    Just adding to the above- the Tamil film being shown in the Eastern SL was a film made by one of the same ba….rds who were protesting about Hindi filmstars attending IIFA in Sri Lanka- perhaps one of Seaman’s films!!!

  3. Ben_silva Says:

    Shenali has given a good message. Will people hear her ? We do no want to come under Indian imperialism, just after ending with British imperialism.

  4. gamunu6 Says:

    Dear Shenali!

    As usual very important document analyzing with facts & figures. Its no wonder India takes advantage for every small matter, our own politicians rush to India. Are they so bankcrupt to see respective political leaders in Sri Lanka.

    These are the very people who complain about Indian intervention in a Soveriegn State, our Motherland Srilanka. These politicians and short term gain seeking individuals always go to as if going to worship GOD, when Indian are dispised by us from day of Sir John Kotelawla’s time.

    We gave them employment because none of sri lankan swanted to work in estate/plantation sector under poor pay,offered by British, so they brought in cheap labour from India & Pakistan. Although we don’t have a BORDER disputes as in many other countries which British ruled, buyt a more serious probelm, that Indians/ tamils will outnumber Sinhalese in few years time. According to a Buddhist monk this is already happening in major cities like Kandy & Collombo which we know of.

    Indians are now in Sothern province of lanka as well, which is the bastion of Sinhalese population. Our politicians of all stripes, run to India for a slightest matter, when these problems can be resolved by Sri lankans to suit best to our culture & religion.

    It is so gratifying to see your galant efforts in all matters pertaining to our motherland, where none other individual or organization fail to tackle.

    Please continue to write & inform us. I was trying to get your Email address to respond to one of ur previous articles, but failed to do so. Now I will give my email address for your benefit….Its [email protected]. Please free to contact me if you so desire.

    I am a retired Petroleum Engineer with qualifications from UK & from canada wher I now reside. Thanks once again Shenali Waduge, for your valuable contribution to this & many others in the past.

    Hoping to hear from you. Sincerely, Gamunu Alahakkone. P.Eng. (Canada), C.Eng M.I.Mech.E (UK)

  5. ranjith Says:

    Hello Ramanie,

    So, you prefer hindi filmstars to tamil filmstars.

    According to you, watching hindi films and welcoming hindi filmstars are acceptable.

    When you allow hindi scavengers in to our country, you assume that there has no adverse cultural impact???

  6. Fran Diaz Says:

    Land & Property must never be sold outright to foreign enterprises. Only leased out, with specific conditions that weapons manufacture, dangerous chemical manufacture, etc. must never be done.

  7. Kit Athul Says:

    An excellent investigative journalistic article. Thank you Shenali, many authors can use this as a valuable reference. Just like Ben Silva states : “Will People hear her”? I don’t think so. Why because until after May 19th we did not call this a war! It was called action against insurgents. HE MR and Gotabaya said the same. Why? INDIAN PUNKS bluntly told HE MR if you call it a war then we will come and occupy the Nortern and Eastern provinces. There MUST be ground level education to SINHALA villages not to buy INDIAN MADE goods. If not these companies can create artifical shortages of any goods that could harm the smooth functioning of commerce. This Ceylon Ambuja Cement mentioned in the article created the Cement shortage. Then, when the Cement shipment arrived from Pakistan, what did the British Colonial press say? It is sub standard cement, because there is no valid International certification issued to the Pakistani manufacturer. Indian RAW fed this info to Sunday Leader and Lakbima so that they can harp on it. The truth is, the manufacturer has the certification but the holding company that exported the cement did not have a certification. Next is the Connection of the Tamil Nadu electrical grid to Sri Lanken Grid with a under water cable. If this happens then, god bless the Sri Lanka electrical grid. I dont think this will happen because Minister Ranawake has an engineering degree. I will use simple terms to explain what will happen if these two grids are connected. It requires very expensive, not Million dollars, but Billion dollar control units at each end to synchronize the two grids. Now what happens if a TAMIL NADU TERRORIST blows up a control unit at any end? The whole SL Grid will come down. It will take not days but week to months to bring it back up. On the Tamil Nadu side, their grid has an current update algoroth on the grid; so to resynchronizes it take only minutes. BOYCOTT OF INDIAN GOODS SHOULD START NOW NOT TOMORROW. Next work item for you is: WHO OWNS THE CELLULAR TELEPHONE NETWORKS IN SL? My answer INDIAN PUNKS. Thanks Shenalli, hope some will read your article and take some action.

  8. Lorenzo Says:

    Funniest thing is crap Indians import SL generated clean electricity produced using wind power (at zero cost because this company is ALSO owned by Indian crap) and then export electricity back to SL at a huge profit!!

    A double robbery.

    Government should immediately allow UNRESTRICTED Chinese investments under the SL-Chinese economic pact. Chinese businesses CAN EASILY undercut ALL (yes ALL) Indian businesses. They are so efficient and regulated. Unlike Indian crap business, Chinese businesses employ MORE SLs and don’t import illegal immigrants from south India.

  9. Lorenzo Says:

    Venerable Anagarika Dharmapala predicted this.

    He said something like, “umbala ela vassige kiri tika vikunala, mala indiyawe thuththukudiyen eka karawala jarawa kanawa”.

    What he didn’t predict was now even the cows will be sent to India. Some fools (including Wijedasa Rajapaksha, MP) want to send old cows to India so that they will not be killed!

    Even the karawala is made from fish illegally caught in SL waters!

  10. Marco Says:

    I wonder what Mr Basil Rajapakse would say regarding the above article?
    BR has been very active in attracting Indian companies to invest in SL

  11. charithsls Says:

    Totally agree with her,Shenali is one quite clear and brave to point out the catastrophe that is coming from Indian hegemony.I think the other most important thing is to safeguard our identity and culture;when the Sinhalese dress the Indian attire,indulge in Indian songs and films,where is our nation?there has to be a campaign against the women wearing indian dresses that has a long term subtle erosion;Most important events and even national events too sponsored by Indian companies who as a result introduce Indian dances,songs,films and what not to the event. This is another adverse effect of indian companies running amok in Sri Lanka.The three things that glue the Indian diaspora to India are the songs,films and cricket.We have only cricket,so it is all important to develop Sinhala film industry at all cost.

  12. charithsls Says:

    Mind you,Asha Bosle has told Sri Lanka is in all similar to India but the only difference is the language!
    So beware they will do all to destroy our Sinhala!!

  13. Kit Athul Says:

    Lorenzo, want to know about the INDIAN HOLY COW!. Googal ” How many tones of BEEF from India was sold to Syria in 2010? This trade is billion dollars worth. India ships more beef to the middle east than Pakistan. Tell Wijadase Rajapkse MP, if you send old cows to India, he is helping the Indian beef export industry.

  14. Kit Athul Says:

    Lorenzo, want to know another Indian beef statics? In 2010 Algeria impoted from INDIA Buffalo meat (Meehark Mus) a total weight of 34,000 tones and 51,000 tones of HOLY COW Beef! Please explain to the readers how the old cows from Sri Lanka can live happly ever after in INDIA?

  15. Lorenzo Says:


    I know.

    We should send him and his gon family to India!

    Yes, I have heard Indians would do ANYTHING and eat ANYTHING (not to mention Manmohan Singh’s early morning drink of human urine and other cow urine drinkers).

  16. Fran Diaz Says:

    If we put the proper Laws in place and see to it that the Laws governing illegal migration, entry into Lanka as Tourists, and investment in Lanka, are implemented and followed through, then we do not have to fear Indian investments or Indians (Tamil people mainly, I presume) entering Sri Lanka. How do other countries in the region manage ? Sri Lanka is an island and that gives a clear advantage on borders.

  17. Fran Diaz Says:

    One part of India (Hindu people) practically worships the cow. The other part (Muslims) eat them. There are more Muslims in India than in Pakistan. A large number of people of Dalit origin embrace Islam.
    It doesn’t make sense to export old cows to India. It is better to slaughter old cattle in Sri Lanka itself. This should be done in the most humane manner possible. In most parts of the world now with a huge population of nearly 7 Billion people, such items as aged cattle are looked on as a resource. The meat to be used as food, or as pet food, and skins for leather products, etc. Such is life – however sad.

  18. Marco Says:

    Shenali should know by now (having received her higher education in India) that Indians would explore any niche in the market place.
    The Indian entrepreneurs are exploiting the Chinese “soft loans” granted to Sri Lanka.
    Indians see a window of an opportunity in SL whilst China keep granting these “soft loans” to SL which will have to be paid back in 8-10 years time.
    Basil Rajapakse has actively sought Indian investment. India floods the SL market with cheap plastics, cement, Onions, Potatoes, flour and even rice.
    They will pull out in 5-7 years before China calls in its favours.

    A lot of cows need fattening!

  19. Marco Says:

    A thought for you to ponder!
    India is (secretly) hoping the US economy will fail with the huge budget deficit they are facing. China being the largest exporter to the US will suffer because unlike India the local Chinese consumers are unlikely to consume due to price controls and Communist principles.
    It would be detrimental to China for the US economy to fail.
    India, meanwhile keeps watching!

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