By: Staff Writer
April 10, Colombo (LNW): The recent claim that Sri Lanka lost a billion-dollar foreign direct investment (FDI) due to the collapse of the Adani wind power project has reignited debate about the true costs and benefits of foreign investments. While FDI is often seen as a lifeline for developing economies, this incident underscores the need to critically assess the terms and implications of such deals, especially when national sovereignty and legal integrity are at stake.
Sri Lanka has long offered generous incentives to foreign investors—tax holidays and regulatory leniency—often ignoring the hardships faced by local entrepreneurs burdened with taxes and bureaucracy. The expectation was that FDIs would boost exports and counterbalance import costs. However, not all investments achieve this goal. Projects that primarily serve the local market and repatriate profits in foreign currency, such as the proposed Adani venture, can worsen the forex crisis instead of easing it.
The Adani deal, in particular, raised significant red flags. It was pushed forward despite violating Sri Lanka’s Electricity Act, which requires competitive bidding for energy projects over 25 MW. This project was accepted without such a process, under the false claim that it was a government-to-government deal—an exception allowed by the law. However, Adani Green Energy Ltd. is a private company, rendering that justification invalid. The Sri Lanka Sustainable Energy Authority (SLSEA) and other agencies went ahead anyway, even spending public resources to facilitate the project, ignoring legal protocols and environmental regulations.
One key point of contention was the proposed tariff of $0.0826/kWh, far higher than the rates paid for similar projects in India, which average around $0.04/kWh. Given Mannar’s superior wind yield, Sri Lanka should have secured a lower rate, closer to $0.03/kWh. President Anura Kumara Dissanayake rightly rejected the inflated tariff demand, a stance that likely led to Adani’s withdrawal.
Critics argue that the claimed $1 billion loss is exaggerated. The actual investment was around $442 million, with expected revenues allowing full recovery in just 3.5 years. Over 20 years, Sri Lanka would have paid nearly $2.8 billion in foreign currency—a steep price for a modest upfront investment. Such terms compromise national energy security and strain limited foreign reserves.
Moreover, local renewable energy developers face systemic neglect. Many invested based on false assurances from past officials, only to be left unsupported. Despite contributing significantly to the country’s 2051 MW non-conventional renewable energy (NCRE) portfolio, local players often face resistance, unpaid fees, and regulatory hurdles.
The lesson is clear: Sri Lanka must prioritize strategic, law-abiding investments that genuinely benefit the country. Renewable energy resources like wind, solar, and biomass can be harnessed domestically without sacrificing economic independence. Rather than courting foreign investors at any cost, the government should empower local developers with fair rupee-based tariffs and remove bureaucratic roadblocks. Saving dollars by reducing fossil fuel imports is more sustainable than risky attempts to attract foreign capital.
Strong leadership and a commitment to national interest are essential to avoid future missteps and secure long-term energy and economic security for Sri Lanka.
