India has agreed to develop three Sri Lankan wind farms on islets between the countries, officials said Tuesday, in a victory for New Delhi after the project was taken away from a Chinese firm.

India and Sri Lanka have signed an agreement on implementing hybrid power projects on three Sri Lankan islands off northern Jaffna, replacing the Chinese venture cleared by the Cabinet last year.

In January 2021, Chinese firm Sinosar-Etechwin was awarded the contract to install a hybrid renewable energy system in Nainativu, Delft or Neduntheevu and Analaitivu off the coast of Jaffna, but was reconsidered following objections raised by India. The three islets are located close to Tamil Nadu.

External Affairs Minister S Jaishankar, who is in Colombo for bilateral meetings and the BIMSTEC summit, and his Sri Lankan counterpart G L Peiris on Monday witnessed the signing of the MoU on implementation of hybrid power projects in three Islands off Jaffna, the Indian embassy said in a statement.

China last year suspended the project to install hybrid energy plants, citing “security concern” from a “third party”, amid reports of India raising concern over its location.

China is one of the biggest investors in various infrastructure projects in Sri Lanka under Beijing’s controversial Belt and Road Initiative (BRI). But there has been criticism, both locally and internationally, and growing concerns that China has lured Sri Lanka into a debt trap.

The island nation in 2017 handed over the strategically important Hambantota port to a state-run Chinese firm for a 99-year lease as a debt swap amounting to USD 1.2 billion

The contract awarded to Chinese company Sino Soar Hybrid (Beijing) Technology Co. Ltd, that had been awarded the tender to develop three hybrid power plants in the Delft, Nagadeepa, and Analthivu islands off the Jaffna peninsula has been cancelled.

“The government originally intended to carry out this project under a loan from an international financial institution, and a Chinese firm was selected through the standard bidding process, but the Indian Government has offered a 75% grant for this purpose, and, therefore, it has cancelled the contract said minister Duminda Dissanayake.

New Delhi has long been alarmed about the growing Chinese influence in the region. In 2020, 20 Indian soldiers and four Chinese troops died in a brawl on their disputed Himalayan border.

A $ 12 million project to build wind turbines on three small islands in the Palk Strait between Southern India and Sri Lanka was awarded to a Chinese firm in 2019, with funding lined up from the Asian Development Bank (ADB).

But after Indian protests about Chinese activity so close to its coast, work never began and the project on the islets of Nainativu, Analaitivu, and Delft was later scrapped.

A joint statement issued Tuesday after a visit to Colombo by India’s foreign minister said a Memorandum of Understanding had been signed to build the installations.

Sri Lankan officials said India had agreed to provide funding in place of the ADB.

Last week, the Chinese ambassador in Sri Lanka, Qi Zhenhong, expressed Beijing’s displeasure over the scuttling of the project and warned it would send a negative signal to potential foreign investors.

India is known to be suspicious of China’s growing political and economic influence in the South Asian nation, which is strategically located at the southern tip of the vast Indian sub-continent.

China and India have been competing for major infrastructure projects in Sri Lanka, which is currently facing its worst economic crisis since independence from Britain in 1948.

Colombo has asked for more loans from both nations to shore up its foreign reserves and import essentials including food, fuel, and pharmaceuticals.

 Sri Lanka’s deficit in the trade account widened to US dollars 859 million in January 2022, compared to the deficit of US dollars 655 million recorded in January 2021, with higher increase in imports.

However, the trade deficit in January 2022 narrowed compared to the deficit of US dollars 1,085 million recorded in December 2021. 

The major contributory factors of the trade deficit are the ratio of the price of exports to the price of imports which deteriorated by 18.7 per cent in January 2022, compared to January 2021, with prices of imports having increased while prices of exports declining, Central Bank said. 

Sr Lanka’s Import expenditure continued to expand, in spite of high earnings from exports exceeding US$ 1.0 billion for the eighth consecutive month, thereby widening the deficit in the trade account in January 2022, compared to January 2021, Central Bank announced Thursday 01 

Earnings from exports in January 2022 grew by 17.5 per cent over January 2021 to reach US dollars 1,101 million, recording the highest level of exports in the month of January. While increases in earnings were observed across all main categories, industrial exports mainly contributed to the expansion.

Expenditure on merchandise imports increased by 23.1 per cent to US dollars 1,959 million in January 2022, compared to US dollars 1,592 million recorded in January 2021, although it decreased compared to December 2021. Increases in expenditure were observed across all main categories, while intermediate goods imports mainly contributed to the expansion.

Tourist arrivals showed a notable recovery in January 2022 over the same month in the previous year, while moderation of workers’ remittances was observed in January 2022. 

Meanwhile, Sri Lanka successfully settled the International Sovereign Bond (ISB) of US dollars 500 million in January 2022. 

The financial account of the balance of payments strengthened during the month with the receipt of the SAARCFINANCE swap facility from the Reserve Bank of India. 

The weighted average spot exchange rate, which remained in Rs. 200-203 range in January, adjusted upwards with greater flexibility allowed in the exchange rate with effect from 07.03.2022

Sri Lankan businesses are in a recovery path although it has to break barricades created by the government’s policy blunders and stupid decisions leading to keep the country without electricity for 13 hours making the economic machinery standstill.

The country’s business confidence which showed some recovery last month has been nullified due poor crisis management of the government and its failure to solve burning problems of the people.

It has even failed to provide basic needs like fuel for transport and electricity, gas for cooking and even food for the people to eat due to present rulers arrogance and policy blunders, economic analysts and civil society activists claimed.

The Colombo Stock Market Trading is now in shambles as a result of tense situation in the country with hundreds and thousands of young people took to the streets in Mirihana near the President’s residence demanding the government to step down. . .

The Colombo Stock Exchange (CSE) cut daily trading to two hours from the usual four-and-a-half because of the power cuts for the rest of this week at the request of brokers, the bourse said in a statement.

But shares slid after the market opened on Thursday and the CSE halted trading for 30 minutes – the third suspension in two days – after an index tracking leading companies dropped by more than 5%.

“Concerns on the macro side, together with news of shorter trading hours plus increased power cuts is driving negative sentiment,” said an analyst at a brokerage firm.

The CSE halted trading twice on Wednesday as worries deepened over the economy and the power cuts.

The crisis is a result of badly timed tax cuts and the impact of the coronavirus pandemic coupled with historically weak government finances, leading to foreign exchange reserves dropping by 70% in the last two years.

The devaluation of the Sri Lankan Rupee, the prospect of some form of debt restructuring and consequently, an easing of the economic restrictions have so far failed to stop Sri Lanka Inc’s move towards a grinding halt several eminent economists said.

However NielsenIQ Business Confidence Index (BCI) registered a notable gain of eight basis points in March – to 132.

This outcome represents an 11 month high and sees the index edge towards where it stood before last April’s third wave of the virus, following which Sri Lanka imposed lockdowns and ‘travel restrictions.’

The barometer of biz confidence is six notches higher than a year ago (as well as its all-time average of 126) and 22 points above its 12 month average of 110.

So for the fourth month in succession, the BCI has headed north – despite the perilous state of the economy, the protracted forex crisis, ongoing shortages of essentials and to cap it all, a power crisis that has left the island in the dark for several hours on end.

NielsenIQ’s Director – Consumer Insights Therica Miyanadeniya explains: “With the COVID-19 counts waning and fear surrounding the virus abating, business seems to have started to pick up – and there’s hope on the horizon once again.”

Despite the rise in inflation and shortage of essential goods, businesses are reporting an improvement in sales volumes over the last three to 12 months, and they’re “optimistic about a better tomorrow,” she adds.

The countless downside risks that hover over the economy and political landscape at this juncture continue to cast a shadow over the BCI’s resurgence in recent months – even though the business community seems to be taking a long-term view of what the future holds.

Worse still, the increasingly ferocious headwinds in the northern hemisphere, from the direction of war ravaged Ukraine, make for a doom and gloom scenario for the rest of the world.

So the most obvious near-term sensitivities at the time of going to press include the price of oil, the value of the Sri Lankan Rupee, ongoing power and forex crises, and the prospect of political upheaval.

Miyanadeniya meanwhile, also believes that with the “Sri Lankan Rupee being floated, brutal power cuts, rampant shortages of diesel and other necessities hindering businesses,” it will be very difficult for the index to continue to improve drastically.