An Echelon Media Company
Thursday June 8th, 2023

Sri Lanka protesters oppose Indian Adani’s USD 500 mn unsolicited wind power deal

ECONOMYNEXT – Hundreds of Sri Lankans this week demanded the cancellation of a 500 million US dollar wind power deal with India’s Adani group due to possible corruption as the project was not opened for competitive bidding.

The protest was held for over three hours starting near a shopping mall –  the Majestic City, in the capital Colombo and then moved to the Power and Energy Ministry and Indian High Commission premises in the neighbourhood.

Adani Group, a multinational diversified conglomerate which has business interests ranging from port management to power generation and renewable energy to natural gas, was awarded the deal in 2021 to generate 500 MW of power using wind mills in the island nation’s northern coast.

The project was resisted by some trade unions at the state-run utility provider Ceylon Electricity Board (CEB) and activists groups claim that the project has bypassed normal tender procedures and was clandestinely signed between President Gotabaya Rajapaksa’s government and the owner of the Adani group who is a close ally of Indian Prime Minister Narendra Modi.

“We are for renewable energy, but we are against shady deals, non-transparency and lack of accountability,” Amanda Wanduragala, a youth protester told EconomyNext.

“This tender should have been given to the lowest bidder, so Adani shouldn’t get it.

“This deal will not be beneficial to us, simply because we can’t give Adani power over our energy sector, and because this is turning into a monopoly. Our country is already suffering and we can’t afford to sell ourselves even more to India,” she said.

Many of the youth came from the group that has been protesting for the last 75 days demanding that President Rajapaksa resign, participants told EconomyNext.

“We are here to tell Adani that although we want renewable energy and although the country needs foreign direct investment (FDI) in order to get through the crisis, we don’t want Adani,” another protester told EconomyNext asking not to be named.

“The way out of this crisis is not more corrupt deals through the backdoor. We want to tell [Rajapasa] and Modi not to push non-transparent deals. The law of this country has been [sidestepped] to push through the wind project.”

Sri Lanka is facing one of its worst economic crises in history, and India has helped with over 3 billion US dollars in credit lines and by delaying the island nation’s import payments.

Some of the protesters said that India should not use Sri Lanka’s vulnerable position to take advantage in business deals.

Melanie Gunathilake, a 26-year old protester, said they were against the allegedly corrupt deal signed by the Rajapaksa government and Adani Power supported by the Modi government.

“Sri Lanka definitely needs renewable energy, and we want to move to a sustainable future but that shouldn’t happen through a corrupt deal,” she said.

The protest comes amid a cold war between India and China in the island nation for strategic infrastructure projects. It was also held nearly a week after the government amended the Sri Lanka Electricity Act to entertain unsolicited projects, replacing the earlier competitive bidding process.

In early 2021, aggressive trade union protests against leasing a Colombo Port terminal to India and Japan forced the government to reverse that deal. However, the Rajapaksa government later compromised with India and gave another 800 million US dollar longer terminal deal to  theAdani group last year.

India has raised security concerns over increasing Chinese influence in Sri Lanka as many infrastructure projects are given to China financed by Beijing.

China was chosen to handle renewable energy projects in Sri Lanka’s northern islands through the standard tender process, but the Sri Lanka government later cancelled them after India protested against China coming close to its southern boarder. (Colombo/Jun16/2022)

Leave a Comment

Your email address will not be published. Required fields are marked *

Leave a Comment

Leave a Comment

Cancel reply

Your email address will not be published. Required fields are marked *

Sri Lanka’s shares slip on profit taking and selling pressure

ECONOMYNEXT – Sri Lanka’s shares closed lower on Wednesday after four consecutive gains in previous sessions spiraled into selling interest and profit taking, an analyst said.

The main All Share Price Index was down 0.28 percent or 24.39 points to 8,722.06, this is the lowest the index has been since May 02, while the most liquid index S&P SL20 was down 0.40 percent or 9.92 points to 2,468.44.

“The market was gaining in the previous sessions and there is selling and profit taking present today, due to continuously being on green,” an analyst said.

In the previous sessions the market was seeing gains, due to lowered policy rates and low inflation stimulating buying interest and driving the sentiment up, an analyst said.

Sri Lanka’s inflation in the 12-months to May 2023 has eased to 25.2 percent from 35.3 percent a month earlier according to a revised Colombo Consumer Price Index calculated by the state statistics office.

The central bank cut the key policy rates by 250 basis points to spur a faltering economic growth as inflation was decelerating faster than it projected.

“There are gradual improvements in the market sentiment, with positive sentiments coming in from lowered policy rates and inflation,” an analyst said.

The market generated foreign inflows of 12 million rupees and received a net foreign inflow of 18 million rupees, due to low share prices and discounted shares followed by a dividend announcement.

The market generated a revenue of 554 million rupees, this is the lowest the turnover has been since May 10, while the daily turnover average was 1 billion rupees. From the total generated revenue, the banking sector contributed 120 million rupees, Diversified Banks contributed 115 million rupees and the Capital Goods Industry generated 78 million rupees.

Top losers during trade were Sampath Bank, Commercial Bank and Aitken Spence. (Colombo/June06/2023)

Continue Reading

Sri Lanka Treasuries yields plunge, 12-month down 318bp

ECONOMYNEXT – Sri Lanka’s Treasuries yields plunged across maturities at Wednesday’s auction with the 12-month yield falling 318 basis points, in one of the biggest one day falls, data from the state debt office showed.

The 3-month yield fell 244 basis points to 23.21 percent.

The 6-mont yield fell 339 basis points to 21.90 percent, along with the 12 months to 19.10 percent.

The short-term yield curve is inverted.

The central bank last week cut its policy rate 250 basis points in a signaling move but is not printing money to enforce the rate cut.

The debt office sold all 140 billion rupees of offered securities. (Colombo/June07/2023)

Continue Reading

Sri Lanka forex reserves rise US$722mn in May 2023

ECONOMYNEXT – Sri Lanka’s foreign reserves grew 722 million US dollars to 3,483 million US dollars in May 2023 from 2,761 million US dollars in April, official data showed as deflationary policy and weak credit reduced ‘above the line’ outflows.

Sri Lanka lost almost all its reserve in over two years as the central bank sold reserves and printed money to keep rates down (sterilized reserves sales) including borrowed dollars from India.

Gross official reserves fell to a low of 1,705 million US dollars in September 2022.

Sri Lanka’s central bank hiked rates in April 2022 to slow credit and also stopped printing money after it ran out of borrowed Asian Clearing Union dollars from India.

Sri Lanka’s gross official reserves are made up of both monetary reserves of the central bank and any balances of the Treasury account from loans or grants it gets.

The central bank’s net foreign reserves are still negative after busting up borrowed reserves to suppress rates. By April (before the collection of reserves in May) the central bank’s net reserves were negative by 3.7 billion US dollars.

In May alone 662 million US dollars were bought from the market, Central Bank Governor Nandalal Weerasinghe said.


No pre-determined level to stop Sri Lanka rupee appreciation: CB Governor

Borrowing dollars through swaps and busting them up, was invented by the US Federal Reserve as it was printing money and breaking the Bretton Woods system in the early 1970s.

Sri Lanka received a 350 million US dollar tranche from the Asian Development Bank and 331 million US dollars from the IMF to the Treasury for budget support.

The loans can be sold to the central bank by the government to generate rupees and spend. However, since credit is weak, not all the inflows go out of the country particularly as the central bank is conducting deflationary open market operations on a net basis.

By allowing the rupee to appreciate unlike in previous episodes of recovery in an IMF program, after a bout of money printing, the central bank is bringing down inflation – in some cases absolute prices – and restoring confidence and easing the ‘pain’ of ‘monetary policy’ or stimulus.


Why is Sri Lanka’s rupee appreciating?

Though exports are falling, tourism revenues are also picking up.

The budget support loans, tourism receipts less the reserve collected will widen the trade deficit. Building foreign reserves involves lending money to the US or other western nations and is similar to repaying foreign debt. (Colombo/June07/2023)

Continue Reading