Sri Lanka’s energy sector at risk: Calls for diversification amidst Chinese investments

Sri Lanka’s energy sector at risk: Calls for diversification amidst Chinese investments

Y P Prakash

Sri Lanka is currently grappling with a severe economic crisis, with its energy sector feeling the impact acutely. The country heavily relies on energy imports, and the soaring costs of oil and gas have strained the government’s finances. In a bid to address this crisis, Sri Lanka has sought assistance from China, which has agreed to provide loans and grants to support the development of the energy sector. However, concerns have been raised by experts over China’s aggressive approach, suggesting that it could jeopardize Sri Lanka’s sovereignty and security.

China has already financed significant infrastructure projects in Sri Lanka, such as a port, an airport, coal power plant and a highway. These projects have granted China considerable control over Sri Lanka’s economy, raising worries about potential political concessions or preferential access to resources that China might demand in return for its financial support. While the Sri Lankan Government denies surrendering its sovereignty, it acknowledges the growing reliance on China for energy, which could make the country vulnerable to undue pressure in the future.

Experts emphasize the urgent need for Sri Lanka to diversify its energy sources to mitigate dependence on China and safeguard its sovereignty and security. One key aspect of diversification is the development of renewable energy resources, including solar and wind power, within the country. Additionally, exploring energy imports from other countries such as India and the United States can contribute to reducing vulnerability to economic shocks and Chinese influence.

The current reliance on traditional energy sources makes it imperative for Sri Lanka to embrace renewable alternatives, not only to shield the environment but also to achieve long-term economic sustainability. Diversifying energy sources would minimize the country’s exposure to fluctuations in global oil prices, ensuring a more stable economic environment. Furthermore, it would enhance energy security by reducing dependence on finite fossil fuels and harnessing abundant local renewable resources.

India, as a neighbouring country with substantial expertise in renewable energy, can play a pivotal role in assisting Sri Lanka’s transition towards cleaner energy sources. Several avenues of collaboration between the two nations can be explored. Technical collaboration and knowledge sharing can involve the exchange of expertise, training programs, and workshops to facilitate the development and integration of renewable energy projects. Financial assistance from India, in the form of grants or concessional loans, can help overcome initial financial barriers to renewable energy infrastructure development. Joint research and development initiatives can drive innovation and technological advancements in the renewable energy sector, benefiting both countries.


Capacity building efforts, including training programs for engineers, technicians, and policymakers, will foster a skilled workforce in Sri Lanka, accelerating the transition towards renewable energy. Exploring opportunities for cross-border energy trade in the renewable sector can provide Sri Lanka with access to surplus renewable energy from India during periods of high demand or low production, ensuring a reliable and stable energy supply.

India can also provide guidance and support to Sri Lanka in establishing favourable policies and regulatory frameworks for renewable energy development. Sharing successful policy frameworks, such as feed-in tariffs and tax incentives, will help create an enabling environment for renewable energy investments and growth in Sri Lanka. Furthermore, project partnerships between Indian and Sri Lankan renewable energy companies can leverage expertise, technology, and financial resources to implement large-scale renewable energy projects.

While foreign investments can be beneficial, it is crucial to ensure that they align with national interests and do not compromise a country’s independence. Concerns over China’s aggressive approach in Sri Lanka’s energy sector include the potential debt trap and economic dependence, security risks, lack of transparency and governance, environmental impact, and the risk of diminishing local industry and expertise. Sri Lanka must prioritize transparency, carefully evaluate investment agreements, and safeguard its sovereignty and economic well-being.

Diversifying Sri Lanka’s energy sources and leveraging the expertise and resources of neighbouring countries like India can provide a pathway to a more sustainable and secure energy future. By reducing reliance on fossil fuels and embracing renewable energy alternatives, Sri Lanka can achieve energy security, mitigate economic risks, and contribute to global efforts in combating climate change.

China is known for its aggressive approach to foreign investment, often offering loans and grants to developing countries in exchange for access to natural resources or strategic locations. While these arrangements may seem beneficial on paper, they can often turn out to be much costlier than expected.

One example of this is China’s Belt and Road Initiative (BRI), a massive infrastructure project that is intended to connect China to Africa, Asia, and Europe. The BRI has been praised for its potential to boost economic growth and connectivity in these regions. However, it has also been criticized for its high cost and opaque financing arrangements.

Sri Lanka is not the only example of China’s aggressive approach to foreign investment. In Djibouti, China has built a military base in exchange for access to the country’s port. In Zambia, China has financed a number of infrastructure projects, including a railway line and a power plant. These projects have been financed by Chinese loans, and they have given China a significant amount of control over Zambia’s economy.

Experts warn that China’s aggressive approach to foreign investment could have a number of negative consequences. It could lead to debt traps for developing countries, as they may be unable to repay the loans they have taken out from China. It could also lead to a loss of sovereignty, as developing countries may be forced to make political concessions to China in exchange for economic assistance.

It is important for developing countries to be aware of the potential risks associated with China’s aggressive approach to foreign investment. They should carefully consider the terms of any agreements they make with China, and they should be prepared to walk away from deals that are not in their best interests.

In recent years, Sri Lanka has become a prominent battleground for the energy competition between India and China. As these two regional powers vie for influence in the South Asian region, the Sri Lankan Government faces a delicate balancing act in managing their competing interests.

India, with its close geographical proximity to Sri Lanka, has been actively seeking to strengthen its energy ties with its neighbouring country. Recognizing the need for Sri Lanka to diversify its energy sources and reduce dependence on fossil fuels, India has positioned itself as a reliable partner in promoting renewable energy development.

On the other hand, China has been pursuing an aggressive approach in Sri Lanka’s energy sector. Through infrastructure projects, including coal-fired power plants, China has sought to expand its influence and establish a stronghold in Sri Lanka’s energy landscape. These projects have often been financed by Chinese loans, raising concerns about the long-term economic implications for Sri Lanka.

The competition between India and China for energy influence in Sri Lanka has broader implications beyond bilateral relations. It is part of a larger geopolitical contest in the Indian Ocean region, where both countries are vying for strategic dominance. Sri Lanka’s strategic location and its energy resources make it a valuable prize in this power struggle.

Ultimately, Sri Lanka’s energy sector should not become embroiled in this power struggle. Instead, it should be a platform for cooperation, regional energy integration, and collective efforts to address the pressing challenges of energy security and climate change. The Sri Lankan Government must play a proactive role in shaping its energy landscape, carefully balancing the interests of multiple stakeholders, and ensuring the long-term benefit of its citizens and the environment.

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