Recently Sri Lanka and China signed the Hambantota Port Concession Agreement.
This effectively converts the loans bought by Srilanka for the development of the port into equity.
What are the highlights of Hambantota port agreement?
China will pay USD 1.12 billion upfront in a debt-equity swap in the ratio of 70:30 approximately.
The China Merchant Port Holdings Company (CMPort) gets 69.55% of the shares and the Sri Lanka Ports Authority (SLPA), holds the remainder.
The agreement leases out the port to CMPort for 99 years, after 10 years SLPA can buy equal shares.
What are India's Concerns on this issue?
India’s main concern has been the long term impact of Chinese state-owned companies acquiring equity in the Sri Lankan economy.
The extent to which Chinese influence on Sri Lanka’s economy would affect Colombo’s ability to practice an independent foreign policy is also an issue.
Chinese influence in Sri Lanka will have serious implications for the latter’s relationship with India.
Sri Lanka in its recent argument cleared that the port is specifically prohibited from activities involving military personnel and/or any kind/type of activities of military nature whatsoever.
But Sri Lanka is now fallen into Chinese debt trap whether it will keep its stand is a big doubt for India.
