The recent reports that Sri Lanka has decided to revoke a 20-year power purchase agreement with India’s Adani Group has prompted considerable debate, highlighting the challenges that the nation’s leaders face in attempting to balance economic imperatives, relations with regional powers, and domestic accountability.
The debate around the Adani projects in Sri Lanka was prompted by the bribery charges that were handed down by U.S. prosecutors against eight Adani executives in November.
While the government insists that the $442 million wind power projects in Mannar and Pooneryn are merely under review – not canceled – the controversy highlights the risks of aligning too closely with a conglomerate embroiled in global scandal and perceived as an arm of the Indian state.
The roots of the dispute go back to early 2023, when Sri Lanka’s Board of Investment approved Adani Green Energy’s wind power projects at a tariff rate of $0.0826 or 8.26 Sri Lankan cents per kilowatt-hour, despite local firms offering it at half the rates.
The deal, signed under former President Ranil Wickremesinghe, faced immediate criticism for bypassing competitive bidding and allegations of Indian government coercion. Statements from Sri Lankan officials suggested the projects were fast-tracked under pressure from New Delhi, with former Foreign Minister Mohamed Ali Sabry controversially labeling them “government-to-government” agreements.
These claims gained traction after U.S. prosecutors indicted Adani executives in November 2024 for allegedly bribing Indian officials to secure energy contracts, a scandal that has since prompted Kenya to scrap $2.5 billion in Adani projects.
For Sri Lanka, a country still reeling from its 2022 sovereign default and the resulting high electricity and fuel costs, renewable energy symbolized hope. Wind farms promised to boost renewable energy capacity and reduce reliance on expensive fuel imports.
But the fact that Sri Lanka was pushed to award renewable energy projects to Adani and the recent U.S. indictment has cast a harsh light on the risks of partnering with a conglomerate now under international scrutiny.
Shares of Adani Green Energy plunged 6 percent following Sri Lanka’s review, reflecting investor anxiety. The fallout is a stark reminder of how quickly corporate scandals can destabilize fragile economies.
The controversy also exposes Sri Lanka’s vulnerability to geopolitical maneuvering. Adani’s projects, including the $700 million Colombo Port terminal, are widely seen as India’s counter to China’s Belt and Road Initiative (BRI) in South Asia. Unlike China’s state-driven BRI, India relies on private firms like Adani to project influence, blurring the line between corporate investment and strategic diplomacy. This approach, however, has prompted backlash.
In 2021, mass protests forced Sri Lanka to cancel Adani’s East Container Terminal project, while Bangladesh now contests exorbitant electricity tariffs from Adani’s Godda power plant.
Financial and environmental concerns further complicate the picture.
The Mannar project’s 8.26-cent tariff – double India’s renewable energy rates – threatens to burden Sri Lankan consumers with inflated costs for decades. Critics argue the deal prioritizes Adani’s profits over public welfare, particularly as local firms offered far lower rates. Environmentalists warn that the project, situated on a critical migratory bird flyway, could devastate avian populations. The government’s environmental impact assessment, criticized as inadequate, allegedly ignored recommendations for underground cabling to cut costs. Legal challenges compound these issues, with five Supreme Court cases questioning the project’s procurement process and land lease terms.
Sri Lanka’s newly elected National People’s Power (NPP) government, which campaigned on anti-corruption pledges, faces a defining test. Retaining the Adani deal without addressing these red flags would undermine its credibility. Conversely, canceling the project risks antagonizing India, Sri Lanka’s largest regional partner and a vital source of economic and political support. The path forward demands a delicate balance.
First, Sri Lanka must prioritize transparent renegotiation. The committee reviewing the project should use local bids as a benchmark for lowering tariffs, potentially saving millions annually. Full disclosure of contract details, currently shrouded in secrecy, is essential to rebuilding public trust. Second, independent environmental reviews must address ecological risks, including mandatory underground cabling and alternative sites. Third, Sri Lanka should decouple geopolitics from economics by insisting on competitive bidding for future projects, avoiding opaque “government-to-government” labels. Engaging Indian firms through joint ventures with local partners could balance diplomatic ties with equitable growth.
Diversifying energy partnerships is equally critical. Over-reliance on a single conglomerate heightens the country’s vulnerability. Sri Lanka should explore financing from European, Japanese, or multilateral agencies like the Asian Development Bank, which offer lower costs and stricter governance standards. Legal accountability cannot be ignored. The Supreme Court must rule conclusively on procurement irregularities, and if evidence of coercion or graft emerges, Sri Lanka should pursue legal action to deter future overreach.
The Adani controversy transcends Sri Lanka’s energy policy. It is a litmus test for the country’s commitment to sovereignty and transparency in an era of great-power rivalry. Kenya’s cancellation of Adani projects and Bangladesh’s tariff disputes signal a growing Global South pushback against exploitative deals.
For the NPP government, this is more than an economic dilemma: it is a chance to prove that campaign promises of integrity are more than rhetoric. Succumbing to geopolitical pressure or corporate lobbying would betray its mandate. Conversely, a principled, rigorous approach could strengthen Sri Lanka’s negotiating leverage and restore public faith.
The stakes are high.
As Sri Lanka navigates post-default recovery, its choices will resonate far beyond its shores. By prioritizing national interest over expediency, Colombo can pursue a policy that safeguards both its economy and its sovereignty, perhaps setting a precedent for other nations grappling with similar pressures. The world is watching.