Adani Group Withdraws From Sri Lanka Wind Power Project

The Adani Group announced its withdrawal from a proposed wind power project in Sri Lanka. This decision followed a series of controversies and criticisms surrounding the project. Initially, the Adani Group planned to invest over $440 million in a 20-year agreement to develop wind power in northern Sri Lanka’s Mannar town and Pooneryn village. However, mounting opposition from local communities and political parties led to the project’s eventual cancellation.

Project Overview

The wind power project aimed to generate a total capacity of 484 megawatts. It was part of Sri Lanka’s broader push towards renewable energy. The Adani Group had previously secured contracts in the country, including a 51% stake in the Western Container Terminal at Colombo Port. The project was first announced in 2022 under then-President Gotabaya Rajapaksa.

Criticism and Controversy

The project faced backlash due to its opaque approval process. Allegations arose that Prime Minister Narendra Modi pressured the Sri Lankan government to award the project to Adani. These claims were made by M M C Ferdinando, the Chairman of the Ceylon Electricity Board (CEB), during a parliamentary hearing. However, he later retracted his statement, citing emotional distress. Critics also raised concerns about the tariff rate of $0.0826 per kilowatt-hour, arguing it was excessively high for Sri Lanka.

Ecological and Economic Concerns

Local communities expressed fears regarding the ecological impact of the wind farms. Environmentalists and CEB unions protested against the project, demanding a competitive bidding process for energy contracts. The opposition intensified amid a financial crisis in Sri Lanka, leading to political upheaval and the ousting of President Rajapaksa.

Change in Government and Project Review

With the election of Anura Kumara Dissanayake as President in September 2024, a review of the wind power project became probable. Dissanayake had previously indicated intentions to cancel the project, citing threats to Sri Lanka’s energy sovereignty. Recently, the government announced the formation of a committee to review the project agreement, signalling potential changes.

Adani Group’s Official Withdrawal

On February 12, 2025, the Adani Group formally withdrew from the wind power project. The company stated that it respected Sri Lanka’s sovereign rights and decisions. The letter brought into light recent discussions with CEB officials and indicated that a new committee would be formed to renegotiate the project proposal. This withdrawal reflects the complexities of international investment in politically sensitive environments.

Future Implications

The withdrawal of the Adani Group may set a precedent for future foreign investments in Sri Lanka. It puts stress on the importance of transparency and community engagement in project approvals. The situation also illustrates the delicate balance between energy needs and ecological sustainability.

Questions for UPSC:

1. Critically analyse the impact of foreign investments on local economies in developing nations.
2. What are the challenges faced by renewable energy projects in politically unstable regions? Provide examples.
3. Estimate the role of public opinion in shaping energy policy decisions in democratic countries.
4. Point out the significance of competitive bidding processes in government contracts. How does it affect transparency?

Answer Hints:

1. Critically analyse the impact of foreign investments on local economies in developing nations.

1. Foreign investments can stimulate economic growth by creating jobs and increasing local income.
2. They often lead to infrastructure development, enhancing local facilities and services.
3. However, profits may be repatriated, limiting long-term economic benefits for the host country.
4. Foreign investments can sometimes lead to dependency, reducing local businesses’ competitiveness.
5. Local communities may face displacement or environmental degradation due to large projects.

2. What are the challenges faced by renewable energy projects in politically unstable regions? Provide examples.

1. Political instability can lead to sudden policy changes, affecting project viability and investor confidence.
2. Corruption and lack of transparency may hinder project approvals and increase costs.
3. Local opposition can arise from concerns over environmental impacts and community rights, as seen in the Adani project.
4. Inadequate infrastructure and regulatory frameworks can complicate project implementation.
5. Examples include the Adani wind project in Sri Lanka and solar projects in Venezuela facing governmental challenges.

3. Estimate the role of public opinion in shaping energy policy decisions in democratic countries.

1. Public opinion can influence policymakers, leading to changes in energy priorities and investments.
2. Grassroots movements can mobilize against projects perceived as harmful, as seen with the Adani project.
3. Transparency and community engagement are critical for gaining public support for energy projects.
4. Public sentiment can drive the adoption of renewable energy by denoting environmental concerns.
5. Examples include the shift towards renewables in Germany, heavily influenced by public advocacy for sustainability.

4. Point out the significance of competitive bidding processes in government contracts. How does it affect transparency?

1. Competitive bidding promotes fairness by allowing multiple companies to submit proposals, encouraging healthy competition.
2. It helps ensure that taxpayer money is spent efficiently, potentially lowering project costs.
3. Transparent bidding processes can reduce corruption and favoritism in awarding contracts.
4. They encourage innovation, as companies strive to present the best solutions to win contracts.
5. Failure to follow competitive bidding can lead to public distrust and backlash, as seen in the Adani project controversies.