New Delhi
India is closely monitoring the Sri Lankan government’s move to offer an airport near the southern city of Hambantota to foreign investors, given the facility’s strategic location and proximity to a Chinese-controlled port, people familiar with the matter said.
The Sri Lankan government has sought expression of interest from local and international investors by June 9 to acquire the Mattala Rajapaksa International Airport in Hambantota under a flexible 30-year build, operate and transfer (BOT) model.
New Delhi has long had doubts about massive infrastructure projects undertaken in neighboring countries with loans from state-run Chinese banks in light of the experience of Sri Lanka’s Hambantota port, which was handed over to Chinese control under a 99-year lease in 2017 after Colombo was unable to repay debts related to the project. A total of 15,000 acres around the port were also delivered with the facility.
Mattala Rajapaksa International Airport — located about 250 kilometers from the capital Colombo and built at a cost of $209 million, including $190 million in loans from the Export-Import Bank of China — has had a complicated history since its opening in 2013. Despite having a modern terminal building and a 3,500-meter-long runway capable of handling wide-body aircraft such as the Airbus A350, Boeing 777, and A380, the airport struggled to attract airline interest and passenger numbers.
The airport has recorded losses estimated at about $130 million, according to Sri Lankan government figures, and currently only handles charter flights.
The move to hand over the airport under a 30-year lease to a joint venture between India’s Shaurya Aviation and Russia’s Regional Airports Management Company in 2024 failed after the change of government in Colombo, sources said.
The Sri Lankan government’s current offer offers two independent investment streams for airport and ground operations, making it an attractive proposition for potential Indian investors, sources said. Investors can go into either or both paths, allowing flexibility to build a risk-free portfolio.
Air Operations involves a civil airport operations management contract and requires five years of relevant aviation experience or operating at least one international airport handling more than one million passengers annually. The onshore operations, offered on a build-operate-transfer model with 30-year lease and extension terms, cover a 238-hectare development, which the people said is comparable in size to the Chinese-developed port city of Colombo but without the attendant political risks.
The land can be used for maintenance, repair and overhaul (MRO) facilities, a flight school, logistics or industrial parks, solar energy facilities, and resort hotels.
“The land opportunity is attractive as it offers 238 hectares of government-leased land in Sri Lanka, which is actively attracting Indian FDI and where India has preferential trade access,” one of the people said.
“There is also a strategic dimension to the project. The Indian presence in Hambantota will be a tangible expression of the Neighborhood First policy and the Mahasagar Vision’s commitment to the Indian Ocean region, especially as an investment in building confidence in a close partner,” this person said.
