The Adani Group, one of India’s largest conglomerates decided to withdraw from its wind power projects in Sri Lanka last week, marking a significant turn in a deal that had been mired in controversy, geopolitical tensions and environmental concerns. The decision comes after Sri Lanka’s newly elected National People’s Power (NPP) Government sought to renegotiate the terms of the agreement, citing the need for lower electricity prices and greater transparency.
Background of the Agreement
The Adani Group has become a significant player in Sri Lanka’s renewable energy sector in recent years, entering the country during a period of heightened Indian geostrategic influence in the Indian Ocean region. This expansion followed India’s provision of $4 billion in credit to Sri Lanka during its severe financial crisis in 2022, which bolstered India’s role as a key economic and political partner for the island nation.
However, the Group’s involvement in Sri Lanka has been highly contentious. In June 2022, M.M.C. Ferdinando, then-chairman of Sri Lanka’s state-run Ceylon Electricity Board (CEB) revealed to the Parliament’s Committee on Public Enterprises that the Sri Lankan Government had faced direct pressure from Prime Minister Modi to award renewable energy project tenders to the Adani Group.
In 2023, the Adani Green Energy Limited (AGEL), a subsidiary of the Adani Group, signed a Power Purchase Agreement (PPA) with Sri Lanka’s State-run CEB to develop two wind power projects in the Mannar and Pooneryn regions of Northern Sri Lanka. The projects, with a combined capacity of 484 megawatts (MW), were expected to involve an investment of approximately $442 million, with a total projected investment of $1 billion including associated transmission systems. The Agreement stipulated that Adani would sell electricity to Sri Lanka at a fixed tariff of 8.26 US cents per kilowatt-hour (kWh) for 20 years.
The deal was signed under the administration of former President Ranil Wickremesinghe which tried to sell it as a key component of Sri Lanka’s efforts to transition to renewable energy and reduce its reliance on costly fuel imports. However, the agreement faced immediate criticism for bypassing competitive bidding processes and for the perceived influence of the Indian government in pushing the deal forward. Critics argued that the tariff rate was significantly higher than what local firms had offered and even exceeded rates for similar projects in India.
The decision to withdraw
The turning point came with the election of President Anura Kumara Dissanayake, whose administration pledged to review and renegotiate the Adani deal. The new Government sought to lower the tariff to below US cents 6 per kWh, citing the need to reduce costs for Sri Lankan consumers. In January 2025, the Sri Lankan Cabinet revoked the earlier agreement and formed a committee to renegotiate the terms.
Adani Green Energy, in a letter to Sri Lanka’s Board of Investment (BOI) last week, stated that while it respected Sri Lanka’s sovereign rights, it had decided to withdraw from the project due to the uncertainty created by the renegotiation process. The company said that it had already invested $5 million in pre-development activities and had secured most of the clearances, except for environmental approval for the Mannar project, which was tied up in a Supreme Court case.
Adani’s withdrawal was also influenced by broader controversies surrounding the conglomerate. In November 2024, U.S. prosecutors indicted eight Adani Executives on bribery charges related to securing energy contracts in India. This scandal, coupled with environmental and financial concerns, cast a shadow over the Sri Lankan projects and contributed to the decision to exit.
Reactions from politicians and environmentalists
The withdrawal has sparked mixed reactions in Sri Lanka. Opposition Leader Sajith Premadasa and Samagi Jana Balawegaya (SJB) MP Harsha de Silva expressed concern over the departure of foreign investors, warning that it could exacerbate the country’s energy crisis. The former emphasised the need for transparency and competitiveness in such deals but lamented the loss of investment at a time when Sri Lanka is struggling with power shortages and economic instability.
However, this is an about turn from the position that the SJB held previously. In 2022, MP de Silva told India’s The Hindu that Adani’s renewable energy agreement with the country violated Sri Lanka’s energy laws, especially the Sri Lanka Electricity (Amendment) Act of 2013.
“The Mannar Basin has one of the best energy yields. Giving it to an investor outside of a competitive process is a clear violation. We are talking about 500 MW in one of our best locations,” he told The Hindu’s Meera Srinivasan.
Environmentalists, on the other hand, hailed the decision as a victory. Groups such as the Centre for Environmental Justice (CEJ) and the Wildlife and Nature Protection Society (WNPS) had earlier filed cases in Sri Lanka’s Supreme Court, challenging the environmental impact assessment (EIA) for the Mannar project. They said that the wind farms, located on a critical migratory bird flyway, could devastate avian populations and increase flood risks for local communities. chairman of the CEJ, Hemantha Withanage described Adani’s withdrawal as a “significant achievement” for environmental advocacy.
Geopolitical and economic implications
The Adani controversy underscores Sri Lanka’s precarious position in the geopolitical rivalry between India and China. Adani’s projects, including a $700 million port terminal in Colombo, are widely viewed as part of India’s strategy to counter China’s Belt and Road Initiative (BRI) in South Asia. However, the perception of Adani as an extension of the Indian state has fueled backlash across South Asia, with critics accusing smaller South Asian nations of being coerced into unfavorable deals.
The withdrawal also highlights the challenges of balancing economic imperatives with environmental and social concerns. While renewable energy projects are crucial for Sri Lanka’s energy security, the high tariffs and environmental risks associated with the Adani deal raised questions about its viability. The new Government’s decision to renegotiate reflects a broader push for accountability and sustainability in foreign investments.
For the Adani Group, the withdrawal marks another setback in its international expansion efforts, following controversies in Kenya and Bangladesh. The conglomerate’s ability to navigate legal and reputational challenges will be critical to its future prospects.
Adani’s exit from Sri Lanka’s wind power projects is a complex saga of economic, environmental, and geopolitical factors. While it represents a victory for environmentalists and advocates of transparency, it also underscores the challenges Sri Lanka faces in attracting foreign investments without compromising its sovereignty or ecological integrity. The episode serves as a cautionary tale for other nations navigating the delicate balance between development, accountability, and environmental sustainability in an era of great-power competition. (RK)
