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India and Sri Lanka are working on a plan to lay a transmission line under the sea to connect the power distribution networks of the two countries so that electricity can be supplied by one when the other is running short. An initial report prepared by the Indian state-owned transmission utility PowerGrid has pegged the cost of the project at Rs 2,292 crore and said it could be completed within 42 months of getting investment approvals.

The report projects laying a power cable under the Gulf of Mannar between Rameswaram in Tamil Nadu and Talaimannar on the left flank of the Mannar islands in Sri Lanka. On the Indian side, the undersea cable will be connected to the southern grid at Madurai through an overhead transmission line. On the Sri Lanka side, the underwater cable will be linked to that country’s network at Anuradhapura through an overhead line. The undersea link will be laid on the sea bed just as telecom and internet cables run across ocean beds around the world. It will have safeguards on both sides against electrocution in case of damage from ship anchors or sharks. An optic-fibre cable will also run alongside the main power cable to keep an eye on the link and also provide extra telecom capacity between the two countries.

The report prepared by PowerGrid says the power supply scenario between India and Sri Lanka will allow them to exchange about 500MW of electricity in the short term, or by 2009-10. Once the two sides settle down with this quantity, the flow of power can be ramped up to 1,000MW, roughly one-third of Delhi’s present consumption, in the medium-to-long term of 2011-12 through 2015-16. These are the time frames when the generation capacities in both countries are projected to improve, with surplus in the Indian southern grid.

At present, India is facing a 16% electricity shortage, with a peak demand of 1,07,000MW. The government plans to add 78,500MW capacity by 2012, with more envisaged in the captive and merchant segments by private investors. Though it has plans to add 3,080MW capacity by 2016, it faces a tough situation. Almost half of the total hydel potential of 2,000MW has been tapped and new projects will be difficult to implement due to social and environmental problems. The existing hydel projects run low during poor monsoon and in the dry season. It is clear that the planned interconnect between the two countries will provide hydel support to Sri Lanka, while India can seek thermal support from its neighbour in winters. The link will help Sri Lanka reduce use of expensive fuels and import cheaper power.

Indian banking titan State Bank of India (SBI) hopes to do business of the order of $250 million in Sri Lanka in the coming three years. The bank already has a balance sheet size of $150 million. And it has only four branches - three in Colombo city and one in the hill town of Kandy - a company source said. Over the last three years, there has been a 50 percent growth, and the profit is of the order of $3.80 million.Worldwide, in 2006-07, SBI had assets totalling $130.33 billion, total deposits of $100.19 billion and a net profit of $1.04 billion.

In its Sri Lankan operations, the Net Non-Performing Assets (NPA), in both the Domestic Banking Unit (DBU) and the Foreign Currency Banking (FCBU), have always been less than two percent. The SBI began its operations in Sri Lanka way back in 1864, and is the island’s oldest bank. In its previous avatar as the Imperial Bank of India, it funded the operations of the Ceylon government, and the then-nascent tea industry. Today, as SBI, it is aggressively into financing the working capital needs of the Sri Lankan corporate sector, even as it has strengthened its traditional hold on the financing of exports and imports, especially Sri Lanka-India trade. Colombo is currently hosting a two-day conference of SBI branches in the south Asian region.