Much recently, Sri Lanka approved the arrival of a Chinese satellite-tracking vessel to its southern Chinese-funded Hambantota port.

Why in news?

• India has raised concerns over the ship’s visit.
• Caught in a delicate diplomatic and geopolitical spot, Colombo gave its nod despites India’s requests to deny the permission.
• It is asserted that bankrupt Sri Lanka succumbed to Chinese pressure after initially refusing the ship to dock.

Yuan Wang 5: The vessel

• Yuan Wang 5 was described by the Sri Lankan government as a “scientific research ship”.
• The BRISL (Belt & Road Initiative Sri Lanka), a Colombo-based organisation studying China’s ambitious connectivity project, was the first to draw attention to the visit.
• It said that the Yuan Wang 5 will conduct “satellite control and research tracking in the northwestern part of the Indian Ocean Region”.
• Vessels of the Yuan Wang class are said to be used for tracking and supporting satellite as well as intercontinental ballistic missiles by the People’s Liberation Army Strategic Support Force.

India’s reaction

• India has expressed its concern over the Chinese vessel visit.
• It is carefully monitoring any development having a bearing on its security and economic interests.

How have other countries reacted?

• The developments showed that Colombo was caught between the U.S. and India on the one hand, and China on the other.
• That too at a time when the Sri Lankan government is counting on all their support as the island nation, hit by a devastating economic crisis, embarks on debt restructuring ahead of a promised IMF package.

How did China respond?

• China reacted strongly at Sri Lanka, following concerns voiced by India.
• It clarified that Sri Lanka is a transportation hub in the Indian Ocean.
• Scientific research vessels from various countries including China have made port calls in Sri Lanka for replenishment.
• Secondly, it invoked Sri Lanka’s sovereignty and the right to develop relations with other countries based on its development interests.

What is Sri Lanka’s stand?

• It is reported that the US and Indian envoys were asked to provide concrete reasons for their objections.
• Not satisfied with the reasons being sufficient to refuse entry to the Chinese vessel, SL decided to inform the Chinese embassy in Colombo to inform the ship to continue its journey to Hambantota.

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A day after angry mob converged in front of President Gotabaya Rajapaksa’s Colombo residence, demanding he step down immediately, he declared a state of Emergency in Sri Lanka.

Sri Lankan Crisis: A backgrounder

• Sri Lanka’s economic crisis can be traced to two key developments— the Easter Sunday bombings of 2019 that deterred tourists, and the pandemic since early 2020.
• These events stalled recovery and further drained the economy.
• As it grappled with an unprecedented challenge, the Rajapaksa regime made policy choices that are now proving to be costly.
• It cut the government’s tax revenue substantially and rushed into an ‘organic only’ agricultural policy that will likely slash this year’s harvest by half.
• The weak and debt-ridden economy with the lingering strain of the pandemic, and ill-advised policies accelerated the downward spiral.

What were the economic indicators?

• COVID-19 hit Sri Lanka’s key foreign revenue earning sectors hard.
• Earnings from tourism, exports, and worker remittances fell sharply in the last two years.
• But the country could not stop importing essentials, and its dollar account began dwindling.
• Fast draining foreign reserves, a glaring trade deficit, and a related Balance of Payments problem came as crucial signals.
• Colombo’s huge foreign loan obligations and the drop in domestic production compounded the economic strain.

When did things begin to worsen?

• The long-simmering crisis made its first big announcement during last August’s food emergency, when supplies were badly affected.
• It was soon followed by fears of a sovereign default in late 2021, which Sri Lanka averted.
• But without enough dollars to pay for the country’s high import bill, the island continued facing severe shortage of essentials — from fuel, cooking gas, and staple foodgrains to medicines.

How did the crisis manifest itself on the ground?

• Consumers could not find the most basic things such as petrol, LPG cylinders, kerosene, or milk in the market.
• They spent hours waiting in long queues outside fuel stations or shops.
• Supermarket shelves were either empty or had products with high price tags that most could not afford.
• For instance, the price of one kg of milk powder, a staple item in dairy-deficient Sri Lanka, suddenly shot up to nearly LKR 2000 in March.
• Be it cooking gas, oils, rice, pulses, vegetables, fish, meat, consumers found themselves paying substantially more, or simply had to forego the item.
• The fuel shortage has led to long blackouts — up to 13 hours — across the island.

What is the situation now?

• The value of the Sri Lankan rupee has dropped to 300 against a U.S. dollar (and even more than 400 in the black market), putting importers in a difficult spot.
• The government is unable to pay for its import shipments, forcing consignments to leave the Colombo port.
• For the average citizen contending with COVID-induced salary cuts and job losses, the soaring living costs have brought more agony.

How did India help mitigate the crisis?

• India has extended $2.4 billion this year.
• China, that is considering a fresh request from Colombo for $2.5 billion assistance, in addition to the $2.8 billion it has extended since the pandemic broke out.
• The government has decided to negotiate an International Monetary Fund programme, while seeking support from other multilateral and bilateral sources.
• But even with all this help, Sri Lanka can barely manage.

How has it affected the people?

• Sri Lankans are seething with anger, going by public demonstrations and protests.
• They want the President to step down immediately and the ruling clan to leave the country’s helm.
• They have been agitating in different parts of the country, including near the President’s home.
• Former military man Gotabaya Rajapaksa, who came to power on a huge mandate in 2019, is Sri Lanka’s most unpopular leader today.
• Following the protests near his home, Mr. Rajapaksa said “extremists” were plotting an ‘Arab Spring’ and hence he declared a state of Emergency.

Back2Basics: Financial Emergency in India

• The President of India can declare the Financial Emergency on the aid and advise of the Council of Ministers.
• She/ He has to be satisfied that a situation has arisen due to which the financial stability or credit of India or any part of its territory is threatened.
• Article 360 gives authority to the President of India to declare a financial emergency.
• However, the 44th Constitutional Amendment Act of 1978 says that the President’s ‘satisfaction’ is not beyond judicial review.
• It means the Supreme Court can review the declaration of a Financial Emergency.

Parliamentary Approval and Duration

• A proclamation of financial emergency must be approved by both the Houses of Parliament within two months from the date of its issue.
• A resolution approving the proclamation of financial emergency can be passed by either House of Parliament (Lok Sabha or Rajya Sabha) only by a simple majority.
• Once approved by both the Houses of Parliament, the Financial Emergency continues indefinitely till it is revoked.
• It may be revoked by the President anytime without any Parliamentary approval (but with the usual aid and advice).

Effects of Financial Emergency

• During the financial emergency, the executive authority of the Center expands and it can give financial orders to any state according to its own.
• All money bills or other financial bills, that come up for the President’s consideration after being passed by the state legislature, can be reserved.
• Salaries and allowances of all or any class of persons serving in the state can be reduced.
• The President may issue directions for the reduction of salaries and allowances of: (i) All or any class of persons serving the Union and the judges of the Supreme Court and the High Court.

Try this PYQ:

Q. With reference to the Constitution of India, prohibitions or limitations or provisions contained in ordinary laws cannot act as prohibitions or limitations on the constitutional powers under Article 142. It could mean which one of the following?

 

(a) The decisions taken by the Election Commission of India while discharging its duties cannot be challenged in any court of law.

(b) The Supreme Court of India is not constrained in the exercise of its powers by laws made by the Parliament.

(c) In the event of grave financial crisis in the country, the President of India can declare Financial Emergency without the counsel from the Cabinet.

(d) State Legislatures cannot make laws on certain matters without the concurrence of the Union Legislature.

 

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Sri Lanka’s economic crisis is aggravating rapidly, putting citizens through enormous hardship.

Reasons for the Crisis

The first wave of the pandemic in 2020 offered early and sure signs of distress.

• In-migration: Thousands of Sri Lankan labourers in West Asian countries were left stranded and returned jobless.
• Shut-down: Garment factories and tea estates could not function, as infections raged in clusters. Tourism sector to saw a big dip.
• Domestic job losses: Thousands of youth lost their jobs in cities as establishments abruptly sacked them or shut down.
• Forex decline: It meant that all key foreign exchange earning sectors, such as exports and remittances, along with tourism, were brutally hit.

Policy failures of Lankan govt

• No strategy: The lack of a comprehensive strategy to respond to the crisis then was coupled with certain policy decisions last year.
• Ill-advised policies: It included the government’s abrupt switch to organic farming —widely deemed “ill-advised”, further aggravated the problem.
• Food hoarding: The government declared emergency regulations for the distribution of essential food items. It put wide import restrictions to save dollars which in turn led to consequent market irregularities and reported hoarding.
• Continuous borrowing: Fears of a sovereign default rose by the end of 2021, with the country’s foreign reserves plummeting to $1.6 billion, and deadlines for repaying external loans looming.

What is happening on the ground?

• At the macro-economic level, all indicators are worrisome.
• The Sri Lankan rupee, which authorities floated this month, has fallen to nearly 265 against the U.S. dollar. Consumer Price inflation is at 16.8% and foreign reserves stood at $2.31 billion at the end of February.
• Sri Lanka must repay foreign debt totalling nearly $7 billion this year and continue importing essentials from its dwindling dollar account.
• Sri Lanka will incur an import bill of $22 billion this year, resulting in a trade deficit of $10 billion.

Implications on Public

• For citizens, this means long waits in queues for fuel, a shortage of cooking gas, contending with prolonged power cuts in many localities and struggles to find medicines for patients.
• In families of working people, the crisis is translating to cutting down on milk for children, eating fewer meals, or going to bed hungry.

How is India helping?

• Acting in the Neighbourhood’s first policy, India stands with Sri Lanka.
• $1 billion credit line signed for supply of essential commodities. Key element of the package of support extended by India.
• Beginning January 2022, India has extended assistance totalling $ 2.4 billion — including an $400 million RBI currency swap and a $500 million loan deferment.

Chinese lure of aid

• China is considering Sri Lanka’s recent request for further $2.5 billion assistance, in addition to the $2.8 billion Beijing has extended since the outbreak of the pandemic.

How is India’s assistance being viewed in Sri Lanka?

• Sacking key infra projects: The leadership has thanked India for the timely assistance, but there is growing scepticism in Sri Lankan media and some sections, over Indian assistance “being tied” to New Delhi inking key infrastructure projects.
• Deep incursion: They mainly include the strategic Trincomalee Oil Tank Farm project; the National Thermal Power Corporation’s recent agreement with Ceylon Electricity Board to set up a solar power plant in Sampur, with investment from India’s Adani Group.
• Diplomatic blackmail: SL media accuses New Delhi was resorting to “diplomatic blackmail”. The political opposition has accused the Adani Group of entering Sri Lanka through the “back door”, avoiding competitive bids and due process.

Options available for SL

• Sri Lanka is hoping for a Rapid Finance Instrument (RFI) facility as well as a larger Extended Fund Facility (EFF) from the IMF to deal with its foreign currency shortages.
• IMF had assured to help the country with an amount of $300 million to $600 million.

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The Sri Lankan Navy has seized eight Indian fishing vessels and arrested 55 fishermen on the charge of poaching.

What is the issue?

• As in the past, fishermen from Rameswaram and nearby coasts continue to sail towards Talaimannar and Katchatheevu coasts, a region famous for rich maritime resources in Sri Lanka.
• Indian boats have been fishing in the troubled waters for centuries and had a free run of the Bay of Bengal, the Palk Bay and the Gulf of Mannar until 1974 and 1976.
• Treaties were later signed between the two countries to demarcate the maritime boundary — the ‘International Maritime Boundary Line'(IMBL).

Issues for Sri Lanka

• Proliferation of Trawlers: The overuse of mechanized trawlers in Palk Bay is damaging the marine ecosystem in SL waters.
• Breach of sovereignty: There were many favorable reasons too for Indian fishermen as their access to Sri Lankan waters was easier at the time of Sri Lankan civil war.
• Porous borders: Maritime boundaries were never tightly guarded as a result, Indian trawlers continue to routinely enter Lankan waters for fishing.
• End of Civil War: Everything changed in 2009 with the end of civil war. Arrests and attacks increased on Indian fishermen as they continued entering Lankan waters because of depletion of marine resources on the Indian side.

Fishermen’s concern:

(1) Depletion of fisheries

• There is a depletion of fisheries on the Indian side, so Indian fishermen cross into Sri Lankan waters thus denying the livelihood of their counterparts.
• They deliberately cross the territorial waters even at the risk of getting arrested or shot dead by the Sri Lankan Navy.
• Sri Lankan fishermen across Palk Bay are concerned over similar depletion on their side (where there is a ban for trawlers) because of poaching by Indian fishermen.

 (2) Rights over Katchatheevu Island

• Tamil fishermen have been entering Sri Lankan waters nearby Katchatheevu island, where they had been fishing for centuries.
• In 1974, the island was ceded to Sri Lanka after an agreement was signed by Indira Gandhi between the two countries without consulting the Tamil Nadu government.
• The agreement allows Indian fishermen “access to Katchatheevu for rest, for drying of nests and for the annual St Anthony’s festival” but it did not ensure the traditional fishing rights.

(3) Hefty fines

• After some respite in the last couple of years, Sri Lanka introduced tougher laws banning bottom-trawling and put heavy fines for trespassing foreign vessels.
• SL has increased the fine on Indian vessels found fishing in Sri Lankan waters to a minimum of LKR 6 million (about ₹25 lakh) and a maximum of LKR 175 million (about ₹17.5 Crore).
• Quiet often, the fishermen are shot dead by SL marines.

Fishermen issue in TN politics

• It has been often a sensitive political issue in Tamil Nadu in the past one decade.
• In a defiant speech in 1991, late CM Jayalalitha had called on the people of Tamil Nadu to retrieve the Katchatheevu Island.

Way forward

• Leasing: Two courses of action exist: (1) get back the island of Katchatheevu on “lease in perpetuity” or (2) permit licensed Indian fishermen to fish within a designated area of Sri Lankan waters and vice versa.
• Licensing: The second course of action would persuade Colombo to permit licensed Indian fishermen to fish in Sri Lankan waters for five nautical miles from the IMBL.
• Reconsidering old agreements: The 2003 proposal for licensed fishing can be revisited.
• Looping in fishermen themselves: Arranging frequent meetings between fishing communities of both countries could be systematized so as to develop a friendlier atmosphere mid-seas during fishing.

Conclusion

• The underlying issues of the fisheries dispute need to be addressed so that bilateral relations do not reach a crisis point.
• Immediate actions should be taken to begin the phase-out of trawling and identify other fishing practices.

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Sri Lankan President has declared an economic emergency to contain soaring inflation after a steep fall in the value of the country’s currency caused a spike in food prices.

Sri Lankan Economic Emergency

• President Rajapaksa declared the state of emergency under the public security ordinance to prevent the hoarding of essential items, including rice and sugar.
• The government has appointed a former army general as commissioner of essential services, who will have the power to seize food stocks held by traders and retailers and regulate their prices.
• The military will oversee the action which gives power to officials to ensure that essential items, including rice and sugar, are sold at government-guaranteed prices or prices based on import costs at customs and prevent hiding of stocks.
• The emergency move followed sharp price rises for sugar, rice, onions and potatoes, while long queues have formed outside stores because of shortages of milk powder, kerosene oil and cooking gas.
• The wide-ranging measure is also aimed at recovering credit owed to State banks by importers.

Why came such an emergency?

• Sri Lanka, a net importer of food and other commodities, is witnessing a surge in COVID-19 cases and deaths which has hit tourism, one of its main foreign currency earners.
• Partly as a result of the slump in tourist numbers, Sri Lanka’s economy shrank by a record 3.6% last year.
• The Sri Lankan rupee has fallen by 7.5% against the US dollar this year.
• The Central Bank of Sri Lanka recently increased interest rates in a bid to shore up the local currency.
• According to bank data, Sri Lanka’s foreign reserves fell to $2.8 billion at the end of July, from $7.5 billion in November 2019.

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Back2Basics: Financial Emergency in India

• The President of India can declare the Financial Emergency on the aid and advise of the Council of Ministers.
• She/ He has to be satisfied that a situation has arisen due to which the financial stability or credit of India or any part of its territory is threatened.
• Article 360 gives authority to the President of India to declare a financial emergency.
• However, the 44th Constitutional Amendment Act of 1978 says that the President’s ‘satisfaction’ is not beyond judicial review.
• It means the Supreme Court can review the declaration of a Financial Emergency.

Parliamentary Approval and Duration

• A proclamation of financial emergency must be approved by both the Houses of Parliament within two months from the date of its issue.
• A resolution approving the proclamation of financial emergency can be passed by either House of Parliament (Lok Sabha or Rajya Sabha) only by a simple majority.
• Once approved by both the Houses of Parliament, the Financial Emergency continues indefinitely till it is revoked.
• It may be revoked by the President anytime without any Parliamentary approval (but with the usual aid and advice).

Effects of Financial Emergency

• During the financial emergency, the executive authority of the Center expands and it can give financial orders to any state according to its own.
• All money bills or other financial bills, that come up for the President’s consideration after being passed by the state legislature, can be reserved.
• Salaries and allowances of all or any class of persons serving in the state can be reduced.
• The President may issue directions for the reduction of salaries and allowances of: (i) All or any class of persons serving the Union and the judges of the Supreme Court and the High Court.

Try this PYQ:

With reference to the Constitution of India, prohibitions or limitations or provisions contained in ordinary laws cannot act as prohibitions or limitations on the constitutional powers under Article 142. It could mean which one of the following?

 

(a) The decisions taken by the Election Commission of India while discharging its duties cannot be challenged in any court of law.

(b) The Supreme Court of India is not constrained in the exercise of its powers by laws made by the Parliament.

(c) In the event of grave financial crisis in the country, the President of India can declare Financial Emergency without the counsel from the Cabinet.

(d) State Legislatures cannot make laws on certain matters without the concurrence of the Union Legislature.

 

Post your answers here.

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Pakistani PM is in Colombo on a two-day visit for ways and means to enhance trade and connectivity with Sri Lanka.

What is the news?

• Pakistan PM’s visit has attracted a fair amount of controversy because of a cancelled invitation to address the Sri Lankan parliament.
• India too granted permission for using its airspace for the Pakistani PM’s aircraft.

Try this question:

Q.The triangulation in the ties between Sri Lanka, China and Pakistan is an emerging threat in the Indian Ocean Region. Discuss.

Sri Lanka- Pakistan Relations

• For Colombo, the visit holds much value. It comes at a fraught time for the government on the international stage.
• Imminently, it is bracing to be hauled over the coals at the UN Human Rights Commission for withdrawing from resolution 30/1 of September 2015, under which it committed to carrying out war crime investigations.
• To make matters worse, the Islamic world is appalled by Sri Lanka’s tight rules for the cremation and not burials of Muslims who have died of COVID-19.
• The rule created a storm in Sri Lanka, with community leaders convinced that this is nothing but an extension of the state’s persecution of Muslims.

Why Pakistan?

(1) Trade ties

• Pakistan is Sri Lanka’s second-largest trading partner in South Asia after India.
• Sri Lanka and Pakistan have a free trade agreement dating back to 2005.
• Pakistan’s top exports to Sri Lanka are textiles and cement.
• Sri Lanka’s top exports to Pakistan are tea, rubber and readymade garments.

(2) Cultural ties

• In addition to trade cooperation, Pakistan invokes cricket and Buddhism, topics that most Sri Lankans share a deep connection with.
• Over the last decade, Pakistan has also been projecting its ancient Buddhist sites to promote cultural ties with Sri Lanka.

(3) Defence ties

Defence ties are a strong pillar of Sri Lanka- Pakistan bilateral relationship.

• During the 1971 war, Pakistan Air Force jets refuelled in Sri Lanka.
• India pulled back the peacekeeping forces in 1990, it provided no active defence support to the Sri Lankan military.
• Sri Lanka turned to Pakistan for arms, ammunition as well as training for its fighter pilots.
• Gotabaya, who was defence secretary at the time, visited Pakistan in 2008 to make a request for emergency assistance with military supplies.
• Earlier this month, Sri Lanka participated in Pakistan’s multi-nation naval exercise Aman.

India’s observations and concerns

• As Sri Lanka’s closest neighbour with strong, all-encompassing ties, even if these are sometimes problematic, India has not perceived Pakistan as a serious rival in Sri Lanka so far.
• Sporadically, the Indian security establishment has voiced concerns about Pakistan’s role in the radicalization of people, especially in Eastern Sri Lanka.
• Funds have poured in for new mosques from some West Asian countries, and the effect that this could have in India.

Emerging threats from the ‘Triad’

• There is now a new wariness about triangulation in the ties between Sri Lanka, China and Pakistan in defence co-operation, though it has not been publicly expressed.
• In 2016, India put pressure on Sri Lanka to drop a plan to buy the Chinese JF-17 Thunder aircraft made in Pakistan and co-produced by the Chinese Chengdu Aircraft Corporation.
• The most recent threat was from excluding India from the Colombo Terminal Project.