Mazagon Dock Shipbuilders Limited (MDL), a shipbuilding company managed by India’s Defence Ministry, has announced that it is in the process of acquiring a majority stake in Sri Lanka’s Colombo Dockyard.
The deal involves the acquisition of a 51 percent controlling stake in Colombo Dockyard (CD), previously owned by Japan’s Onomichi Dockyard, for $US52.9 million. Onomichi announced in November last year that it had decided to sell its stake amid its own financial crisis. Completion of the deal with MDL will take another four to six months, pending regulatory clearance.
Established in 1974 and located in Colombo Harbour, the dockyard is Sri Lanka’s largest shipbuilding and repair facility. It specialises in commercial and naval shipbuilding and maintenance activities. Japan’s Onomichi Dockyard had been its principal stakeholder since 1993.
Announcing its new venture, MDL stated that the acquisition gives the company “a strategic foothold in the Indian Ocean Region—a key maritime corridor.”
The deal marks a significant expansion of New Delhi’s strategic build-up in the Indian Ocean region against China. For Sri Lanka, the move signals deeper integration into the strategic orbit of India, which is a major partner in US preparations for war with China.
Colombo Dockyard’s staggering loss of $US38.2 million in 2023—a crisis for the Sri Lankan government, which holds a 49 percent stake—forced Sri Lanka to turn to India.
An Indian Express article on June 29 quoted Indian officials as saying, “The Sri Lankan government requested the Indian government to encourage Indian investors to look at Colombo Dockyard.” The article added that officials from both governments “worked overtime to conclude this strategic deal on Sri Lanka’s largest shipyard.”
The deal, however, is not purely commercial. The Dissanayake government’s decision to invite Indian investment in the dockyard aligns with its broader foreign policy objectives of strengthening ties with New Delhi and the US.
Dissanayake visited New Delhi in December and signed a “Joint Vision Agreement” with the Modi government, titled Fostering Partnerships for a Shared Future, to enhance “investment-led growth and connectivity in economic partnership.”
During Modi’s April 4–6 visit to Sri Lanka, both leaders signed several agreements involving $US1.2 billion in joint investments.
The most significant was a five-year defence cooperation pact to enhance maritime security and counterterrorism operations. This includes joint military exercises, intelligence sharing, training, capacity-building initiatives, and high-level exchanges.
After signing the agreements Dissanayake declared, “Sri Lankan territory will not be allowed to be used by anyone to undermine India’s security.” An enthusiastic Modi responded, “We believe that our security interests are aligned… Our security is interdependent and interconnected.”
MDL, which has operated as an Indian government-owned company since 1963, builds both naval and commercial vessels. Its website notes that it has constructed “30 warships, ranging from advanced destroyers to missile boats, as well as 8 submarines” for the Indian Navy since 1960.
India and the US have deepened their military collaboration through Master Ship Repair Agreements (MSRAs), which authorise Indian shipyards to service US Navy Military Sealift Command vessels. Facilities at Larsen & Toubro’s Kattupalli yard, Mazagon Dock Shipbuilders, and Cochin Shipyard have been approved to conduct this work.
Several US ships have already undergone repairs in India—reflecting the intensifying militarisation and consolidation of imperialist interests in the Indo-Pacific through the strategic partnership. Colombo Dockyard could now become part of this network.
Sri Lanka’s location—adjacent to vital sea lanes connecting Europe, the Middle East, and Africa with East Asia, including China—makes it a linchpin in Pentagon war plans against China.
For almost two decades, Sri Lanka has been under pressure from the US and India on one side, and China on the other, to align strategically.
China’s Belt and Road Initiative brought significant investment into Sri Lanka’s maritime infrastructure, particularly in Colombo Port City, Colombo South Container Terminal, and Hambantota Port.
The Indian conglomerate Adani holds a 51 percent stake in the $US700–800 million Colombo West International Container Terminal in Colombo Harbour, which handles over three million containers annually. India is also redeveloping the Trincomalee oil tank farms, saying this will “enhance Sri Lanka’s energy security and maritime capabilities.”
As part of New Delhi’s drive to expand its influence in Sri Lanka, a high-level business delegation from the Confederation of Indian Industry (CII), led by its President Sanjiv Puri, visited Colombo from June 29 to July 2.
The delegation met with President Dissanayake and was briefed on Colombo’s efforts to attract foreign investors. Puri is reported to have told Dissanayake that to attract foreign direct investment, Sri Lanka needs a “strong government.”
New Delhi has announced $US4 billion in financial aid to Colombo following Sri Lanka’s unprecedented economic collapse in 2022 and the subsequent mass uprising that ousted the Rajapakse government. India also assisted Sri Lanka in obtaining the $US3 billion International Monetary Fund (IMF) bailout loan by providing financing assurances and supporting debt restructuring.
Every faction of the Sri Lankan ruling elite—the United National Party, Samagi Jana Balawegaya, Dissanayake’s Janatha Vimukthi Peramuna-led National People’s Power government, and the Tamil parties—fully supports the integration of Sri Lanka into US strategic interests and its Indian partner. They all endorse the IMF’s austerity program.
In fact, President Dissanayake is furthering the previous Wickremesinghe government’s pro-US foreign policy and IMF-driven austerity program. Dissanayake and his Janatha Vimukthi Peramuna long ago abandoned their previous anti-imperialist posturing.