Indian renewable energy giant Adani Green Energy has withdrawn from a proposed $400 million, 484 MW wind energy project in northern Sri Lanka, citing unviable terms imposed by the President Aruna Dissanayake-led government.
The US Department of State’s 2025 Investment Climate report identifies the Adani exit as a key example of how unpredictable policies and opaque regulatory practices are deterring foreign investors.
After two years of negotiations, Adani had offered the most competitive tariff of 8.26 cents per unit, payable in Sri Lankan rupees to avoid foreign exchange pressures.
However, the government reportedly demanded tariffs below 5 cents, prompting Adani to redirect resources to more promising markets such as India.
Policy Instability Deters Foreign Investment
The report notes that Sri Lanka’s investment climate remains challenging despite signs of economic recovery following the 2024 electoral victory of President Dissanayake and the National People’s Power (NPP) coalition.
Investors cited high transaction costs, project reversals, slow decision-making, and inconsistent regulatory enforcement as significant obstacles.
The withdrawal by Adani underscores broader issues affecting large-scale foreign direct investment (FDI), with most transactions remaining modest, between $3 million and $5 million.
The government’s ambitious $5 billion FDI target for 2025 faces hurdles unless policy stability and transparency are improved.
The Adani Group has already committed to expanding its renewable energy footprint outside Sri Lanka, commissioning over 15 GW of capacity globally and targeting 50 GW by 2030, positioning itself among the top three global renewable energy players.
The group’s planned investment in Sri Lanka, including transmission infrastructure, would have exceeded $1 billion.
Senior US officials highlighted that regulatory unpredictability, fragmented approval processes, and poor bureaucratic responsiveness remain key challenges for potential investors.
While the NPP government publicly encourages inward investment, inconsistent messaging and a preference for state-owned collectivism continue to frustrate private sector participation.
The US report stresses that Sri Lanka will continue to face significant headwinds in attracting large-scale foreign investment unless it implements comprehensive reforms, including trade facilitation, digitisation, and stronger governance mechanisms. Adani’s withdrawal signals a cautionary tale for investors considering the island nation.
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