India has agreed to develop three Sri Lankan wind farms on islets between the countries, officials said on Tuesday, in a victory for New Delhi after the project was taken away from a Chinese firm.

New Delhi has long been alarmed about growing Chinese influence in the region. In 2020, 20 Indian soldiers and four Chinese troops died in a brawl on their disputed Himalayan border.

A $12 million project to build wind turbines on three small islands in the Palk Strait between southern India and Sri Lanka was awarded to a Chinese firm in 2019, with funding lined up from the Asian Development Bank (ADB).

But after Indian protests about Chinese activity so close to its coast, work never began and the project on the islets of Nainativu, Analaitivu and Delft was later scrapped.

A joint statement issued on Tuesday after a visit to Colombo by India's foreign minister said a memorandum of understanding had been signed to build the installations. Sri Lankan officials said India had agreed to provide funding in place of the ADB.

Meanwhile, an Indian official said he couldn't confirm if the plants in the new agreement are to be built on the same islands earmarked for the Chinese project. The power source and other details on the projects weren't available.

Last week, the Chinese ambassador in Sri Lanka, Qi Zhenhong, expressed Beijing's displeasure over the scuttling of the project and warned it would send a negative signal to potential foreign investors.

India is known to be suspicious of China's growing political and economic influence in the South Asian nation, which is strategically located at the southern tip of the vast Indian subcontinent.

"It is kind of [a] substantial victory for India," said Lynn Ockersz a senior journalist and foreign relations analyst in Sri Lanka.

"Overall, it will be in a great position to influence Sri Lanka when it comes to policy issues affecting India," he said.

China and India have been competing for major infrastructure projects in Sri Lanka, which is currently facing its worst economic crisis since independence from Britain in 1948.

Colombo has asked for more loans from both nations to shore up its foreign reserves and import essentials including food, fuel and pharmaceuticals.

India provided a $1 billion credit line to buy essentials following a previous $500 billion to buy fuel. China is considering a request for a $2.5 billion economic assistance from Sri Lanka.

Infrastructure projects that were built on Chinese loans but don't make money are blamed for its debt crisis. Sri Lanka's foreign reserves are dwindling but it has to repay $7 billion in foreign debts this year.

China has been non-committal to a request for debt restructuring.

Beijing has invested billions of dollars in building a sea port, airport, roads and a port city on reclaimed land near the Colombo harbour which Sri Lanka's government aims to develop into a financial city.

Sri Lanka's government previously scrapped a plan to allow China outright ownership to land on the Colombo Port City and gave 62 hectares (153 acres) on a 99-year lease.