Indian government-owned construction company IRCON has signed a deal with Sri Lankan Railways to reconstruct a railway line through Jaffna, in a contract worth $150 million.

The railway project is to be funded through an $800 million loan from the Government of India to Sri Lanka, with a repayment period of 20 years and a 5 year moratorium. India is also providing another loan to Sri Lanka worth $167.4 million to reconstruct railway lines in the South of the island, with IRCON involved in three other railway contracts across Sri Lanka.

While the railway projects are progressing as scheduled, an Indian project to build 50,000 houses in Vanni has seen only 52 built so far.

The railway deal was signed in Colombo by Indian and Sri Lankan ministers, including Indian High Commissioner Ashok K Kantha, on Friday.

Also in Colombo on Friday, Sri Lankan Defence Secretary Gothbaya Rajapakse told reporters that he had requested for two offshore patrol vessels for the Sri Lankan Navy from India. Apparently they are already in the process of acquiring the vessels and said it needed approval from the Indian Cabinet.

The Sri Lankan Navy has been accused of an escalating number of attacks on Indian fishermen in recent months and has become a point of contention between the two nations, with Indian Prime Minister Manmohan Singh labeling the attacks “totally unacceptable”.

Gothbaya went on to tell reporters that expanding the Navy’s capabilities “will be to the benefit not only of the regional nations, but to the world.”