Colombo: Sri Lanka has approved a proposal for a mega underwater power transmission deal with India to meet a major part of the soaring power needs in the island nation, a minister said on Friday.

Power and Energy Minister W D J Seneviratne said the proposed $450 million deal, once executed, would help export electricity through a 200-km submarine cable from the Madurai power grid in Tamil Nadu via the Palk Strait - the narrow strip of sea that divides the two countries - to Thalaimannar, Mannar and to the Anuradhapura national power grid.

"This is a project acceptable to governments of both countries as it is a two-way traffic. We are hoping to sign the Memorandum of Understanding (MoU) as soon as possible," Seneviratne told reporters.

"Once completed, this project is expected to bring maximum economic benefits to both countries through the exchange of 1,000 MW of power," he said, adding the Cabinet approved his proposal when it met on Wednesday.

Asked if there was any possibility that the MoU could be signed on the sidelines of the coming South Asian Association for Regional Cooperation (SAARC) summit, he said, "It cannot be ruled out." According to preliminary studies, Seneviratne said the construction work, once it starts, would take 40 months to finish.

The Cabinet has also granted approval to a memorandum submitted by the minister for the implementation of a rural electrification project with assistance from Iran.

Source : IANS