NEW DELHI — A proposal to make the shallow strait between India and Sri Lanka navigable has upset environmentalists and the port of Colombo.

To its supporters, it is a dream project, no less than the "Suez of the East." To its opponents it would be an environmental catastrophe.

Either way, plans to dredge a channel in the seabed between India and Sri Lanka will be controversial, and could alter maritime and military operations in the Indian Ocean.

The $400-million project, called the Sethusamudram Ship Canal, involves digging a 152-kilometer-long, 300-meter-wide channel through the Palk Strait, a shallow stretch of sea separating the south Indian peninsula and Sri Lanka. If it is created, it would carve out a continuous navigable sea route around India and reduce the trip by a day for ships that currently need to go around Sri Lanka.

P. Chidambaram, India's finance minister, has called the canal "a long-standing demand, nay, dream of the people of peninsular India." Building the canal is part of the Indian Congress-led coalition government's policy to soothe south Indian allies who want to develop southern ports and regional shipping.

But the canal has upset Sri Lanka, which has been involved in the project involuntarily; India apparently revived the plan last year without consulting its smaller neighbor.

The countries are enjoying their most cordial relations for decades. Sri Lanka welcomed India's rapid assistance after December's tsunami and trade between the countries, driven by a 5-year-old bilateral trade agreement, has grown to $1.6 billion a year.

Yet the proposed canal has raised echoes of past unilateral Indian conduct toward Sri Lanka. As one shipping company executive in Colombo put it: "When India decides it wants something, it will do it."

A group of Sri Lankan and Indian ministers are now dealing with several controversies springing from the project.

The first is over the commercial effect on Sri Lanka's capital of Colombo. Its port last year handled 2.2 million shipping containers, more than any other port in South Asia. Because of its good geography and decades of underinvestment in infrastructure by Indian ports, Colombo is South Asia's hub port.

But Willie Mendis, professor of planning at Sri Lanka's University of Moratuwa, says if India digs the channel to boost its southern port trade, it could be at Colombo's expense: "I fully agree that Indian ports must be upgraded, but we must complement each other, not at the expense of competition but to benefit sustainability."

Another controversy is the probable disruption of waters vital to fishermen, many of whom are still recovering from tsunami damage. And the construction of repair yards and other onshore services to support the canal would displace fishing villages, according to the canal project's environmental impact assessment.

The biggest controversy is the canal's threat to the rich marine ecology in the tropical seas of the Palk Strait and Mannar Gulf. The area is home to rare and endangered species of sea turtles, dolphins, dugongs and whales. Coral and ecologically significant plants and algae are also found there.

Environmentalists say a canal would destroy the natural barrier between the Bay of Bengal and the shallower waters of Palk Bay. The Environment Foundation of Sri Lanka says a canal would disrupt currents in the area, endanger reefs and lead to rising sea levels, causing "the inundation" of part of Sri Lanka's northern Jaffna district.

The canal's main developer, a south Indian port company, argues that most of the sensitive biological resources, including coral reefs, are found near the coast and are therefore "mostly away" from the proposed route. They also say scientific models show currents are not going to alter significantly. But they concede there are threats of pollution from shipping.

The developers recently accepted tenders to arrange financing for the project. And, according to T.R. Baalu, India's shipping minister and a leading south Indian politician and supporter of the project, environmental regulators have given approval. Financial authorities in New Delhi must OK funding.

Romesh David, president of transport with the John Keels group, says the canal is "inevitable" and adds: "The real driver for the project is [India's] defense and national security."

The shallow seas of the Palk Strait prevent large Indian naval vessels from patrolling the waters around northern Sri Lanka. A canal would help India's navy deploy into the region faster.