COLOMBO (REUTERS) - Sri Lanka will hand over commercial activities in its main southern port to a Chinese company on Saturday (Dec 9)and receive around US$300 million (S$404.2 million) out of a US$1.1 billion deal soon after, Ports Minister Mahinda Samarasinghe said.

The deal, signed in July, will see China Merchants Port Holdings, handling the Chinese-built Hambantota port on a 99-year lease.

"After one month, we will be getting another 10 per cent (US$100 million) and in six months we will get the balance," Mr Samarasinghe told reporters in Colombo.

The Chinese firm last year agreed to pay $US1.12 billion for an 80 per cent stake in Hambantota port, which is located near the main shipping route from Asia to Europe.

But the deal triggered protests by opposition groups and trade unions, saying they feared China would take control of the port.

Government and diplomatic sources told Reuters that the United States, India and Japan had also raised concerns that China might use the port as a naval base.

Both sides then agreed to redraw the deal and the Chinese firm will now hold 70-per cent-stake in a joint venture with the state-run Sri Lanka Ports Authority (SLPA), part of a plan to convert US$6 billion of loans that Sri Lanka owes China into equity.

Sri Lanka has said the Chinese firm will invest an additional US$600 million to make Hambantota port operational and US$1.12 billion from the deal will be used for debt repayment.

India is in advanced talks with Sri Lanka to operate an airport near Hambantota port.