Natwar Singh, the Indian external affairs minister, told reporters here that the Indian government supported the proposed tsunami relief joint mechanism.
His comments came just a few hours after Kumaratunga's main coalition partner, the JVP, or the People's Liberation Front, announced that they would quit the government next week over the issue.
"We are supportive of the ongoing effort of the president on the tsunami relief mechanism," Singh said.
The JVP in an earlier press conference said they would leave the government unless the president changed her mind by midnight on June 15.
The JVP claims the deal would confer recognition to a terrorist group impinging the country's sovereignty.
Natwar Singh is here on a three-day visit and attending the India-Sri Lanka Joint Commission meeting.
Singh added that a defense co-operation agreement between India and Sri Lanka is being finalized, and will lead to better military ties between the two neighbors across the Palk Straits.
Any defense ties between Colombo and New Delhi would not be favorable to the Liberation Tigers of Tamil Eelam rebels, analysts said.
Their leader Velupillai Prabakaran is wanted in India for the 1991 murder of the former Indian Prime Minister Rajiv Gandhi.