* Top general expected to challenge incumbent in poll * Had been given new post by president * President to accept resignation, source says (Adds more quotes from Fonseka, retirement date) By Ranga Sirilal COLOMBO, Nov 12 (Reuters) - Sri Lanka's top general, who engineered the defeat of the Liberation Tigers of Tamil Eelam after a 25-year war, submitted his resignation on Thursday amid speculation he will run for president. General Sarath Fonseka, the Chief of Defence Staff, is expected to challenge his commander in chief, President Mahinda Rajapaksa, in an election which may be held by April. If Fonseka enters the race, he is expected to weaken Rajapaksa's core voter base and erode the incumbent's present monopoly on claiming political capital from the war victory. "I gave my retirement papers," General Sarath Fonseka told reporters. "I have been serving my country in the past and I will serve the country in future as well." When asked whether he planned to run in the election, Fonseka said: "I can't comment as I am still in uniform. I will decide my future once my retirement comes into effect at the end of this month. I have the same basic right as anybody else." A source close to Rajapaksa told Reuters the president had said that he would accept Fonseka's resignation without delay. He and another military source said Fonseka's retirement letter, in which he had stated he would retire with effect from Dec. 1, had been handed to the president. In July, Rajapaksa promoted the then-army commander to a newly created post, chief of defence staff, which many analysts saw as neutralising the wide powers Fonseka had been given in wartime. [ID:nCOL506585] RIFT WITH THE PRESIDENT The government has repeatedly denied any split between Fonseka and Rajapaksa, but evidence of a long-brewing rift has been clear. Numerous ruling alliance politicians have publicly rubbished Fonseka's ability to lead the nation as president. Opposition parties have been happy to fan speculation of Fonseka's potential candidacy to unsettle the ruling alliance and help find any issue that can help them erode the incumbent's enormous post-war popularity. Rajapaksa has called for early presidential and parliamentary polls to be held by April in what analysts have said is a manoeuvre to lock in a second term before his post-war popularity fades over issues like the cost of living and public wage hikes. Trade unions allied with the Marxist Janatha Vimukthi Peramuna and pro-business United National Party have joined hands in a five-day labour action in the public sector, demanding pay raises the president pledged to give after the war ended. The government's agreement to reduce its budget deficit under a $2.6 billion International Monetary Fund loan could complicate Rajapaksa's ability to deliver on that pledge, a fact the opposition parties know. Although both parties are ideologically incompatible, they have both indicated they will back Fonseka for the purpose of defeating Rajapaksa. (Writing by Bryson Hull and Shihar Aneez; Editing by Ron Popeski)
India's Prime Minister Manmohan Singh (R) speaks with his Australian counterpart Kevin Rudd before their meeting in New Delhi November 12, 2009. Australia said it will invest $50 million to develop ...
