By Shihar Aneez
COLOMBO (Reuters) - Sri Lankan President Mahinda Rajapaksa could hold a snap election in January, nearly two years before he has to, a close ally said, amid signs his popularity is fading among people who criticise his party for abusing power.
Rajapaksa, 68, came to power in 2005 and retained the presidency in 2010 on a wave of popularity after the military defeated Tamil Tiger separatists in 2009, ending a 26-year-old civil war.
Now seeking a third term, he has been tainted by accusations of nepotism, although he has responded by saying that any relatives in parliament are there because people elected them and not because he chose them.
No rival with realistic chances of defeating Rajapaksa has emerged, although the president is unlikely to take winning a third six-year term for granted.
A close ally of Rajapaksa, who spoke on condition of anonymity, told Reuters that the president was considering holding the vote on Jan. 9.
His second term ends in November 2016, but he can call for an early election after Nov. 19 this year, according to the constitution.
Cabinet spokesman Keheliya Rambukwella also hinted at an early poll.
"The president has arrived at a decision that, following the completion of four years, he will exercise his constitutional right," he said. "...Therefore an election can be held. If that happens, the election will most probably be in January."
The 2009 victory over the Tamil Tigers helped the president secure more than two thirds of parliamentary seats, enabling him to change the constitution that had limited leaders to two terms in office.
The euphoria has long faded, however, and, although the ruling United People's Freedom Alliance (UPFA) party won a local election in the southeastern province of Uva last month, it was with 21 percent less support than in 2009.
The president re-appointed his nephew, Shasheendra, as chief minister of Uva.
His younger brother, Gotabaya, is defence secretary, and another younger brother, Basil, is economic development minister. Elder brother Chamal is parliamentary speaker and the president's son, Namal, is a parliamentarian.
Political analysts said sooner would be better than later for Rajapaksa, amid growing support for political opponents, led by the main opposition United National Party.
"Rajapaksa's popularity is continuing to fade as the government's 2009 victory over the Tamil Tigers slips further into the past," said Sasha Riser-Kositsky of the Eurasia group.
"He stands the best chance of winning a third term, albeit by a slimmer margin than his 58 percent of popular vote in 2010, if an election is held earlier rather than later."
Several recent policy decisions point to an early poll.
Shortly before the Uva vote, Rajapaksa cut electricity and fuel prices, a move popular with residents of rural areas, who make up about 70 percent of the population and form the president's main support base.
The government also brought forward its presentation of the 2015 budget and expects to complete it by Nov. 20, giving Rajapaksa more time to campaign should he opt for January polls.
An early elections could jeopardise Pope Francis's planned visit to Sri Lanka from Jan. 13-15, because the Vatican may be reluctant to be there so close to an election.
Rajapaksa, a Buddhist, visited the Vatican last week, leading to speculation that he was speaking about polls.
Some top lawyers argue that the Rajapaksa is still barred from a third term by clauses in the constitution. However, his allies say the constitution does not stop him from contesting.
As well as charges of nepotism and abuse of power, people have begun to complain about the rising cost of living, even as inflation and interest rates remain historically low.
Sri Lanka has also come under criticism from abroad for its conduct during the final phase of the war against Tamil Tigers.
The United Nations estimated in a 2011 report that about 40,000 Tamil civilians were killed in the final weeks of the war, mostly by the army. Sri Lanka has rejected the allegation.
Rajapaksa has also drawn criticism from Western nations and ethnic minority Tamils for his poor reconciliation efforts in the former northern Jaffna war zone.
But he argues that economic development, with over $5 billion worth of infrastructure, will help the reconciliation process, including the Jaffna rail link to the south which re-opens on Monday for the first time in more than two decades.
International criticism over alleged war crimes has boosted Rajapaksa's popularity, as many ethnic majority Sinhalese consider the accusations unfair.
(Additional reporting by Ranga Sirilal; Editing by Mike Collett-White, Frank Jack Daniel and Nick Macfie)