Sri Lanka on Friday announced its decision to sign three lease agreements on developing the strategic Trincomalee oil tank farm with India, after the Rajapaksa administration negotiated a “suitable” deal for 16 months.
The announcement, signalling forward movement in a long-dragging project, is significant for New Delhi following a year of diplomatic strain beginning early 2021, when Sri Lanka unilaterally cancelled a tripartite agreement to develop a Colombo port terminal with India and Japan.
The Trincomalee oil tank farm project, pertains to some 100 oil storage tanks — built by the British during World War II — in Sri Lanka’s eastern Trincomalee district. It has dominated bilateral talks for decades, from the time of the Indo-Lanka Accord of 1987, but has seen little progress.
As per the new deal, 14 tanks currently operated by Indian Oil Corporation subsidiary Lanka IOC will be leased to the company for 50 years, Energy Minister Udaya Gammanpila told a media conference on Friday. Further, 24 tanks will be given to the Ceylon Petroleum Corporation (CPC), while 61 will be developed in a joint venture, with CPC holding 51 % stakes, and Lanka IOC, the remaining 49 %, the Minister said. The lease agreements are expected to be signed in the coming weeks, following Cabinet clearance.
After it was set up in 2003, Lanka IOC obtained a 35-year lease to develop the 850-acre tank farm in Trincomalee for an annual payment of $1,00,000. The company currently operates only 14 tanks — apart from two other recently built tanks in place of a damaged old one — while the other tanks in the massive storage facility remain unused, as the two countries have been unable to agree on the terms of its joint development. Successive governments in Colombo have acknowledged the need to bring in big foreign investment – refurbishment of each tank is estimated to cost over $ 1 million – to make the near century-old, neglected facility commercially viable, but none was able to finalise a deal with India, in the face of opposition from nationalist sections to any Indian involvement in a strategic national asset.
Perhaps anticipating similar resistance from the government’s predominantly nationalist support base, the minister pitched the deal as a “historic victory” at Friday’s press conference. Sri Lanka, he said, is “regaining control” of the Trincomalee oil tank farm, while also announcing that Lanka IOC — representing Indian interests in the project — would operate 14 tanks for half a century, in addition to holding 49 % stakes in the new venture to develop 61 other oil tanks at the facility.
The minister’s statement comes at a time when the government’s popularity is plummeting over its response to the current economic crisis stifling the country. On the one hand, a severe dollar crunch has prompted speculation of a sovereign default. On the other, there is growing public resentment over soaring living costs and fears of an imminent food shortage, following the government’s overnight shift to organic farming, disregarding advice from farmers and scientists. Sri Lanka has sought urgent assistance from multiple sources, including India.
Early December, Sri Lanka’s Finance Minister Basil Rajapaksa visited New Delhi and sought emergency Lines of Credit to help Colombo import food, medicines and fuel, and a currency swap to boost the country’s foreign reserves. Negotiating a “four-pillar” strategy during his visit, the two countries agreed to strengthen collaboration in the energy sector, specifically mentioning the “early modernisation” of the Trincomalee oil tank farm as part of it.
Mr. Basil is expected to visit India again to attend the ‘Vibrant Gujarat’ summit from January 10 to 12. He will likely meet Prime Minister Narendra Modi on the side lines of the event, officials earlier told The Hindu.
Source : The Hindu
