Sri Lanka and India sign milestone Trincomalee Oil Tank deal
Daily FT: Marking a new milestone in Sri Lanka-India economic and energy partnership, an agreement was reached with the Finance Ministry to develop the Trincomalee Oil Tank Complex, which was previously under the control of the Lanka Indian Oil Company (LIOC), as a project with the majority of the tanks under the control of the Ceylon Petroleum Corporation (CPC). Accordingly, the 2003 lease agreement regarding the Trincomalee oil tanks has been terminated and the tank complex will now be divided between three institutions for a period of 50 years. CPC will hold 24 tanks, whilst Trinco Petroleum Terminal Company (TPTC) will hold 61 tanks and LIOC will hold 14 tanks.
TPTC is a subsidiary of the CPC, which owns 51% of the Ceylon Petroleum Corporation and 49% of the LIOC. Its Board of Directors consists of four members appointed by the CPC and three members appointed by the LIOC. The Chairman of the new company is also appointed by the CPC.
The agreements were signed on behalf of the Government by Finance Ministry Secretary S.R. Attygalle.
The new agreements will be presented to the Cabinet on 10 January and to Parliament on 18 January. These agreements will be added to the official website of the CPC on 11 January, the Energy Ministry said.
As per the Ministry, the 85 of 99 oil tanks will be held by the CPC, which it described as a historic achievement in the history of Sri Lanka.
The Trincomalee Oil Tank Complex was built in the 1920s by the British who ruled Sri Lanka. The tank complex consisted of 100 tanks with a capacity of 10,000 metric tons spread over an area of 827 acres. One of these tanks was destroyed by a Japanese air strike on 9 April 1942 during World War II.
According to Article 2 (iii) of the letter exchanged between the Prime Minister of India and Sri Lanka President on 29 July 1987, the Trincomalee Oil Tank Group agreed to operate as a joint venture between India and Sri Lanka.
Under an agreement signed on 7 February 2003, all 99 tanks at the Trincomalee Tank Complex were handed over to the LIOC on a 35-year lease basis. However, the LIOC used only 14 tanks and the remaining tanks were decaying to no avail.
In 2017, the Government agreed to lease all 99 tanks to India on a 99-year lease basis under the Malik-Sushma Memorandum of Understanding (MoU). The successful conclusion follows 16 months of negotiations with India enabled Sri Lanka.
CPC Chairman Sumith Wijesinghe, CPC Managing Director Buddhika Madihahewa, LIOC Managing Director Manoj Gupta, Land Commissioner General Keerthi Gamage were also present at the occasion.
“Let us join hands with determination to move towards a land empowered country by developing this great resource that belongs to the country again,” the Ministry said.
OSL take:
Sri Lanka and India enjoy strong bilateral and trade ties that have been further strengthened by a free trade agreement (FTA). India is also a strong development partner of Sri Lanka and the joint venture on the Trincomalee oil tank farm is the latest mega project to be undertaken by India in Sri Lanka. The country’s geographical positioning in the Indian Ocean and the many trade agreements as well as concessions enjoyed by Sri Lanka have attracted foreign businesses/investors, especially from India to explore business/investment opportunities in Sri Lanka. Also, other foreign businesses/investors interested in doing business with India could look at setting up base in Sri Lanka to engage with India.
| Article Code : | VBS/AT/14012022/Z_1 |