Hardening its stance after India backed a UN resolution against Sri Lanka,Colombo has indicated that a decade-old MoU on a strategic oil tank farm in the island nation would have to be re-negotiated to include a Lankan partner in its operation.
In 2003,Indian Oil Corp subsidiary,Lanka IOC (LIOC),bought one-third share in Ceylon Petroleum Storage Terminals Ltd which operates the China Bay tank farm. Ceylon Petroleum Corp (CPC) and Colombo entered into an MoU with LIOC to grant a long-term lease for sole operation by the latter.
However,the 35-year lease finalisation dragged on as Colombo insisted that CPC had no authority to sign the lease for the tank farm which was a state asset.
Last month,Sri Lanka through its Finance,Planning and Economic Development Secretary P B Jayasundra conveyed to New Delhi that the lease could be finalised only if LIOC took on a Lankan company as a partner.
The best way to move ahead,he told the Indian petroleum ministry,was to set up a joint venture between LIOC and a government entity like CPC on the lines of a joint venture formed between National Thermal Power Corp and Ceylon Electricity Board for a 500 MW coal plant at Sampur.
An IOC official said IOC was told to submit a proposal by May on the structure of the proposed joint venture to address all issues tank farm as well as bunkering of foreign ships at northeastern Trincomalee port through improvement of its jetty and draft.
Both countries agreed to finalise the joint venture arrangement on fast track,preferably within three-four months, said the official.
He said Colombos stand could have been harsher if not for the legal view by its attorney general Palitha Fernando,who opined that the issue needed to be sorted out between both parties because of a sovereign agreement between two nations.
After the UN vote on March 21,Lanka had sounded out that it planned to abrogate on the 2003 MoU and take back part of the strategic oil storage depot. A day after India backed the US-sponsored resolution against Sri Lanka seeking an independent and credible probe into allegations of human rights violations,its Information Minister Keheliya Rambukwella said there was a provision to re-possess tanks not used by LIOC.
The China Bay tank farm,a World War II depot in Trincomalee,is the largest tank farm in South Asia and of great strategic value as it falls between the Middle East and Singapore.
Under privatisation,Colombo gave Lanka IOC the farm of 99 storage tanks,of which 15 are being used and two more are being refurbished at a cost of $17 million.