India finally on board, but Trincomalee oil farm now waits for economic crisis to lift

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India finally on board, but Trincomalee oil farm now waits for economic crisis to lift

  • The deal: 85 decrepit oil tanks in 850 acres of dense jungle, and a strategic natural harbor.
  • The foliage is so thick that the place is now home to several species of animals and birds, and cutting down the trees needs government permission.
  • India's prized agreement with Sri Lanka for the joint development of the Trincomalee Oil Tank farm, signed earlier this year after a 35-year wait, may take years to turn around and at least a 100 million dollars.
  • The twin economic and political crises in sri lanka carries their Own risks.

Crisis in Sri Lanka

  • On April 12, Sri Lanka officially announced that it was temporarily suspending repayment of external debts worth $51 billion.
  • It is now seeking a bailout from the International Monetary Fund (IMF) and other multilateral organizations. It does not have the dollars to repay these debts.

India’s Interest

  • The agreement gives India a strategic footprint on Sri Lanka's eastern coast, with access to the China Bay harbor, said to be the finest natural harbor in Asia.
  • It was after years of indecision amid opposition from worker unions at Ceylon Petroleum Corporation (CPC) that the Sri Lankan state owned oil company signed off on the agreement with Lanka Indian Oil Corporation(LIOC) recently , paving the way for the formation of the joint venture called Trinco Petroleum Terminals Ltd (TPIL).

The Joint Development

  • The joint development was first mentioned in the 1987 India Sri Lanka accord. An agreement was nearly reached in 2003, but was never finalised.
  • While negotiations had been going on for a year, it was after former finance minister Basil Rajapaksa's December 2021 visit to Delhi with a request for financial assistance to help Colombo cope with its economic meltdown, that the agreement was fast-tracked.

IOC in Sri Lanka

  • When IOC first entered Sri Lanka in 2003 as LIOC for retail operations, it also got the lease for a portion of the Trincomalee storage called the Lower Tank Farm.
  • It has since refurbished the 14 tanks in it, and uses them to supply petrol and diesel across Sri Lanka.
  • The new agreement is for the 85 tanks, each with a capacity of 10,000 metric tonnes (MT), in the Upper Tank Farm.
  • The 1932 British-built storage, located next to the harbor, was used by the Allies during the Second World War and for some years after, but has been in disuse at least for six decades.
  • Tall trees and dense foliage cover the entire area. In 1987, the Indian Peace Keeping Force camped in some parts of it.
  • The tanks are being refurbished for three commercial activities - supply of petrol and diesel across the country; to store petroleum products; and to offer bunkering facilities.

Exam Track

Prelims Take Away

  • Location Based Questions
  • India Srilanka relations
  • IOC
  • Trincomalee Oil Farm