India, Lanka Tread Cautiously on Trincomalee Deal, Say Oil Tank MoU 'Only a Road Map'

Ceylon Petroleum Corporation workers oppose role for India in development of strategic port assets.

New Delhi: India characterised the latest memorandum of understanding signed with Sri Lanka for cooperation on mega projects as a “roadmap” – with more discussions required to “flesh out” details for joint investments like port development and upper oil tank farm at Trincomalee.

India and Sri Lanka signed the MoU on economic projects after talks between Prime Minister Narendra Modi and his Sri Lankan counterpart, Ranil Wickremesinghe in Delhi. The Sri Lankan PM was on a working visit to India, which included a two-day trip to Udaipur to attend the wedding of the son of Nepali tycoon Binod Chaudhry of Wai Wai noodles fame.

A day before Wicrekmesinghe began his India trip, Sri Lanka faced crippling fuel shortages, after workers of Ceylon Petroleum Corporation went on strike. The union workers had a number of demands, including that the lower tank oil farms leased out to the Lankan subsidiary of Indian Oil Corporation be taken back and that Colombo should not sign any agreement with India over the upper oil tank farm.

According to the Sri Lankan newspaper, Daily News, Wickremesinghe had assured the striking union workers that the MoU to be signed in Delhi “would be limited only to a political agreement”.

Further, the Sri Lankan petroleum resources development minister, Chandima Weerakkody, said that any “legal agreement”, which will be signed later, would be done only after consultations with the workers of the state-run oil organisation. The strike was called off within a day, but it was a reflection of the strong nationalist sentiment in the island nation over foreign control of the strategic Trincomalee port and its various installations.

Wickremesinghe has been keen to mitigate Indian concerns over China’s huge investments in strategic projects like Colombo port city and Hambantota port – by also giving India a share of the port infrastructure pie.

The MoU was earlier planned to have been signed during Modi’s vosot to Sri Lanka next month, but both sides agreed to advance the signing date.

Giving details of the MoU on Thursday, external affairs ministry spokesperson Gopal Baglay stressed that it was part of the Indian government’s vision of joint economic development in the neighbourhood.

He listed the following projects as being part of the scope of the bilateral pact –

  • A re-gasified Liquefied Natural Gas fired 500 MW capacity LNG Power Plant
  • An LNG Terminal /Floating Storage Regasification Unit in Colombo/Kerawalapitiya
  • A 50 MW Solar Power Plant in Sampur
  • Upper tank farm in Trincomalee will be jointly developed by India and Sri Lanka
  • Port, petroleum refinery and other industries in Trincomalee
  • Industrial Zones/Special Economic Zones in identified locations in Sri Lanka
  • Development of road segments Mannar-Jaffna, Mannar-Trincomalee and Dambulla-Trincomale Expressway under Indian investments
  • Railway sector development in Sri Lanka including new projects for track upgradation and purchase of rolling stock
  • Container Terminal in Colombo Port as a joint venture
  • Agricultural sector and livestock development in Sri Lanka

Both the Sri Lankan and Indian governments released similar sound-bites over the status of the new pact. “This MoU in the nature of an agenda or a roadmap for the future.  It identifies projects and areas of bilateral economic and investment cooperation.  Details will be fleshed out through further discussions,” Baglay told reporters.

Rusting but still serviceable Wordl War II-era oil tanks dot the area around Tricnomalee harbour. Credit: Lankahit.com

On the proposal for the upper tank farm in Trincomalee, he said that while India had the rights to fully develop the entire tank farm, it has so far only developed the lower tank farms. Indicating that the plan for a joint venture was an Indian initiative, Baglay noted, “Given our spirit of partnership, we proposed to Sri Lanka to develop the upper tank farm as a joint venture”

Admitting that Sri Lanka also had “special requirements”, Baglay added that there would be further discussions between the two sides to work out the details.

During World War II, Great Britain had built 101 oil storage tanks at Trincomalee port, out of which 99 are still in good condition. Lankan IOC has so far maintained 15 in the lower tank farm.

Earlier this month, Weekarody had said that the new joint venture would allow for India to run 73 additional oil tanks, while Sri Lanka will retain 10.

Both countries also decided to set up a joint working group to discuss the development of a port, refinery and other industries in Trincomalee.