As Sri Lanka’s Cabinet gave its nod to India for jointly developing the World War II era Trincomalee oil tank farm, New Delhi is set to gain strategically. The deal will also help India balance China’s presence in the island nation.

This oil farm facility built by the British as a refuelling station, has a storage capacity of about 1 million tonnes, which is significantly higher than Sri Lanka’s demand.

Under this fresh agreement, Lanka IOC, the subsidiary of Indian Oil will have 49 per cent stake in the joint development of the oil farm while the remaining 51 per cent stake will remain with Ceylon Petroleum Corporation.

“This is a welcome move, though this has been in the making for long but Sri Lanka was dragging its feet. The move will deepen and strengthen India’s strategic presence in Sri Lanka’s core sector while for Sri Lanka it makes very good business sense,” Narendra Taneja, leading energy expert told India Narrative.  Taneja added that Sri Lanka is an important country for India’s Neighbours First Policy

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The proposal to jointly develop and modernize this facility was laid down 35 years ago, in the Indo-Lanka Accord 1987.

Sri Lanka currently is in the grip of an acute economic crisis with rising debt levels, high inflation, shortage of food items and gas supply. Analysts have said that the economic situation in the new year will only worsen.

Latest data released by Sri Lanka’s central bank revealed that food inflation (Y-o-Y) increased to 22.1 per cent in December 2021 from 17.5 per cent in November.