Unions agitate to press Sri Lankan PM to take up oil tanks retrieval with Modi

Sri Lankan petroleum sector workers went on a day’s strike on Monday to force Sri Lankan Prime Minister Ranil Wickremesinghe to ask Indian Prime Minister Narendra Modi, to return to Sri Lanka the 99 giant oil tanks which had been given to India on lease in 2003.

As serpentine queues of vehicles formed at petrol stations throughout the island, Wickremesinghe is to leave for New Delhi for meetings with Modi and other Indian leaders on Tuesday.

Apart from the unions, successive Sri Lankan governments have themselves been wanting to terminate the agreement, which they believe had bartered away a unique national strategic asset – 99 World War II vintage tanks, each with a capacity of 12,000 tonnes and an overall capacity of one million tonnes.

India, which was eying the tanks since 1987 on account of their strategic value in the projection of their interest in the Bay of Bengal, took them with alacrity in 2003, when the then government headed by Prime Minister Wickremesinghe offered them.

Wickremesinghe had hoped that India’s presence at the facility would prevent the Tamil Tiger rebels from attacking it. Colombo’s calculation was correct. The Tiger guerrillas made no attempt to destroy the tanks which stored valuable fuel. India then went on to help Sri Lanka in many ways to defeat the Tamil insurgency.

The agreement signed by the Sri Lankan government’s Treasury (Finance) Secretary, the Lanka Indian Oil Corporation (LIOC) and the Ceylon Petroleum Corporation (CPC) on Feb 7, 2003 envisaged the transfer of all the 99 tanks and the land on which they stood,  to the LIOC on a 35 year lease for an annual payment of $100,000. But the Sri Lankan government was guaranteed access to the tanks to fulfil “national and security needs”. Another important clause was that the agreement could not be annulled unilaterally.

Between 2003 and now, the LIOC has invested $15 million in renovating 14 tanks in the Lower Tank Farm. It has plans to spend another $17 million to refurbish some of the 84 tanks in the Upper Tank Farm. The tanks in the Upper Tank Farm have remained un-refurbished and un-used because of war and political instability.

However, in 2013, when India did not support Sri Lanka on the issue of human rights violations, and downgraded its representation at the Commonwealth Summit in Colombo, the Mahinda Rajapaksa government unofficially indicated that it would take back the tanks from the LIOC saying that the transfer of land was illegal. But the government backed out when India said that the 2003 bilateral agreement could not be annulled without both parties agreeing and that the land was transferred by an inter-governmental agreement.

When Rajapaksa gifted huge infrastructure projects to the Chinese on a platter, India had advised Sri Lanka that it should ensure that its strategic national assets remained under Sri Lankan control. But this was ignored and the “sell out” became an issue in the 2015 presidential election leading to Rajapaksa’s defeat.

But to the surprise and dismay of Indians, the new Sri Lankan government of Maithripala Sirisena and Ranil Wickremesinghe turned the heat on the India-controlled Trincomalee oil tank farm. In 2016, the government declared that it would take back 16 tanks and give them to the CPC, as the CPC needed storage space.

When the CPC sent a team to inspect the tanks, the LIOC detained one of the members saying the entry was illegal as the LIOC was in charge of the high security facility. To defuse the public outcry, the LIOC said that if the CPC wanted storage facilities, the LIOC would provide them, but the tanks could not be arrogated by anybody.

The government then said that it wants to develop the 84 tanks in the Upper Tank Farm as a “Joint Venture” between the LIOC and CPC on the basis of a study done by consultants Earnest and Young. To keep the Sri Lankan government in good humor, India agreed to have discussions on this and talks are on.

Parliamentary committee

Meanwhile, the parliamentary Committee on Public Enterprises (COPE) reported that the land lease agreement had not been signed; and the LIOC had not paid its lease dues regularly. It urged the government to take back the tanks.

Refuting the charges, the LIOC said that it has been paying the lease fee of $100,000 every year without fail. It had also been paying taxes. In 2016-2017, for example, it had paid LKR 30 billion as tax out of an income of LKR 80 billion.

The LIOC said that the Land Lease Agreement was not necessary as the land was transferred by the government through the 2003 agreement under the signature of the treasury (finance) secretary.

Discussions in Delhi

Prime Minister Wickremesinghe is expected to discuss the matter with Narendra Modi in New Delhi on April 25. But the focus will be on forming a Joint Venture to run the tank farm rather than the issue of taking back the tanks. India has said that it will not give back the tanks before the end of the lease in 2038.