New Delhi, Jan 6 : Amid reports that Sri Lanka is preparing to sign an agreement with New Delhi on the Trincomalee oil tank farms, India Today  acknowledged, without divulging details, that it is in talks with Colombo for the “modernisation” of the World War II vintage tanks.

Sri Lankan Energy Minister Udaya Gammanpila is quoted in Sri Lankan media as saying that Colombo will likely sign an agreement with India next week on sharing the oil tank farm in Trincomalee with Lanka IOC, a subsidiary of Indian Oil Corporation, following the cabinet’s nod.

Gammanpila told reporters on Tuesday that cabinet approval for the agreement has been obtained and a date for the signing will be decided soon.

In response to a query, the Ministry of External Affairs spokesperson Arindam Bagchi, said at a media briefing here, that they have seen reports that the Sri Lankan Cabinet has approved the development of the Trincomalee Tank Farms.

“Energy security is an important area of our bilateral cooperation with Sri Lanka. We are in consultation with the Government of Sri Lanka for the modernization of the Trincomalee Tank Farms. This will allow for the storage of fuel and will augment bilateral energy security,” he added.

On reports that inking of the Trincomalee agreement would open up prospects of Sri Lanka getting a $1.5 billion loan from India to tide over its severe cash crunch, the MEA spokesperson referred to the visit of Sri Lankan Finance Minister Basil Rajapaksa to New Delhi last month.

Bagchi said that Basil Rajapaksa had “briefed the Indian side on the economic situation in Sri Lanka and his Government’s approach in addressing these challenges.” Basil Rajapaksa had met Indian External Affairs Minister S Jaishankar and Finance Minister Nirmala Sitharaman in New Delhi. However, he could not meet Prime Minister Narendra Modi due to scheduling problems.

The spokesperson said that “India has always stood by the Sri Lankan people and Sri Lanka is an important part of our Neighbourhood First policy.

“During the visit discussions took place on deepening cooperation in areas of food and health security, energy security, balance of payment issues and Indian investments in Sri Lanka, among others.

“I understand that further consultations are ongoing,” he added.

According to Sri Lankan media reports, Colombo had asked for a US$400 million swap from the Reserve Bank of India, a US$500 million petroleum credit likely from the Exim Bank of India and a US$one billion food and medicines credit during the visit of Basil Rajapaksa to India in early December.

With signing of the Trincomalee oil tank agreement, India is poised to extend emergency Lines of Credit and a currency swap request to economically battered Sri Lanka.

Gammanpila told reporters that according to the agreement worked out with India, a majority of the 99 tanks in Trincomalee will be in Sri Lanka’s control, with 24 under the direct control of state-run Ceylon Petroleum Corporation (CPC), while the remaining 61 will be brought under Trinco Petroleum Terminal Ltd, a joint venture, that will be a subsidiary of the CPC.

The CPC will hold 51 percent controlling stake in Trinco Petroleum Terminal Ltd, with Lanka IOC, a subsidiary of Indian Oil Corporation, owning the remaining 49 percent.

Gammanpila said the chairman of the company, as well as four out of its seven board members will all be appointed by the CPC.

The company will be subject to government scrutiny and can be questioned by parliament committees, he said.

“It will be very much part of the state machinery,” he said.

Gammanpila said that as a result of the new agreement with India, 85 out of the 99 tanks will be under the control of the CPC, 24 directly and 61 through the subsidiary.

“The LIOC will manage only 14 tanks. Therefore, regaining the control of Trinco Oil Tank Farm by Sri Lanka is a historical victory,” the Minister said. The oil tank farm issue is a sensitive one in Sri Lanka with the opposition alleging that the country’s assets are being given away.

The Trinco oil tank farm is located on 850 acres of land and originally contained 101 tanks, each with the capacity to hold 12,100 metric tonnes (MT) of oil.

Out of the original 101 tanks, two were destroyed by a kamikaze attack during the Japanese air raid on Trincomalee on 9 April 1942 and when a Royal Ceylon Air Force plane crashed in the early 1960s.

Of the 99 oil tanks in existence, 14 are already being utilised by the LIOC.

The remaining 85 tanks are reported to be in a state of disrepair. The purported agreement between CPC and LIOC will be for the renovation and development of these 85 oil tanks.(UNI)