By P.K. Balachandran

Sri Lanka and India have drawn up an extremely tight schedule for the economic projects mentioned in the Memorandum of Understanding (MoU) signed in New Delhi on 25 April in the presence of Prime Ministers Ranil Wickremesinghe and Narendra Modi.

According to informed sources in New Delhi, the need for a tight timetable arose from a feeling that much could have been done in the field of India-Sri Lanka economic cooperation in the last two years after the change of regime, but the opportunity was not seized. Therefore, it was felt that projects have to be agreed upon and evolved as per a strict and tight schedule.

Authoritative sources in New Delhi said that the first moves in the projects will take place between mid-May and July 2017.  The details are as follows. 

LNG project   

By the end of May, the Sri Lankan Government will issue a Letter of Intent to the Government of India or its representative, for a re-gasified Liquefied Natural Gas (LNG) fired 500 megawatt capacity power plant in Kerewelapitiya near Colombo. 

For the LNG Terminal/Floating Storage Regasification Unit (FSRU) in Kerawalapitiya, a Joint Venture will be formed involving entities from Sri Lanka, India and Japan, for which modalities will be worked out by July end. 

Sri Lanka will issue a Letter of Intent for the FSRU and the LNG package to India by mid-May. A Joint Working Group (JWG) will be constituted for the project which will meet for the first time in the first half of May. 

By August end, India will submit a Detailed Project Report (DPR) to Sri Lanka on the piped gas distribution system and retail outlets for the supply of Compressed Natural Gas (CNG) to the transportation sector. The LNG project also envisages a piped gas distribution system; and conversion of liquid fuel-based power plants to R-LNG fired plants. 

Solar power

As regards the 50 MW (extendable to 100 MW) solar power plant in Sampur in the Eastern Province, Sri Lanka will issue a Letter of Intent to India or its representative by the end of May.

Trincomalee oil tanks 

The two countries have decided that the 84 giant oil tanks in the Upper Tank Farm in Trincomalee will be “jointly developed” by the Lanka Indian Oil Corporation (LIOC) and the Ceylon Petroleum Corporation (CPC). A Joint Venture (JV) will be set up for this by the end of July. Business development proposals for the JV will be prepared by the JV by September 2017. 

The JV will give “priority” to the development of 10 tanks in the Upper Tank Farm for the “exclusive use” of the Government of Sri Lanka. The land in the Upper Tank Farm, which is currently in the possession of LIOC as per the 2003 agreement, will be leased to the JV through LIOC. The land of the Lower Tank Farm, which is also in the possession of LIOC as per the 2003 agreement, will be leased to LIOC directly. 

The period of all the leases will be 50 years, extendable up to a maximum of 99 years by mutual consent. 

In 2003, the LIOC had taken all the 99 tanks in the Upper and Lower Tanks Farms, and the land on which they stood, on lease for 35 years under an agreement signed by the Sri Lankan Treasury Secretary, the LIOC and the CPC.

Trincomalee Port

India and Sri Lanka have agreed to build a port, a petroleum refinery and other industries in Trincomalee, for which the governments of Sri Lanka and India will set up a Joint Working Group by June end. 

The two countries will jointly set up Industrial Zones or Special Economic Zones in identified locations in Sri Lanka, the details of which will be submitted by Sri Lanka to India at the beginning of May. 

Roads 

By June end, Sri Lanka will submit to India a list of road projects to be considered for joint development. The two countries have already agreed to develop a Mannar-Jaffna and Mannar-Trincomalee highway; and to build a Dambulla-Trincomalee Expressway with Indian investment. 

Railways  

As regards railway upgrading and the purchase of rolling stock, Sri Lanka will submit to India by June end a list of railway projects for its consideration.

Colombo Port

India and Sri Lanka will build a Container Terminal in Colombo Port as a JV, which includes Indian investments considering  the fact that most  of transshipment in Colombo Port  relates to India. Sri Lanka will announce the award of the contract for the container terminal by May end. 

Agriculture

In a significant departure from the past, when India-Sri Lanka economic cooperation did not include agriculture, the two countries have now decided to get their agriculture  ministries to meet and bring out a Concept Paper by June end. 

The projects envisaged include livestock development, water management and agro-based industries. 

It was agreed that the MoU may be amended or supplemented in writing by mutual agreement.  

Focal points

To enable better coordination and implementation, the Sri Lankan Ministry of Development Strategies and International Trade (which is close to the Sri Lankan Prime Minister’s office) and the Indian Ministry of External Affairs (the agency on the Indian side  which is primarily interested in the projects) will act as the focal points.

Stress on Joint Ventures

Sources in New Delhi considered it important to draw attention to the fact that the projects in the MoU will be executed by “Joint Ventures” between Indian and Sri Lankan entities. They were keen to allay fears in Sri Lanka that India is out to gobble up Sri Lanka’s resources by executing projects unilaterally.

They also pointed out that cooperation in agriculture, agriculture-based industries and water management have been included in the MoU for the first time. This has been done in view of the need to improve agricultural production and to use better water management techniques in Sri Lanka. 

India, the sources said, has the necessary experience in these fields and is keen on sharing it with Sri Lanka.  India is keen to share its experience of transforming itself from an importer of food grains to being self sufficient in food. It also has experience in drought management, as droughts in India no longer lead to deaths as they did in the past, when droughts not only led to deaths but mass migration of people. 

The need for a tight timetable arose from a feeling that much could have been done in the field of India-Sri Lanka economic cooperation in the last two years, but the opportunity was not seized. Therefore, it was felt that projects have to be agreed upon and evolved as per a strict and tight timetable.

Delhi talks lead to compromise on Trincomalee oil tanks 

Talks between Sri Lankan Prime Minister Ranil Wickremesinghe and his Indian counterpart Narendra Modi in New Delhi on 25 April have led to a compromise on the sensitive issue of the Trincomalee oil tanks.

Informed sources in New Delhi said that while both sides have climbed down from their earlier positions, they have also gained ground. It is now a ‘win-win’ deal, the sources said. 

As per the Memorandum of Understanding (MoU) on Cooperation of Economic Projects signed in New Delhi on 25 April by the Sri Lankan Minister of Development Strategies Malik Samarawickrama and the Indian Minister of External Affairs Sushma Swaraj, in New Delhi on 25 April, India has agreed to the Sri Lankan proposal to refurbish and use the 84 giant oil tanks in the Upper Tank Farm as a “Joint Venture” between the Lanka Indian Oil Corporation (LIOC) and the Ceylon Petroleum Corporation (CPC).

Previously, by the tripartite agreement signed in 2003, the tanks were to be refurbished and used entirely by the LIOC on a 35-year lease, though there was a provision for the Sri Lankan Government to use them for “national and security” purposes when needed.

The Sri Lankan Government had mooted the idea of developing and running the tanks as a Joint Venture in 2016 because it felt that it needed to have a certain number of tanks (the number varied from time to time) under its control, to store fuel for power generation during an expected drought. 

There were also proposals for a wholesale takeover of the tanks from the LIOC on the grounds that the 2003 agreement was legally flawed and also that India had developed only 17 tanks (by refurbishing 15 and building two anew), while a total of 99 tanks had been handed over to it. 

More recently, the Sri Lankan parliamentary Committee on Public Enterprises (COPE) had sought to take over the tanks on the grounds that the LIOC had not fulfilled its financial commitments to Sri Lanka and that a land lease agreement required by the 2003 pact had not been signed as per the stipulated time period.    

 

Current changes

The two countries have now decided that the 84 giant oil tanks in the Upper Tank Farm will be jointly developed by the LIOC and the CPC. The 17 tanks in the Lower Tank Farm will continue to be with the LIOC.

The Joint Venture (JV) for the Upper Tank Farm will be set up by the end of July. It is also stated that the JV will give “priority” to the development of 10 tanks in the Upper Tank Farm for the “exclusive use” of the Government of Sri Lanka. 

The land in the Upper Tank Farm, which is currently in the possession of LIOC as per the 2003 agreement, will be leased to the JV through LIOC. The land of the Lower Tank Farm, presently 17, which is also in the possession of LIOC as per the 2003 agreement, will be leased to LIOC directly. 

The period of all the leases will be 50 years, but extendable up to a maximum of 99 years by mutual consent. 

As per the 2003 agreement, the LIOC had taken over all the 99 tanks and the land on which they stood, on lease for 35 years which was to expire in 2038. 

By the new agreement, there has been an increase in the time period of the lease from 35 to 50 years with a possible extension to 99 years. This is a gain for India. Sri Lanka has yielded to India in terms of the lease period, but India has climbed down from the position of being the sole Lessee to being a Joint Lessee with the CPC in so far as the 84 tanks in the Upper Tank Farm are concerned.  

Sri Lanka becomes a partner in the ownership and development of the Upper Tank Farm, which it was not, from 2003 till April 25, 2017. India gets the lease extended from 35 years to 50, and possibly up to 99 years, albeit as a partner in a Joint Venture with the CPC in respect of the Upper Tank Farm. (PKB)