IndianOil's Lanka plans on the table despite Colombo's takeover threat
New Delhi   11-Apr-2013

Despite Sri Lanka’s plan to partially take back a strategic oil storage depot in Trincomalee from IndianOil’s local arm, the Indian state-run company is set to go ahead with its planned expansion in the island nation.

“We are going ahead with our expansion plans, including the setting up of a $17-million (Rs 93 crore) bitumen-handling facility. We are also looking to refurbish about 30 oil tanks at Trincomalee within the next two years, which may see an investment of about $40 million,” Subodh Dakwale, managing director of Lanka IndianOil, the Sri Lankan arm of IndianOil, told Business Standard.

Asked about Sri Lanka’s plan to take over part of the Trincomalee depot, Dakwale said the government had not informed the company about any proposal in that regatrd.

The China Bay Tank farm, a World War II depot in the north-eastern port district of Trincomalee, is the largest tank farm in South Asia.

There were clouds over the IndianOil’s investment in Sri Lanka after the nation’s information minister Keheliya Rambukwella said last month the government was planning to take over tanks not being used by Lanka IndianOil in the China Bay farm. The minister’s statement came after India voted against Sri Lanka at the UN Human Rights Commission over its alleged rights violations.

Dakwale said IndianOil Lanka was also working on a road map for larger investment in the coming years. IndianOil had drawn up initial plans to set up its first refinery outside India in Sri Lanka with an investment of more than Rs 20,000 crore, but negotiations with the government are yet to take place. "There were plans for setting up refinery, but nothing has been crystalised," Dakwale added.

Lanka IndianOil had bought a one-third share in Ceylon Petroleum Storage Terminals Ltd, which operates the China Bay Tank farm, in 2003. Currently, only 15 of the 99 tanks of the farm — each with a capacity of 12,000 kilolitres — are operational. “We are working on various possibilities on how to go ahead in utilising those facilities,” he added.

Curious case of Vietnamese ship

Meanwhile, Lanka IndianOil, which also has petroleum retail business in Sri Lanka, returned a consignment of diesel fuel last week to Singapore after tests found that the diesel imported from the Southeast Asian nation was sub-standard.

According to reports, the Colombo High Court had ordered the seizure of a ship belonging to a Vietnamese company, which was bringing a stock of 4,500 tonnes of diesel to the Trincomalee port from Singapore. The consignment, valued at $13 million, changed its colour onboard due to inferior quality.

Lanka IndianOil says the quality of fuel, which was checked prior to dispatching from Singapore on a Vietnamese ship, was higher and “turned sub-standard mid-sea”. “We rejected the consignment and had filed a case at the Colombo High Court. Once, the Singapore company assured bank guarantee, it was returned,” Dakwale said.