IAS Gyan

Daily News Analysis

Sri Lanka –India Energy deal                                 

29th December, 2021 International Relations


Context: Sri Lanka to sign Trincomalee oil tank farm deal with India in a month.

  • If the deal is finalised and signed next month, it will give shape to a proposal envisaged 35 years ago, in the Indo-Lanka Accord.



  • During the Second World War, the British built the Trincomalee oil tank farms to serve as a refuelling station, adjacent to the Trincomalee port, an enviable natural harbour.
  • The nearly century-old oil tanks need to be refurbished — at the cost of millions of dollars — if they are to be fit for use again.


About the project:

  • The work of restoring and operating the Trincomalee oil tank farm will be undertaken as a joint venture between India and Sri Lanka.
  • The facility, is located in ‘China Bay’, has 99 storage tanks with a capacity of 12,000 kilolitres each, spread across the Upper Tank Farm and the Lower Tank Farm.
  • This deal is part of the “four-pronged approach” that India has adopted to help Sri Lanka mitigate its current economic crisis.


Four-pillar initiative


  • It comprising lines of credit for food, medicines and fuel purchases granted by India
  • A currency swap agreement to deal with Sri lanka’s balance of payment issues
  • An “early” modernisation project of the Trinco oil farms that India has been pursuing for several years, and
  • A Sri Lankan commitment to facilitate Indian investments in various sectors.


SWOT Analysis of India-Sri Lanka relations