The Hindu : To Trincomalee at last

Online edition of India's National Newspaper
Saturday, May 31, 2003

Opinion

Opinion - Editorials

To Trincomalee at last

WITH THE INDIAN Oil Corporation (IOC) deciding to spread its wings, at least in South Asia, the first step in its regional operations was taken with the setting up of Lanka IOC and its entry into the retail business of petroleum products in Sri Lanka. What is of greater significance is the move to take over and launch the modernisation of the China bay tank farm in the eastern port town of Trincomalee. The IOC has taken up the task, or even the challenge of upgrading the facility in phases, to commission the 99 tanks, each with a capacity of 12,250 kilolitres, on a 35-year lease. On the face of it, the Trincomalee farm project, on an initial investment of Rs. 16 crores, may appear insignificant. But the strategic importance of the project cannot be missed. In a way, it fulfils a commitment made over 15 years ago — to be precise, in the Indo-Sri Lanka agreement and its annexure in July 1987. Though there was some resistance within the island nation to let India develop the oil farm at this strategic port town, it was incorporated into the bilateral framework, basically to keep `outsiders' out of the Indian Ocean. The regional and international situation may have changed in these years, but for India the importance of Sri Lanka and Trincomalee cannot be underestimated. So the launching of the modernisation project in China bay is in many ways symbolic of the emerging bonhomie on the bilateral front.

But there is hardly any room for euphoria. Given the flux in Sri Lanka and the uncertainty over the peace process as well as the intentions or plans of the Liberation Tigers of Tamil Eelam (LTTE), there are certainly going to be problems in the future in the operation and maintenance of the Trincomalee facility. The security situation in the north and east of the island remains highly vulnerable and if the LTTE decides to walk out of the peace process, it will surely want to retain control over Trincomalee. The Government of India and the public sector IOC will certainly bear this in mind before they plunge headlong into the $30-million project. That is perhaps a reason for taking it up in phases, keeping an eye on the peace process and the security aspects of the installation as well as the personnel who will be working there. Despite these in-built risks, it is still better for India to take up this venture than let one of the multinational petroleum majors set up shop at this strategic location. The Petroleum Minister, Ram Naik, who was in Trincomalee to launch the IOC's initiative, has also spoken of joint oil exploration with Sri Lanka, at least in a few blocks, once the legal infrastructure is in place for such ventures. Both the ONGC and the IOC may be inclined to take up this project when the time comes. As of now, the IOC is expected to invest $ 100 million in developing an `energy infrastructure' in the island nation.

India's oil initiative must be seen in its overall emphasis now on enhancing and upgrading the economic ties with its neighbours, particularly Sri Lanka. A free trade agreement between the two countries is in place, though it has also created quite a few problems in its implementation. Tea and rubber are `sensitive' items, which Indian plantations/producers do not want the country to import, but which are two of Sri Lanka's strengths. There has to be a greater synergy between the planters and producers on both sides so that they could start working together to maximise their relative strengths and go in for joint promotion of particularly tea in new markets. The Confederation of Indian Industry is also organising a `Made in India' show now in Colombo to showcase the best of Indian companies. This should not be a one-off show and Indian industry should sustain its interest in Sri Lanka to establish itself there. That will be the real test in a small, but open economy.

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