The Telegraph
Since 1st March, 1999
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Indian Oil starts feeling the Lankan heat

New Delhi, April 22: The breakdown in the talks between the LTTE leadership and the Sri Lankan government is bad news for Indian Oil Corporation.

The oil major has just taken over 100 petrol and diesel filling stations in Sri Lanka as part of its Rs 340-crore retail marketing plan for the country. It intends to add another 150 filling stations to this chain to spread its network further on the island.

Sources disclose that IOC has also drawn up ambitious plans to enter the aviation turbine fuel (ATF) and LPG business in Sri Lanka.

However, a stable political environment is essential for good business. The peace process that had been initiated about a year ago has received a serious jolt with the LTTE leadership pulling out of the ongoing talks.

The IOC foray into Sri Lanka forms part of India’s economic diplomacy in the region and is based on a government-to-government agreement. The development of the oil tankage at Trincomalee forms part of IOC’s business development plan as well. The oil major also intends to use its Sri Lanka operations as a base to market petro goods in other Saarc countries.

However, the IOC plan was conceived amidst a lot of optimism over a breakthrough in the peace talks. But instead of moving forward at the anticipated pace, the peace talks have hit a roadblock.

A senior IOC official told The Telegraph that although there was some concern over the issue, as of now IOC was going ahead with its plans. He, however, admitted, “Sri Lanka is slippery ground for doing business compared to other countries.”

He said that at the moment there are about 12 IOC officers posted in Sri Lanka and the company was operating its retail marketing network mainly with local staff.

Sources disclose that the Sri Lankan government has offered a very attractive package to IOC which includes a 10-year tax holiday. However, this offer has been extended on the condition that the Indian oil major invests Rs 340 crore in Sri Lanka over a period of five years. After 10 years, IOC is expected to pay a tax of 15 per cent on the profits earned which is much lower than the 35 per cent tax imposed on the profits of other companies.

The Trincomalee tankage is also strategically located as it has access to a wide harbour. The tanks which are of World War II vintage are in remarkably good shape because of the high-quality steel with which they are made.

IOC is already reported to have operationalised 10-odd tanks. Trincomalee, situated in Tamil-dominated territory, virtually straddles one of the world’s busiest shipping routes.

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