Sri Lanka has decided to purchase petrol and diesel, 40,000 metric tonnes each, from the Indian Oil Corporation, according to a Cabinet note on Tuesday, as part of the government's bid to tide over the current fuel and energy crisis faced by the island nation.
The move came weeks after Power Minister Gamini Lokuge said that Sri Lanka will hold talks with the Indian Oil Corporation’s local entity amidst a severe foreign exchange crisis.
The Lanka IOC, the Sri Lankan subsidiary of India's oil major Indian Oil Corporation (IOC), has been in operation in Sri Lanka since 2002.
According to the Cabinet statement, the Ministry of Energy has discussed with the IOC to procure 40,000 metric tonnes of diesel and 40,000 metric tonnes of petrol.
“Accordingly, the Indian Oil Corporation has agreed to supply a shipment of 40,000 metric tonnes of diesel,” it said.
The Cabinet of Ministers approved the proposal tabled by the Minister of Energy to take further measures to buy the Oil consignment.
Sri Lanka in the recent weeks has been mulling different options to facilitate measures to prevent fuel pumps from going dry as the island nation was faced with a severe foreign exchange crisis to pay for its imports.
Energy Minister Udaya Gammanpila had predicted fuel shortages in the country due to the inability to pay for imports.
When the crisis loomed, the government approached the IOC’s local operation LIOC to import fuel for the government.
The LIOC had earlier declined the request as they themselves were affected by the shortage of foreign currency to import.
Sri Lanka is currently facing a severe foreign exchange crisis with falling reserves.
The country is grappling with a shortage of almost all essentials due to the lack of dollars to pay for the imports.
Additionally, power cuts are imposed at peak hours as the state power entity is unable to obtain fuel to run turbines.
The state fuel entity has stopped oil supplies as the electricity board has large unpaid bills. The only refinery was recently shut as it was unable to pay dollars for crude imports.
Last month, the Indian government announced a billion dollar assistance package in addition to other balance of payment support to Sri Lanka.
The billion dollar loan credit facility is to be used to avert a food crisis while allowing for the import of items and medicines. Additionally, there will be $500 million for importing fuel from India.
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