State-run Indian Oil Corporation (IOC) is planning to set up a 6 million tonne per annum (mtpa) greenfield refinery in Sri Lanka. The proposal was discussed between  petroleum minister Dharmendra Pradhan and Sri Lankan PM Ranil Shriyan Wickremesinghe in New Delhi on Tuesday.

Though IOC’s proposal has been there for a while, New Delhi now feels that its relationship with the new government in Colombo could be reinforced with ‘extended economic ties.’ IOC is already present in the island nation through its subsidiary Lanka IOC.

Pradhan also brought to Wickremesinghe’s attention the hike in customs duty and reduction in retail prices hurting revenues of Lanka IOC,  an official privy to the talks told FE.

If the refinery proposal sails through, this would be IOC’s first such project overseas. The government-owned company has recently completed the 15-mtpa greenfield refinery at Paradip in Odisha. With full commissioning of the refinery, IOC’s refining capacity would increase by 28% to 69.2 mtpa from 54.2 mtpa.

The two sides, the official said, also discussed developing the Upper Tank Farm at China Bay in Trincomalee on mutually acceptable terms. “IOC would need around 800 acres for the refinery project. Other business terms could be mutually agreed between Lanka IOC and the Ceylon Petroleum Corporation (CPC),” the official added.

Currently, Sri Lanka has a single refinery of 2.5 mtpa capacity, while the demand for petroleum products is double. IOC wants to cash-on the opportunity by setting up the refinery. In 2014-15, Lanka IOC’s turnover increased by 9% to Rs 8,180 crore, and profit after tax rose by 65% to Rs 480 crore.

Lanka IOC is the only oil company other than the state-owned CPC that operates retail petrol and diesel stations in Sri Lanka. Currently, it has 179 fuel stations.

(The Financial Express)