By Rusiripala Tennakoon –
A long standing controversy that remained heavily conjectured among interested groups in the society came to a virtual intermission pause with the tabling of the so-called Agreement for a Joint Venture between the CPC and the LIOC. The text of the Agreement is not yet available for the Public but a document Titled Regaining Trincomalee Oil Tank Farm has been tabled in Parliament giving certain excerpts of the said agreement.
In summary the details contained are as follows;
Nature of the Company A joint venture between CPC & LIOC
Lease Period 50 years
Share Ownership CPC 51% LIOC 49%
Director Board CPC 4 LIOC 3
The document also provides the following Information briefly about the contents;
The Oil tanks numbering 99 has been allocated as, CPC-24: LIOC 14: New JV Company 61
In the same context, the method of generating profits is stated as follows;
1. Renting to countries which need storage capacity to maintain oil reserves’
2. Renting to investors who purchase and store oil when prices slash;
3. Bunkering business
4. Providing storage facility to companies which require to store liquid commodities;
5. Providing storage facility for bio-gas
6. Providing storage for Hydrogen gas;
7. Providing facilities to store water;
8. Leasing out to CPC and LIOC when they need additional storage capacities;
9. Utilize the land area of 827 acres as a solar energy farm;
What we could surmise with this information is that irrespective of the previous agreements, this agreement takes precedence and becomes effective with the appointment of the Board of Directors. The Directors are responsible for the objectives outlined to operate the Joint venture Company to Generate Profits. It is difficult to understand why the Company objectives be confined only to these 10 areas. Let us presume that the decision makers view that the company could be made profitable only by engaging in these activities.
The capital structure is not known but a substantial portion of the required initial capital has to be provided by the venture partners. The profitability of the venture will depend to a great extent on the cost of funds. It has to be understood that there is a relationship between the profitability of a business and the cost of its capital. The type of capital financing impact the profitability and the profit margins. If the capital itself is debt -heavy it will be a reason for reducing the net profits of a company. We wonder how the CPC which is already in heavy debts could provide the initial capital for the new Company. Partners will have to procure their components of contribution within the limits of cheaper costs if they expect to generate profits. It will be a gigantic task for the CPC which is heavily burdened with debts some remaining unsettled over long periods to fulfil their part.
Except for one or two among the spelled out, other objectives sound frivolous for a venture of this magnitude. Compared to the huge cost of refurbishing which may involve unforeseen large expenditures (particularly due to the very long period during which the tanks have remained un-used) the initial costs to put them in good order before offering for any commercial venture may be very high. Therefore, the success of the project, in particular the operations of the Joint Venture will depend on how seriously the board members will address these issues.
In the explanatory notes provided to Parliamentarians it is repeatedly mentioned that the current effort is to take back the oil tanks already given to India. The document also refers to 3 previous agreements.
The First, is not an agreement per se. It is an Exchange of letters between two Heads of State, Sri Rajiv Gandhi (INDIA) and H.E. Mr. J.R.Jayewardene. Before examining its contents let us take a look at the events preceding. As I have explained in detail in one of my articles written about the Oil Tank Farm published before, the interests expressed by India regarding certain issues in relation to the Ethnic conflict and the war situation paved the way to this discussion between the two countries. Let us recall the background situation that led to the 1987 Indo -Sri Lanka Accord. I wish to Quote from published media reports available in the internet about this matter.
Quote; “India had, initially under Indira Gandhi and later under Rajiv Gandhi, provided support to Tamil interests from the very conception of the secessionist movement. This included providing sanctuary to the separatists, as well as support the operations training camps for Tamil guerrillas in Tamil Nadu of which the LTTE emerged as the strongest force. This was both as a result of a large Tamil community in South India, as well as India’s regional security and interests which attempted to reduce the scope of foreign intervention, especially those linked to the United States, Pakistan, and China. To this end, the Indira Gandhi government sought to make it clear to Sri Lankan President J. R. Jayewardene that armed intervention in support of the Tamil movement was an option India would consider if any diplomatic solutions should fail.
In 1986, the campaign against the insurgency was stepped up and in 1987, retaliating an increasingly bloody insurgent movement, Operation Liberation was launched against LTTE strongholds in Jaffna Peninsula, involving nearly four thousand troops, supported by helicopter gunships as well as ground attack aircraft. In June 1987, the Sri Lankan Army laid siege on the town of Jaffna. As civilian casualties grew, calls grew within India to intervene in what was increasingly seen in the Indian (and Tamil) media as a developing humanitarian crisis, especially with reports use of aerial support against rebel positions in civilian areas. India, which had a substantial Tamil population in South India faced the prospect of a Tamil backlash at home, called on the Sri Lankan government to halt the offensive in an attempt to negotiate a political settlement.
However, the Indian efforts were futile. Added to this, in the growing involvement of Pakistani and Israeli advisors, it was necessary for Indian interest to mount a show of force. Failing to negotiate an end to the crisis with Sri Lanka, India announced on 2 June 1987 that it would send a convoy of unarmed ships to northern Sri Lanka to provide humanitarian assistance but this was intercepted by the Sri Lankan Navy and turned back.]
Following the failure of the naval mission, the decision was made by the Indian government to mount an airdrop of relief supplies in support of rebel forces over the besieged city of Jaffna. On 4 June 1987, in a blatant show of force, the Indian Air Force mounted Operation Poomalai in broad daylight. Five An-32s of the Indian Air Force under cover of heavily armed Indian fighter jets flew over Jaffna to airdrop 25 tons of supplies, all the time keeping well within the range of Sri Lankan radar coverage. At the same time the Sri Lankan Ambassador to New Delhi was summoned to the Foreign Office to be informed by the Minister of External Affairs, K. Natwar Singh, of the ongoing operation. It was also indicated to the ambassador that if the operation was in any way hindered by Sri Lanka, India would launch a full-force military retaliation against Sri Lanka. The ultimate aim of the operation was both to demonstrate the credibility of the Indian option of active intervention to the Sri Lankan Government, as a symbolic act of support for the Tamil Rebels, as well to preserve Rajiv Gandhi’s credibility.
Faced with the possibility of an active Indian intervention and facing an increasingly war-weary population at home,] the Sri Lankan President, J. R. Jayewardene, offered to hold talks with the Rajiv Gandhi government on future moves. The siege of Jaffna was soon lifted, followed by a round of negotiations that led to the signing of the Indo-Sri-Lankan accord on July 29, 1987 that brought a temporary truce. The terms of the truce specified that the Sri Lankan troops withdraw from the north and the Tamil rebels disarm, and saw the induction of the Indian Peace Keeping Force in Sri Lanka.”
It is in such a background that the Accord referred to by Minister Gammanpila in his explanatory notes document tabled in Parliament came about. Because there is no reference to the Trinco Oil tanks in the Accord or the official annexures to the Accord, Minister Gammanpila has quoted the Exchange of letters between the two Heads of State prior to the Accord, where there is some reference to the Trinco Oil tanks.
Now let us see what is there in the letter quoted, mentioned about the Oil Tanks In Trinco. Sri Rajiv Gandhi by his letter dated 29th July 1987, addressed to H E the President Sri Lanka stating inter-alia as follows,
“recognizing the importance of nurturing the traditional friendship, it is imperative that both Sri Lanka and India reaffirm the decision not to allow our respective territories to be used for activities prejudicial to each other’s unity, territorial integrity and security.
In that spirit you had, during the course of our discussions, agreed to meet some of India’s concerns as follows;
1. Your Excellency and myself will reach an early understanding about the relevance and employment of foreign military and intelligence personnel with a view to ensuring that such presences will not prejudice Indo-Sri -Lanka relations;
2. Trincomalee or any other ports in Sri Lanka will not be made available for military use by any country in a manner prejudicial to India’s interests;
3. The work of restoring and operating the Trincomalee Oil Tank Farm will be undertaken as a joint venture between India and Sri Lanka; (emphasis by writer)
4. Sri Lanka’s agreement with foreign broadcasting organizations will be reviewed to ensure that any facilities set up by them in Sri Lanka are used solely as Public Broadcasting facilities and not for any military or intelligent purposes.
Our President on the same date confirmed the acceptance of the correctness of the contents in the Indian Prime Ministers letter. It is very clear from this that the concerns India had in this instance were focused on territorial integrity and security and all other interests relevant to those fundamental aspects. There were absolutely no commercial considerations such as the need to profiteer out of any of our sovereign owned assets. The fact that in the agreement proper there was no mention of any conditionalities specified in the exchanged letters before, confirms and reaffirms this position. India had no intention whatsoever to make a business deal out of our Oil Tanks. In as much as they wished to restrict our rights to offer any of our Ports for any military use by any foreign country prejudicial to India, they only wanted any development associated with the Oil Tanks to be done with the consensus of both countries in a manner acceptable to both in keeping with the basic concerns regarding the security and territorial integrity.
Accordingly construing what is included in the letters exchanged as a prelude to the Indo -Lanka accord as prohibitory clauses to limit our chances of making good and economic use of our assets is factually erroneous. Any sensible negotiator would have convinced the Indian Authorities that what the two countries consented to then was only to safeguard the security aspects and to prevent any foreign military interventions through such operations. If we carefully sorted out this aspect, we would not have to be bound by what was included in the Accord as a restriction to our making use of the Oil Tanks to our economic benefit without compromising the security concerns of India. The question of setting up a commercial venture between the two countries to share the benefits would not have arisen then.
The only other agreement that followed the Accord of 1987 is the 2003 agreement with LIOC which was any way a time bound one for a period of 35 year lease of a specified number of tanks.
And the 2017 MOU was merely an expression of interest to enter into a subsequent agreement to achieve greater economic, investment and development cooperation through joint ventures. Any way the Understanding reached in that MOU regarding the Trinco Oil tank farm had automatically lapsed by end of July 2017 due to non- performance and non- pursuance by both parties to the MOU which was signed in April 2017.
From the foregoing account it can be concluded that the “Regaining Concept” heavily canvassed by Minister Gamanpila is, in fact not so, and it tantamount to a let- down of the side due to hasty and scanty treatment of the background situation, which never would have stood as an obstacle to our developing the OIL TANK FARM by ourselves, with the consensus of India and not as a business venture between the two countries.
Petty politics can take us down to be bound by unnecessary restrictions causing colossal losses to the country. The Minister was taking up a stand that the Tanks have already been given to India by other regimes and his task was to free them from that hold which is totally fallacious.