Amid the growing fuel crisis exacerbated by a foreign exchange crisis, the Sri Lankan government has decided to purchase diesel from India’s state-owned Indian Oil Corporation Ltd (IOCL), and a proposal for the purchase has been cleared by the Cabinet on Tuesday.

Sri Lanka’s forex crisis has reached a level where several power plants are reporting a shortage of fuel. Officials from Sri Lanka’s Energy Ministry had held discussions with the Lanka Indian Oil Corporation (LIOC), a local subsidiary of IOCL, following which the government passed the proposal for the purchase.

The LIOC has agreed to provide 40,000 metric tons of diesel to Sri Lanka, Daily Mirror reported the statement released by the Cabinet.

Earlier, New Delhi had extended a $500 million credit line, part of its total $1.5 billion assistance, for the purchase of fuel. Prior to that, India had also provided facilities worth over $900 million, including deferment of the $500 million loan repayment, to Sri Lanka.

Crisis-ridden Sri Lanka will have to pay over $6 billion in 2022 to avoid default on its external obligations. Recently, despite the extremely low forex reserve, Sri Lanka had paid a $500 million bond payment.

Last month in July, India’s External Affairs Minister S Jaishankar had assured that New Delhi will support Sri Lanka in "all possible ways" to overcome its economic and other challenges. [Read More]

(SAM)