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Difficult raising 30% of cost of doubling refinery capacity
In the face of rapidly deteriorating economic difficulties worsened by the global economic meltdown, Sri Lanka is finding it difficult to raise funds required for ambitious project to boost the capacity of the Sapugaskanda oil refinery.
President Mahinda Rajapaksa with Iranian President Mahmoud Ahmadinejad
Well informed sources said yesterday that this transpired at a recent meeting attended by senior Treasury representatives and members of the Iranian embassy. The sources said that Sri Lankan officials had briefed the meeting chaired by an influential MP that Sri Lanka was finding it difficult to raise her component of the funding.
Under an agreement between the Rajapaksa administration and Iran, the Islamic Republic would provide USD 1.1 billion or 70 per cent of the total funding while Sri Lanka would raise the remaining 30 per cent.
The sources said that Sri Lanka’s attempts to raise USD 350 million hadn’t been successful and last week’s meeting was called to discuss the entire range of Iranian funded projects in Sri Lanka.
Other sources said that although Iran originally agreed to pay 80 per cent of the funding requirement, Treasury bosses here subsequently raised the Sri Lankan component to 30 per cent when the Engineering Procurement and Construction contract was signed.Responding to our queries, the sources said that although mega Uma Oya project would go ahead, the refinery modernization would have to be put on hold if funding wasn’t available.
President Mahinda Rajapaksa and Iranian President Mahmoud Ahmadinejad launched the project last April. It was part of the Iranian initiative to extend her energy ties in South Asia.
Ahmadinejad, who visited Pakistan to seal a $7.6 billion pipeline deal opposed by the United States, traveled to India before coming here to launch the Sapugaskanda project.
Iran had pledged a $1.5 billion loan to fund a raft of infrastructure projects in Sri Lanka, including boosting the oil refinery capacity and a 100-megawatt Uma Oya hydropower project.
The project aims to double production of the existing Sapugaskanda oil refinery near Colombo from 50,000 barrels per day to 100,000 bpd.
Sri Lanka is negotiating with the IMF for a staggering USD 1.9 billion loan to boost her foreign reserves. Media Minister Lakshman Yapa Abeywardene last week told The Sunday Island that the country could ask for USD 3.2 billion depending on need.
