Oily Cousins

June 11, 2006 (LBO) – Two kinds of oil. One fires up vehicles, the other adds flavour to cooking.

The two have managed to create a nasty oil spill between Sri Lanka and India, with trade relations between both countries simmering to boiling point. The spat between Colombo and Indian Oil Corp's local unit over 76 million dollars (7.6 billion rupees) worth of unpaid bills dragged on for over a year, which pushed Lanka IOC towards a brink of bankruptcy and allowed their pumps to run dry.

Both sides came to a settlement last Friday with Lanka IOC being paid a billion rupees and up to 5-billion rupees in 2-year treasury bonds priced at 11 percent. While LIOC has to absorb the balance losses, Colombo has allowed them to fix retail prices at the 160 sheds they own islandwide from next month.

Away from the center stage another controversial drama Sri Lanka's growing shipments of vanaspati oil to India has earned nasty reviews with New Delhi taking the unusual step of limiting imports last week, despite a free trade pact between both nations.