By Uditha Jayasinghe
COLOMBO (Reuters) - Sri Lanka has given approval for India's Lanka Indian Oil Corporation (LIOC) to open 50 new fuel stations, a company official said on Monday, as part of efforts to reduce severe shortages that have crippled the island nation.
Sri Lanka is caught in its worst financial crisis in more than 70 years as a shortage of foreign exchange has left it struggling to pay for essential imports of food, medicine and, critically, fuel.
LIOC, the smaller player in the island's fuel supply duopoly, already has 216 fuel stations and will invest about 2 billion rupees ($5.5 million) on the expansion, its Managing Director Manoj Gupta told Reuters.
LIOC is a subsidiary of India's Indian Oil Corporation and is listed on the Colombo Stock Exchange.
"We have been trying for some time to get this approval and we are more than willing to come forward and play a larger role to support and work with Sri Lanka to resolve its challenges," Gupta said.
The country's largest fuel retailer, state-run Ceylon Petroleum Corporation (CPC), operates around 1,190 fuel stations.
LIOC's retail expansion follows a separate agreement signed in December to gain control of 75 oil tanks in a strategically important storage facility near Sri Lanka's eastern port of Trincomalee.
The company has also stepped up supplies to CPC in the last two months after Sri Lanka ran short of dollars to pay for shipments, forcing consumers to wait in long queues, sometimes for days.
India has poured about $4 billion into its southern neighbour this year to prop up the economy, including swaps and multiple credit lines to purchase fuel, food and fertilizer.
Sri Lanka is also in discussions with the International Monetary Fund (IMF) for a possible $3 billion bailout package, besides seeking assistance from China and Japan.