Thousands of Sri Lankan motorists were queuing for fuel on Monday after workers at the state-run oil firm went on strike, demanding the government scrap a deal which they say would give India too much influence over fuel prices.
Unions said the strike was to stop a deal that puts 99 oil tanks in the island nation's eastern port city in the hands of Lanka IOC, a subsidiary of Indian Oil Corporation.
Sri Lanka has agreed with India to jointly develop and operate all oil tanks in the oil storage facility located in the port town of Trincomalee near the world's second deepest natural harbour.
Union leaders said there was speculation the deal could be finalised either when Sri Lankan Prime Minister Ranil Wickremesinghe visits New Delhi on Tuesday or Indian Prime Minister Narendra Modi comes to Sri Lanka on May 11.
Lanka IOC already operates 15 of the oil tanks; the rest have not been used for decades.
For its part, IOC has agreed to build a second refinery with a capacity of at least 100,000 barrels per day (bpd) in Sri Lanka, while Modi in 2015 pledged to establish a petroleum hub in Trincomalee.
The unions at state-run Ceylon Petroleum Corporation (CPC) said handing the tanks to Lanka IOC would give it too much influence over fuel stations.
"If they are given, they will have the control to decide the market prices," D. J. Rajakaruna, a CPC union leader told Reuters.
A top CPC official said fuel stations could run out of supplies later on Tuesday if the strike continued, though the island nation's 50,000 barrel-per-day capacity refinery is still in operation.
"We have enough stocks, but we can't supply as workers in the distribution unit have gone on strike," the official said, asking not to be named.
State Enterprise Minister Kabir Hashim said the unions were given false information, as India and Sri Lanka had agreed to hand over 10 tanks to CPC while 74 were expected to be developed under a joint venture between CPC and Lanka IOC.
"It will be signed between the governments of India and Sri Lanka," he told reporters in Colombo.
A Lanka IOC official told Reuters that due to trade union pressure CPC would be allowed to use 10 of the 84 tanks earmarked for the joint venture between the two companies.