The Sri Lankan and Iranian governments have entered a new crude oil deal, the state radio said Thursday.

Sri Lanka Broadcasting Corporation said that during the talks held in Tehran last week, Sri Lanka's Ceypetco, a government owned subsidiary of the Ceylon Petroleum Corporation (CPC) had agreed to purchase 1 million tons of crude oil from Iran.

This would ensure uniterrupted fuel supply in the country, the radio said. The Sri Lankan government is looking at ways to enhance its refinery capacity in order to minimize the huge losses currently suffered by the CPC.

The government subsidy on fuel was 16 billion rupees (about 160 million US dollars) or equivalent to a nearly 1 percent of the country's gross domestic project in 2004.

The government has promised its international donors to effect reform in the power sector which includes the introduction of a third player in the petroleum industry for 88 mln US dollars.

About 60 percent of Sri Lanka's fuel needs are imported as crude and the balance come as refined products from Saudi Arabia, Iran and Malaysia.

Source: Xinhua