Colombo, Feb 2 (IANS): As Sri Lanka faces one of its toughest financial crisis leading to breakdown of power and fuel supplies, India came to rescue with $500 million Line of Credit (LOC).

The Export Import Bank (EXIM) of India and the Sri Lanka government signed a

LOC Agreement for purchase of petroleum products on Wednesday in the presence of Sri

Lanka's Finance Minister, Basil Rajapaksa and the High Commissioner of India to Sri Lanka, Gopal Baglay.

"The Agreement was signed by Treasury Secretary, S.R. Attygalle from the Sri Lankan side

and Chief General Manager of EXIM Bank, Gaurav Bhandari from the Indian side," the Indian High Commission in Colombo said in a statement.

The Indian support for fuel imports by Sri Lanka from India, through the LOC, is in response to Sri Lanka's urgent requirement. This critical support comes in the wake of a virtual meeting between India's External Affairs Minister, S. Jaishankar and

Rajapaksa on January 15, during which they discussed a range of issues, the statement added.

"As Sri Lanka's closest neighbour and long-standing partner, India is committed to assist Sri Lanka in its post-Covid economic recovery. Signing of the LOC Agreement is another landmark in our bilateral cooperation and is in continuation of India's recent foreign exchange support of over $900 million to Sri Lanka," the High Commission stated.

The Indians assistance followed last December discussions between the two sides during the visit of the Finance Minister to India. With the recent support, India's overall development assistance to Sri Lanka stands at close to $4 billion, the High Commission stated.

Meanwhile on Tuesday, the Sri Lanka Cabinet announced that Indian Oil company is to supply a shipment of 40,000 metric tons of diesel to the Ministry of Energy to generate electricity. With the ongoing financial crisis, the Petroleum Ministry had refused to supply fuel to the state-run Ceylon Electricity Board to generate electricity.