Sri Lanka has said it will go ahead with its deal with Bharat Petroleum Corporation Ltd in oil retailing in the island nation despite opposition from the Marxist JVP, or People's Liberation Front, in the coalition government.

Finance Minister Sarath Amunugama said BPCL was willing to pay $50 million for a 49 per cent stake in the third petroleum distribution company to be set up using assets of the state-run Ceylon Petroleum Corporation.

Asserting that it was 'not privatisation', he said: "BPCL is also a state-owned entity in India and the money from the deal will go to retire debt of the CPC and make it viable."

"The trade unions are up in arms, but we will have to stick to our proposal," Amunugama said in remarks published in Colombo.

"I cannot see any other way out." A part of CPC assets have already been sold to Indian Oil Company which is the second petroleum retailer in the island after CPC.

The previous right-wing United National Party which invited the IOC to enter the market here had identified a Chinese company, Sinopec, to be the third player in the island with full ownership of the new company.

But, the new JVP-backed government decided to sell off only a minority stake in the new company, a condition to which Sinopec did not agree. However, BPCL had agreed to a minority stake in the company.

The JVP last week organised a petroleum strike crippling transport, to protest against government plans to give the third player company to Indian BPCL.