The Indian Oil Corporation (IOC) chartered huge oil tanker 'New Diamond', laden with about 3,00,000 tonne of Kuwaiti crude on fire, has been towed more than 35 nautical miles away from Sri Lankan coast to safe waters, Indian Coast Guard said on Saturday.

"There is no oil slick reported," the Indian Coast Guard said after a joint effort by the two countries to contain the blaze.

Sri Lanka's navy said rescuers were still spraying foam on the vessel but that the blaze had been brought under control.

There was no immediate danger of the tanker breaking up despite a two-metre (6.6 feet) crack in the hull 10 metres above the waterline, it said.

The fire was triggered by an engine room explosion that killed a Filipino crewman on Thursday morning as the vessel was passing Sri Lanka on its way to the Indian port of Paradip.

It issued a distress signal 60 kilometres from Sri Lanka's eastern coastal town of Sangamankanda Point.

Three tugboats -- two Indian and one chartered by the owners -- were brought into action on Friday night to push the vessel back into deeper waters amid fears of an environmental disaster should the oil leak.

A total of 16 vessels, including specialised firefighting tugs and four aircraft, were deployed to bring the blaze under control by Friday night.

Sri Lanka's Marine Environment Protection Agency said legal action could be taken against the owners, Liberian-registered Porto Emporios Shipping Inc "should the worst happen and the ship breaks up".

Sri Lankan officials said they were considering a ship-to-ship transfer of the crude before salvaging the tanker.