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IPI pipeline: India asks Pak to waive transit fee

Last updated on: April 04, 2007 16:23 IST
India has asked Pakistan to waive the $200 million transit fee a year for allowing passage of a pipeline carrying natural gas from Iran.

Sources said Petroleum Minister Murli Deora told visiting Pakistani Prime Minister Shaukat Aziz and its Foreign Minister Khurshid Mehmood Kasuri that Islamabad stood to benefit most out of the Iran-Pakistan-India pipeline project to meet its energy needs.

A 48-inch pipeline from Iran is to carry 60 million standard cubic meters per day of gas that will be split equally between India and Pakistan.

Pakistan is expecting a natural gas deficit in 2009-10, just before the pipeline arrives, while in case of India its current deficit is expected to be wiped out by then as gas finds of Reliance Industries and GSPC come on stream.

The pipeline would benefit Pakistan more as Islamabad is in requirement of gas more than India, Deora said, asking Pakistani leaders for a waiver as a goodwill and confidence building measure, particularly as New Delhi will anyway be paying a transportation tariff for using pipeline in Pakistan.

With the visiting side not relenting on waiver, New Delhi offered to pay Pakistan a transit fee of no more than $60 million per annum, sources said.

Sources said Deora also asked Pakistan to trim the transportation charge India has to pay to Pakistan for using the 1,035-km of the pipeline section in Pakistan.

He proposed a tariff of $0.55 per million British thermal unit ($220 million per annum for 30 mmscmd gas) as against Pakistan's expectation of $1.57 per mBtu.

Sources said Indian expectation of a transportation tariff of $0.55 per mBtu was based on a 13 per cent return on investment made by Pakistan in laying the section of the pipeline falling in its territory.

As per the agreement between the three countries, each will lay the section of the pipeline falling in its territory. This would help the project from not being subjected to sanctions from US, which had barred any company from doing business with Iran for its suspected nuclear arms programme.

However, to strengthen the commitment of both India and Pakistan for the pipeline, Deora suggested India's state-run gas utility GAIL (India) Ltd joining Pakistan's Inter-State Gas (Pvt) Ltd for laying the pipeline from Iran-Pakistan border to India-Pakistan border, sources said.

Deora told Pakistani leaders that transit fee was levied in cases where the pipeline passes through a country and that country was not a beneficiary of the project. But in case of Iran-Pakistan-India pipeline, Pakistan would be utilising a sizable proportion of the gas within its own territory.

Of the 1,035-km length of pipeline in Pakistan, only 240-km length of pipeline is exclusively meant for India's requirement. The balance 795-km length would be utilised by Pakistan.

No special concessions have been proposed for the project by Pakistan government till now.

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