India has threatened to walk out of the $7 billion Iran-Pakistan-India gas pipeline project if Islamabad did not bring down the fee it wants to charge for allowing flow of natural gas from Iran to India.

At the beginning of the two-day technical level talks in New Delhi on the project, Indian officials told Mukhtar Ahmad, energy advisor to Pakistan Prime Minister Shaukat Aziz, that transportation tariff for the 1036-km pipeline section falling in Pakistan and the transit fee payable to Islamabad has to be brought down for New Delhi to continue in the project.

"Transportation tariff and transit fee impinge on delivered price of gas," a top Indian official said.

The official said New Delhi, drawing from experience in international pipeline projects, has suggested a transportation tariff of $0.50 per million British thermal unit while Pakistan wants $1.57 dollars per mBtu.

Islamabad is seeking a transit fee of 10 per cent of the gas price at India border (price payable to Iran plus transportation cost) while India is willing to pay a maximum of 5 per cent of the gas price at Iran-Pakistan border.

"It is a question of $0.65 per mBtu versus $0.25 per mBtu but when taken together with transportation tariff, the price of gas at Indian border will be almost $1.50 per mBtu costlier," the official said.

After meeting Petroleum Minister Murli Deora and oil secretary M S Srinivasan, Ahmad said: "We are very hopeful that we will converge on all the issues" and a tripartite deal will be signed in June.