October 08, 2008
India may opt out of IPI if Pakistan refuses to drop transit fee – Report
ANI reported that India is likely to issue an ultimatum to Pakistan to drop the demand for a transit fee, which if refused, could lead to New Delhi opting out of the proposed Iran Pakistan India natural gas pipeline project.
New Delhi’s apparent confrontational stance has been phrased after a meeting of the technical teams of both sides at Islamabad on April 16th and April 17th 2008 where Pakistan stuck to its demand that India pay 10 per cent of the gas price as transit fees.
India’s position was that 15 cents per million British thermal unit was a fair and reasonable fee that would provide Pakistan USD 180 million and save more than USD 350 million in costs each year. The changed position for the bilateral talks is that India has made enough sacrifices to deserve the waiver. Pakistan, which in June 2007 estimated the transport tariff at 59 cents per million British thermal unit, is now asking for USD 1.17 per million British thermal unit due to the rise in cost estimates because of an increase in steel prices. India wants the cost of service to be arrived through international competitive bidding, but Pakistan has indicated that it would execute the project through Pakistan Pipeco and not through ICB.
The reasons, to be cited by petroleum minister Mr Deora, are Pakistan is not purely a transit country. As Iran gas is being shared equally between India and Pakistan, both have equal stake in the project. Moreover, 70% of the pipeline through Pakistan would be used in transporting gas for both countries. India’s participation has brought in higher gas volumes and economies of scale, yielding lower transport tariff and other costs. This would improve the projects financial viability as also the comfort level of the lenders.
Both India and Pakistan want Iran to nominate the whole of South Pars gas field for pipeline supply. They also want supply assurance, asking Iran to get the gas reserve volume certified by an international consultant. Their demand is that any litigation on the pipeline be heard in a court outside the three nations, contrary to Iran’ stand that disputes be adjudicated in Tehran.
