The Hindu Business Line : Pipeline glitches

New Delhi’s decision not to attend the trilateral meeting at Teheran on the India-Pakistan-Iran gas pipeline suggests that a hard line is being taken on the $7.4-billion project, which has been in the works for the past couple of years. This is a welcome development because till now the 1,035-km pipeline has been held hostage for reasons that are trifling compared to the benefits all three participants stand to reap from it. This apart, Teheran has also repeated its threat that if New Delhi is not serious about the project, it would go ahead with Pakistan to implement it. This would, of course, hit the economic viability of the project because, if it cannot tap the Indian market, it is as good as dead. On the face of it, New Delhi has cited the non-resolution of the transit-fee issue with Pakistan as the reason for skipping the Teheran meeting, stating that unless such bilateral problems are settled there is no point in tackling trilateral issues. While technically this approach to the pipeline negotiations makes a lot of sense, it can be argued that, given the requisite political will, such problems can be dealt with, especially because the transit-fee issue is more political than economic, which is the case with the transportation charges India will have to pay Pakistan for wheeling the gas to India. Indeed, although there is a substantial gap between Pakistan’s demand for 70-75 cents per million British thermal units (mBTU) and the Indian offer of 55 cents, the basic principle of calculation has been agreed on by Islamabad and New Delhi, which in fact led to optimism at the end of June that the pipeline deal would be signed and sealed soon. At the time, reports had also said that the transit-fee issue would be decided before the trilateral meeting (which was to be held earlier), which suggests that the efforts at resolving the problem have failed. Pakistan is said to be asking for a fee of 49 US cents per million BTU while India is prepared to offer 20 cents.

However, the transit-fee issue is a sideshow, the main hurdle holding up the pipeline project being gas pricing. Admittedly, the rate of $4.93 per mBTU proposed by Iran early this year has been agreed to by both India and Pakistan, but there is still disagreement on the price-review schedule. Iran would like a review every three years while India and Pakistan would like the agreed price to hold for much longer. India’s absence from the trilateral meeting will have one certain impact — a further delay in the project. Given the projected sharp increase in gas consumption in the years to come, it is to be hoped that alternative external sources of supply (from Qatar and Australia, among others) are tied up, even as negotiations are continued for the Iranian gas, initially at 60 million cubic metres a day but rising substantially over time, for all of 25 years.

Related Stories:
India skips trilateral meet on Iran gas pipeline
Iran pipeline: Indian segment may cost $1 b
Gas pipeline hitch: Iran wants 3-year review of price formula

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