IPI gas ain't free: Deal or no Deal? India's hardball tactics fail

Posted on 07 May 2008. Tags: Gas Pipeline, India, IPC, IPI, Iran CA, Pakistan, TAPI

India playing hardball on Transit fees. They wanted to dictate the price. For Pakistan this is a business, and commercial interests dictate that Pakistan get about $1 Billion in transit fees which is tied in to the price of gas. Anything else is not worth investing in. The expenses for Pakistan for maintaining the pipeline will be milions of Dollars. Surely the petroleum industry in Pakistan does not want any headaches by giving away the gas free to India without any reciprocal deal.

India also has a way of wrigling out of signed agreements. Case in point the Indus Water agreement which was indeed bad for Pakistan and good for India. Ayub Khan negotiated away two rivers to India hoping that India would keep its part of the bargina and not reduce the waters from the other three rivers. The exact opposite has happened. India is not putting dams on the other rivers also–trying to starve Pakistan.

Now the shoe is ont he other foot. Pakistan is in a strong position to bargain on the price of gas. This strong position cannot and should not be be diluted away.

Perhaps India has realized this about Pipelinistan: All energy routes lead through Islamabad

India had wanted to bypass Pakistan by building an underwater line from Qatar. That entire project failed. India new view of Iran:-Pakistan cannot be avoided!

India with the IPI popeline will have to give up its support for the BLA-an organization not very popular in either Iran or Pakistan. …the Iran Pakistan China pipeline heralds the eviction of India from Afghanistan and maybe Chahbahar-Iran

The politics of IPI, IPC, TAPI, TPC, TIPI, pipelines will continue to aggravte the Indian-Pakistani negotitors. This much is clear…Pakistan ain’t giving it away!

The Indians notirious bargaining gurus were unable to browbeat the Paksitanis on the transit fees for the IPI pipeline

India is stuck on its untenable position that Pakistan does not deserve any fee becuase the pipeline is also used by Pakistan. Additionally India wanted a pay the paltry sum of about $200 million for the fees forever. These negotiating tactics show the non-seriousness of the negotiators who “want something for nothing”. Obviously Pakistan has choices and India is not the only option. If Paksitan gets only $200 million as transit fees, then providing energy to India may not economically feasible for Pakistan and India should be dropped from the IPI project. China is very interested inthe IPI as well as the TAPI projects. Therefore the IPI can be transformed into the IPC and the TAPI can easly be connected to China as the TIPC project which avoids both India and its clients in Kabul.

New Delhi, May 6Despite India’s tough talking with Pakistan at the recent bilateral meet over the $7-billion-plus Iran-Pakistan-India (IPI) gas pipeline project, no consensus has emerged over the two main issues concerning the transit fee and transportation fee. The gas pipeline has to transit Pakistan before it reaches India. Pakistan’s position on the issue of transit fee is that it should be linked to the price of gas and should vary between 5-10% of the price of gas. India feels that the fee should be an absolute number and not linked to the price of gas.

However, the petroleum ministry is of the view that the transit fee being sought by Islamabad is “completely unjustified as 70% of the pipeline through Pakistan would be used in transporting gas for both the countries. Therefore, Pakistan is not a purely transit country.

“We have told Pakistan that the transit fee should follow the energy charter treaty (ECT) principles i.e non-discriminatory, transparent and cost reflective and should not be based on a percentage value of the gas. It was also mentioned by the Indian side (at the recent bilateral meet in Islamabad during April 16 to 17) that transit fee should be a nominal one considering value brought into the project by Indian participation. However, the Pakistan side disagreed with our position and maintained their earlier stand that the transit fee should be based on relevant international practices,” a senior petroleum ministry official told FE.

On the issue of transportation tariff, both India and Pakistan had agreed in earlier meetings that this tariff shall be based upon cost of service to be achieved through international competitive bidding.

While in the June 2007 discussions between India and Pakistan, the cost estimates of transportation tariff that were indicated were 59 cents per mmbtu, Pakistan is now demanding the tariff to be $1.17 on the basis of revised estimates. This, officials said will be further revised after the preparation of the detailed feasibility report (DFR), followed y tender enquiry and award of bid. Officials said Pakistan has justified this escalation due to change in factors especially steel price and other inputs over a period of time.

“To this, we suggested to Pakistan that the cost assumptions be worked out along with suitable provisions for price escalation and tariff be frozen as this would enable determination of the price of gas at Indian border. It was also mentioned that participation by…

2 Responses to “IPI gas ain't free: Deal or no Deal? India's hardball tactics fail”

Neel says:

May 7, 2008 at 12:19 pm

It is a win win situation now.
India will drink water, ang Pakistan will make gas pakodas !!!

Reply
Dr. Nadeem Bhatti-Rajput says:

December 27, 2008 at 1:00 am

Suggestions to the Pakistan Delegation going to Iran in regards to Gas Pipeline.
1) To finalize the pipeline deal with Iran, regardless of India involvement. It should be Iran and Pakistan pipeline first. Despite of US objection, Pakistan need to go ahead with the project, as matter of National Energy Security. Pakistan’s interest First and Most Important. Time is right to go ahead without any further delays.
2) In terms of money for the project, no need to borrow from IMF or World Bank at any cost, no matter what. Get the loan for the project from China only.
3) To link the Gas price to crude oil in Gulf at the rate of 50% (or half the price of crude oil barrel for one million BTU) of the crude oil rate. That is a fair rate for both Iran and Pakistan.
4) Pakistan should ask India for a Tariff of $2.00 per million BTU for transit fee, at the current rate. If they agree to the price, then Pakistan can extend the pipeline to India. Regardless of the close distance proximity for India. Pakistan shouldn’t sell at any price lower than $2.00 rate. If the price of crude oil varies then the future Tariff should also varies according to the present percentage of the initial price. Tariff price will not be at fixed rate but at a variable percentage of $2.00 for $50.00 rate of one million BTU. So future rate variable to that formula. DEAL OR NO DEAL , plain and simple as that to India. Take it or leave it.
5) If present government agrees to deal with India at a lower rate, then that should be considered a treason and protested at all levels within Pakistan, and will not be acceptable to Pakistani citizens and will be rejected. So the government officials ( petroleum ministry) better keep the nations interest First.
6) If India plays games as always and stall the process than Pakistan should extend that Pipeline to China regardless.
7) Along the gas pipeline, Pakistan need to get a pipeline for crude oil as well from Iran, which will save on infra-structure, at the same time and have two pipelines coming from Iran to Pakistan and then to China for Gas and Crude oil. It will save a lot of money to have these two projects launched for gas and crude oil pipelines simultaneously rather than starting them separately years apart.
8) Again, all cost for the project can be loaned from China or even better as following:
9) Pakistan Pipeline Fund; which citizens can help generate, as National Investment Scheme for Nation Building, which will be paid back within 2 years by the government in the from of: National Health Care, National Welfare and National Educational Scheme back to the citizens from the revenue generated. This way the whole Nation has stake in the project, for all people of Pakistan. This will be a test for our wealthy elite and business man to show how much Patriotic they are to the Nation. We did that before under Ayub Khan to purchase Gawader, but never planned to develop it further into any National Project. This time for Nation building and within 2 years we will see the benefits of project.
10) We can do it, leaders need to have pure intent for the cause and it will serve as multi-purpose approach to energy, welfare, education, medical, regional development and security needs of Pakistan from Tariff money via China and India. Even if there is no India we can launch all these projects from China Tariff on gas and crude oil.
Lets not waste time on politics, Pakistan First.
May Allah gives us Strength, Courage and Wisdom.
Best Regards to All.
Dr. Nadeem Bhatti-Rajput.

Reply