Pakistan seeks $200 m as transit fee for IPI gas

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New Delhi, May 9 Pakistan has asked India to pay a flat $200 million a year as transit fee for the portion of the Iran-Pakistan-India (IPI) gas pipeline traversing that country’s territory and carrying gas to the Indian border. The offer was conveyed to petroleum minister Murli Deora by his Pakistani counterpart during the former’s visit to Islamabad from April 23 to 25.

A senior government official associated with the bilateral talks on the IPI gas pipeline told FE that Pakistan has agreed to de-link the transit fee from the price of gas and has now asked India to pay $200 million a year, which is at the rate of 42 cents per million British thermal unit (mmBtu).

The official said efforts were on to narrow the wide difference between what the Indian side had offered to pay vis-à-vis what was demanded by the

Pakistani side.

“As India had agreed to pay 15 cents, it has asked the Pakistani authorities to further reduce the fee and make it nominal, considering that Pakistan would also be off-taking gas at 80% of the pipeline length. We expect that India and Pakistan would soon be able to conclude an agreement on the transit fee along with the two other issues concerning transportation charges and the project structure,” said the official.

On the issue of transportation charges, the Indian side has agreed to Pakistan’s proposal that the final tariff be based on the rate received in response to the tender to be floated for award of work through international competitive bidding. A reasonable return on the pipeline (15-18%) was sought to be built into the project. It has been indicated by Pakistan that a special purpose vehicle would be formed, with the government of Pakistan having a majority stake through its PSUs.

To this, the Indian side has reiterated its earlier offer of having a consortium approach for the project and to include India’s state-owned GAIL in the construction of the pipeline.

“This would not only allow cost effectiveness and enhanced accountability, but would also help as a CBM and in pipeline security. Pakistani authorities have an open mind on this issue and would respond shortly,” the official said.