The Telegraph
Monday , July 14 , 2014
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Gas sop signals intent to forge closer Pak ties

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New Delhi, July 13: Energy diplomacy is likely to gather pace when the commerce ministers of India and Pakistan meet on the sidelines of Safta (South Asian Free Trade Area) ministerial council meeting in Bhutan later this month.

As a prelude to the meeting, the government has exempted basic customs duty on the supply of natural gas to Islamabad, which is reeling under the impact of a severe shortage.

“Exemption from basic customs duty is being granted on re-gasified LNG for supply to Pakistan,” the budget document stated. LNG imports attract a duty of 5 per cent.

The waiver could lead to the revival of a proposal to build a gas pipeline to the Pakistan border.

The move to cut the duties is seen as part of Prime Minister Narendra Modi’s strategy. “Greater regional co-operation is imperative to unfetter the engines of economic growth and create mutually beneficial opportunities throughout South Asia,” analysts said.

Commerce minister Nirmala Sitharaman is slated to meet her Pakistani counterpart Khurram Dastgir Khan for the first time on July 24 to discuss a fresh road map to remove the bottlenecks. The meeting is expected to draw up a plan to liberalise ties between the two neighbours.

Officials of India and Pakistan had earlier held talks on LNG supplies.

India, which imports LNG at $14 per million British thermal unit (mBtu), had quoted around $21 per mBtu for selling gas to Pakistani consumers after taking into account duties, transportation charge and local taxes. However, Pakistan is pitching for a maximum price of $17 per mBtu.

The talks fell apart over the pricing issue in March, as India had quoted a price, which Pakistan considered unfeasible. However, Indian officials had pointed out that New Delhi could bring down the price by waiving off taxes on LNG.

Pakistan is suffering from a massive gas shortfall of over 2 billion cubic feet a day, which has led to the shutting down of several industrial establishments.

GAIL (India) Ltd, the transmission utility company, maintains that there will be a shortage of gas in Pakistan in the coming years and its pipeline close to that country provides for a good business opportunity. Unlike India, Pakistan has till now not built an LNG import terminal and so buying gas from GAIL may make economic sense.

India has proposed to lay a 110-km pipeline from Jalandhar to the Wagah border via Amritsar to supply gas to Pakistan. LNG will be imported through ports in Gujarat and moved through GAIL’s existing pipelines to Jalandhar. The proposed line will ensure the transport of gas from Jalandhar to Wagah.