India, Pakistan to discuss lifting ban on fuel export

With India-Pakistan entering a new phase of bilateral talks, a secretary-level delegation from New Delhi may seek free access for export of petroleum products to Pakistan.

An Indian delegation, led by commerce secretary Rahul Khullar, reached Islamabad today. The delegation is expected to hold trade dialogue with the Pakistan government tomorrow. The bilateral trade between India and Pakistan estimated at $2 billion at present constitutes mainly agriculture products and cement.

Indian refineries export about 25 per cent of petroleum products out of a total capacity of little over 240 million tonnes. Though refineries of Reliance Industries Ltd (RIL) and Essar Oil are the main exporters, Indian Oil Corporation’s Panipat refinery and HPCL-LN Mittal group’s upcoming Bhatinda refineries are located closer to Pakistan.

A senior executive in one of the companies said it made more business sense for HPCL to sell in the domestic market than export once the Bhatinda refinery comes onstream later this year. “The Bhatinda refinery is in a 15-year contract with HPCL for selling all liquid fuels to it for marketing,” said the executive. HPCL is currently deficit in refinery capacity and has to rely on private refiners for marketing products, especially in northern India.

India has been seeking a ‘most favoured nation’ status from Pakistan for more than five years, but petroleum products continue to be on its negative list for imports. “For both RIL and Essar, it would make sense to sell in Pakistan since currently they are sending products to far off markets in Europe and America,” said the executive.

Pakistan has about 12 million tonnes of refining capacity, which meets only half of its annual requirements, making it a good market for Indian refiners. Exports of India's petroleum products rose to about $31 billion in 2009-10. IndianOil’s director (refineries) BN Bankapur said if Pakistan lifts the import ban it would provide an opportunity to expand its refinery in Panipat that is currently producing 15 mt.